One word of caution is in order. If you have non-family members as employees, you may not want to sponsor a fringe benefits plan, since you must offer all benefits to all employees. The only exception is a medical reimbursement plan, which you can offer to selected key employees (such as your spouse). This plan can reimburse the employee for medical costs not covered by a policy, such as co-payments, deductibles, non-covered items (like dental, glasses, etc.), and even the premiums on medical insurance itself. You should document any fringe benefits plans by signing a spousal employment agreement. Also, most fringe benefits plans require initial approval from the Department of Labor and annual filings of a tax return (Form 5500) even though the plans are tax exempt.

You should save money for your future, whether for kids college costs or your retirement. Uncle Sam wants to discount your tax bill if you agree to save money. You can sponsor a retirement plan for yourself and all your employees. There are a number of retirement plans allowed, but two in particular are great for small businesses because they are exempt from annual tax return filing requirements.

The first plan is called a Simplified Employee Pension plan, or SEP. You have the flexibility to choose between zero to 15% to put aside for employees, and you can exclude all employees who are union, under age 21, part-time, or have not worked for you at least three years. Note that family members are usually kept on the payroll for more than three years, while small business employees tend to turn over rapidly in recent years. The effect is to be required to give tax-deferred retirement contributions only to family members.

The other plan for smaller businesses is called the SIMPLE plan (Savings Incentive Match Plan). You have to provide up to 3% of wages matched dollar for dollar, but only if the employee puts the funds aside from his or her wages first. Many small business employees will not take advantage of this plan because they often cannot afford to cut their own pay. Therefore you can benefit yourself and family members by socking away up to $6,000 per family member plus the 3%.

HSA Plans (Health Savings Accounts) are also a neat way to both cut the cost of health insurance coverage and save additional cash. The HSA has two parts. The first part is a high deductible insurance policy ($2,000 for individuals, $5,000 for families) which covers 100% of everything over those amounts (i.e. no copays or sharing of expenses). The second part of the plan is an IRA-like savings account. You and your employees can fund up to the full deductible each year. If your family is healthy and tends not to visit the doctor much, over time you will accumulate a large surplus savings account while receiving annual tax deductions. The HSA savings account can be withdrawn tax free if it is used solely for healthcare-related expenses. Otherwise, you will owe income taxes. Either way, you still way ahead.

Another neat idea is to borrow from your spouse when your business hits those inevitable ebbs in the "ebb & flow" of business cash flow. While your interest expense is offset by his/her interest income for income tax purposes, you do cut the self-employment tax. Be sure to document the loan with a promissory note (which you can buy from any office supply store).

Likewise if you work at home you can rent office and/or store space for your business stuff from your spouse. You will cut self-employment taxes. Your spouse will have rental income, but this will be partially sheltered with depreciation of part of the house or garage, and you can take a few normally non-deductible items as writeoffs, such as repairs and general maintenance of the grounds and buildings as a landlord expense.