Starting a business? What to know about taxes
Posted on November 20, 2017
If you are launching a new business, don’t forget to ask your business CPA firm about tax-related concerns before launching your company. Talking to the business specialists at Teipen, Selanders, Poynter & Ayres can help set up a recordkeeping system that will grow with your business – and avoid expensive tax surprises.
Here’s what to know:
First, choose a business structure. The most common forms of business are:
Second, your CPA can help you determine business tax responsibilities related to your business structure. That’s because the type of business you operate determines what taxes you need to pay – and how to pay them, including:
- Income tax –Income tax can be confusing because sole proprietors and single member LLCs file on schedule C of the taxpayer’s 1040, which is not a separate tax return, but rather part of their individual tax return. C Corporations pay their own income tax. Sub S corporations and partnerships are flow through entities, and their owners pay their share of the business’ income tax.
- Estimated taxes – If the amount of income tax withheld from a taxpayer’s salary or pension is not enough, or if the taxpayer receives income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, or receive a form K-1 from a Partnership, Sub-S corporation or trust, they may have to make estimated tax payments.
- Self-employment tax – This is a Social Security and Medicare tax. It applies primarily to individuals who work for themselves.
- Employment taxes – These are taxes an employer pays or sends to the IRS and the state where it is located for its employees, and include unemployment tax, income tax withholding, Social Security, and Medicare taxes.
- Property tax – These taxes apply to businesses that own real estate and personal property and are local taxes.
Third, choose a tax year accounting period, typically based on a tax year of 12 consecutive months. Choose from:
- Calendar year: 1 to Dec. 31, or
- Fiscal year: 12 consecutive months ending on the last day of any month except December (generally only allowed for a regular corporation.)
Fourth, set up and organize a recordkeeping process, consulting with a business CPA firm like Teipen, Selanders, Poynter & Ayres. Effective, systemized recordkeeping helps a business monitor progress — and helps prepare financial statements and tax returns.
Schedule a free TSPA consultation and pick our brain. Our business CPA experience can help you stay on top of the tax paperwork that goes along with launching a new business.