What to know when you open a new business
Posted on November 16, 2023
Starting a new business is exciting – and often a little overwhelming when it comes to getting the details right. That’s why the small business professionals at Teipen CPA Group want to familiarize entrepreneurs with the appropriate business tax rules and regulations.
Here’s what to know:
Choose the correct business structure. The form of business determines which income tax return a business needs to file. The most common business structures are:
- Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
- Partnership: An unincorporated business with ownership shared between two or more members.
- Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
- S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
- Limited Liability Company: A business structure allowed by state statute. If a single-member LLC does not elect to be treated as a corporation, the LLC is a “disregarded entity,” and the LLC’s activities should be reflected on its owner’s federal tax return as a sole proprietorship.
New business owners need to choose a tax year — the annual accounting period for keeping records and reporting income and expenses. Choose from either:
- Calendar year: 12 consecutive months beginning January 1 and ending December 31.
- Fiscal year: 12 consecutive months ending on the last day of any month except December.
Note: If an individual files their first tax return using the calendar tax year but later begins business as a sole proprietor, becomes a partner in a partnership, or becomes a shareholder in an S corporation, they must continue to use a calendar tax year unless they get IRS approval to change it or meet one of the exceptions listed in the instructions to Form 1128, Application To Adopt, Change, or Retain a Tax Year.
Apply for an Employer Identification Number (EIN), sometimes called a Federal Tax Identification Number.
- Most businesses need an EIN, but some don’t. For example, a sole proprietor without employees who doesn’t file any excise or pension plan tax returns doesn’t need an EIN.
- Need clarity? Go toEIN checklist on IRS.gov or ask a Teipen CPA Group small business professional what’s best for your situation.
- Once you have an EIN, keep the details (business mailing address, location and responsible party) up to date.Report changes in the responsible party to the IRS within 60 days.
All business employees must complete these forms:
- I-9, Employment Eligibility Verification U.S. Citizenship and Immigration Services
- W-4, Employee’s Withholding Allowance Certificate
What about state requirements?
Corporations that are incorporated or do business in Indiana must file and pay corporate income taxes to the DOR, according to Teipen CPA Group. Indiana’s corporate tax rate for the 2023 tax year is 4.9%. For more information, feel free to contact our small business CPA team.