Five Reasons Having a Business Tax Attorney Is a Good Idea

Running a small business often means doing a little bit of everything yourself. You may handle sales, hire employees, negotiate with vendors, plus suddenly have to urgently fix whatever problem shows up on a given morning. When tax season comes around, it can be tempting to handle that yourself, too.

For a very small business with simple finances, that may work for a while. But business taxes quickly become more complicated once you start hiring employees or making larger transactions. At that point, what you owe, how you get paid, what records you need to keep can become very murky for the average business owner. 

If you own a small business in Illinois in 2026, here are five reasons that working with a Naperville business tax attorney is a great idea. 

Choosing a Business Structure that Carefully Considers Taxes

The IRS recognizes several common ways a business can be taxed, including sole proprietorships, partnerships, corporations, and S corporations. The IRS specifically notes that the form of business you choose determines which income tax return you file, and that both legal and tax issues should be considered when choosing a structure.

Many business owners assume that an LLC is the best way to go. Under 805 ILCS 180/10-10, the debts and liabilities of an LLC generally belong to the company rather than its members or managers. But an LLC is a state-law business structure; it does not automatically tell you how the federal government will tax the company.

For example, one owner may create a single-member LLC and continue reporting business income on an individual return. Another business owner may decide, with appropriate tax advice, to elect S corporation treatment. A business with several owners may be taxed as a partnership unless another election is made.

It’s much better for a business attorney and tax professional to work together before choosing a business structure instead of trying to repair a bad fit later.

Paying Yourself and Your Employees Correctly

Once a business starts paying people, mistakes become easier to make and more expensive to fix. Suppose you own an S corporation and work full-time in the business. You may have heard that taking distributions instead of wages can reduce payroll taxes.

But that doesn’t mean you can simply pay yourself entirely through distributions. The IRS requires an S corporation to pay reasonable compensation to a shareholder-employee for services before making non-wage distributions to that person. A business tax attorney can advise you on the best pay to pay yourself while protecting yourself from tax liability. 

Employee compensation creates its own set of responsibilities. Employers generally have to withhold and report federal income taxes, Social Security and Medicare taxes, and handle federal unemployment taxes. They also have filing and deposit deadlines throughout the year, not just at tax time.

Buying or Selling a Business While Planning for the Tax Consequences

The tax consequences of a business sale should be discussed before the purchase agreement is signed. The IRS generally requires both sides in qualifying asset sales to report how the purchase price was distributed. The allocation can affect the buyer’s basis in the acquired assets and the seller’s gain or loss.

The same problem can arise when a partner buys out another partner, a shareholder sells an interest, or a company purchases only certain assets from another business. The legal structure of the transaction and the tax result are tied together.

Making Everyday Business Transactions

Many major tax issues come from minor transactions that add up over time. For example, a business owner might buy a vehicle using company money and then end up using that vehicle much more for personal reasons. An employee might need to be reimbursed for travel, but how this should be done if there isn’t a clear travel stipend or budget might be unclear. Everyday transactions don’t seem like they should cause tax problems, but sometimes they do. 

Small businesses are especially vulnerable to blurred lines between personal and business finances. An owner may know exactly why a particular payment was made and assume that explanation will always be obvious. Two years later, the owner may have completely forgotten what the payment was for and misplaced any documentation proving its justification. 

Good recordkeeping is important for business owners, but just as important is making sure the underlying transactions are structured correctly. A business tax attorney can help business owners make sure their everyday transactions are in compliance with state and federal law so they don’t run into unexpected problems later. 

Dealing with Complicated Commercial Issues 

As a small business grows, commercial issues become almost inevitable. When it comes to doing business, you can guarantee that if there’s a commercial issue, tax issues are not far behind. A company that started with only a couple of employees and a simple home office may need more space and a real lease. At the same time, contracts with landlords and other businesses become both more common and more complicated. 

For example, if the owner of a growing business finds a great location for the business’s first ever commercial lease, the owner still has to answer many serious questions about the lease itself. These include, but are not limited to: 

• Is the cost of the lease a tax writeoff? 
• How long should a first lease be? 
• What if the business is operating at a loss and can’t afford lease payments? 
• Who pays for repairs? 
• Can the business put up signs, change the interior, or add specialized equipment? 
• What happens if the company needs to get out of the lease? 
• What are the rules about parking and opening hours? 

These are questions that should be answered before signing a lease and after considering all the ways a business’s taxes could affect the business’s chances of success in a commercial space. 

The same is true of business contracts. Agreements that worked when transactions were small may no longer provide enough protection when a company begins taking larger orders or hiring contractors. Likewise, the taxes involved with making loans or paying contractors can be very complicated indeed. Many things can go wrong when it comes to payments, taxes, and contract disputes. 

For many owners, these are the first commercial legal issues they have ever had to manage and taxes are a major part of the picture. Having an attorney review commercial transactions for their tax consequences is the best way for business owners to protect both the businesses and themselves from expensive issues later on. 

Call a Naperville, IL Business Law Attorney Today

You don’t have to become a tax lawyer, accountant, and business attorney just because you own a small company. In fact, there are many reasons you should leave the tax side of your business to the professionals. 

Gierach Law Firm helps Naperville business owners handle the legal side of forming, operating, buying, selling, and growing a business. Call Gierach Law Firm at 630-756-1160 to speak with a Naperville, IL business tax attorney about your company.