Starting a business can be incredibly rewarding – and a little overwhelming. Even as you make business plans, and marketing strategies; keep in mind, you will need have tax responsibilities and there are steps to take and business tax structure to consider.
- What will be your business structure? The form of your business determines which income tax return your business will need to file. Common structures are:
- Sole proprietorship: business owned by an individual – not incorporated. There is no distinction between the taxpayer and their business.
- Partnership: Ownership shared by two or more people, unincorporated.
- Corporation: A separate entity owned by shareholders and also known as a C corporation.
- S Corporation: a corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
- Limited Liability Company: A business structure without shareholders, allowed by state statute.
- Which type of tax year will you use? A tax year contains 12 consecutive months, either:
- Calendar year – January 1 through December 31 of each year.
- Fiscal year – 12 consecutive months ending on the last day of any month except December.
- Apply for an employer identification number. An EIN, or Employer Identification Number, is a federal tax identification number used to identify a business. If you will have employees, you will need an EIN.
- Have all employees complete forms I-9 and W-4 immediately upon hiring.
- Pay business taxes. Once you decide on your business structure, you will be able to file taxes timely. Not paying the taxes can mess up your business for years. Starting right will make all the difference in the success of your business now and in the years to come.
Starting right makes the difference for new businesses. BusinessTaxPrep.org can match you to a local tax professional who can walk you through the steps to business tax planning and preparation. Come see us today.