Tax tips to get your new business off to the right start
Starting a business can be very rewarding. It can also be a little overwhelming. From business plans to market strategies, and tax responsibilities, there are many things to consider. Here’s what new business owners can do to help get off to a good start.
The form of business determines which income tax return a business taxpayer 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 people.
- 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.
A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose 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.
An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need an EIN.
Have all employees complete these forms
- Form I-9, Employment Eligibility Verification
- Form W-4, Employee’s Withholding Allowance Certificate
- Pay business taxes. The form of business determines what taxes must be paid and how to pay them.
Taxpayers interested in starting a business can find information for some industries on the Industries/Professions Tax Centers webpage. Each state has additional requirements for starting and operating a business. Prospective business owners should visit their state's website for info about state requirements.
- Small Business Admiration’s 10 steps to start your business.