Important Tax Considerations for Start-ups
If you are starting a new business, there are a number of essential elements that you need to know, and your federal tax responsibilities are high on that list. Following are some of the most important things that you should keep in mind for this tax year.
One of the first steps that you need to take is to determine the type of business entity that your business will be. You need to do this in order to know which tax forms you need to file. There are three basic types of businesses from which to choose: Partnership, sole proprietorship, and S corp.
Not only will the type of entity you select determine the tax forms that you need to file, it also establishes how you pay your taxes and which taxes you have to pay. Income tax, employment tax, sales or excise tax and self-employment tax constitute the different types of taxes that businesses may be required to pay.
Most business entities are required to have an an employer identification number, or EIN, but not all do. If you believe that you need on and would like assistance in getting one, or if you aren’t sure whether one is required for your business, one of our professionals would be happy to assist you in finding out.
If you make it a habit to keep meticulous records right from the start, it will go a long way towards supporting your business’ success. There are a number of excellent record-keeping systems available, and each has its own merits, but what is most important is that it easily identifies both your expenses and your income. The type of business you are in may create specific requirements on the type of records that you keep.
One decision that you will need to make is about how you are going to define your tax year. A tax year is the annual accounting period on which your taxable income is based. In most cases, either a fiscal year or a calendar year are chosen.
In addition to determining what type of tax year your business is going to use, you also need to determine what type of accounting method you will use. In most cases businesses select either the accrual method, in which income is reported in the tax year it was earned and expenses are deducted in the year they are incurred (regardless of whether they have been received or paid, or the cash method in which income is reported in the year it is received and expenses are deducted in the year they are paid.
Starting a new business is an exciting time, but the tax requirements can be daunting. If you need assistance with these or any other tax issues, contact Bob Mason at Coast Financial Services or call (831) 462-0330.
Have a question about your new business? Call us at (831) 462-0330 and let's discuss your financial future.