Are you new to business and want to make sure you get things organized, up and running right from the start? If you have recently opened a business or you are considering it, here are a few quick tax tips to get you started on the right foot…
1. Business Entity Type: Your selection will determine which tax form(s) you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
2. Tax Payments and Frequency: This is also determined by they type of business entity and operations. The general business taxes are: income tax, self-employment tax, employment tax and excise tax.
3. FEIN or EIN aka the “Employer Identification Number”: An EIN is number used to identify a business entity. You can ask your tax professional to help you get one or visit IRS.gov for more information.
4. Good records! Good records are necessary in helping you to ensure you the successful operation of your business. If you don’t know what’s going on at least on a monthly basis, you’re basically operating your business without a road map. In general, you may choose any record keeping system that you like, that suits your business… one that you will actually keep up with. Any system that you will not do, is useless. Note: the business you are in affects the type of records you need to keep for federal tax purposes.
5. Tax Year: Like individual taxpayers, every business taxpayer must determine and report taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.
6. Accounting Method: Whatever accounting method chosen, it must be used consistently. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them. Subtly difference but different anyway.
If you have any questions about any of the 6 tips for New Business Owners, contact us. We are here to help and would love to hear from you.
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