Was your summer so ambitious that you started a new business? Or are starting one soon? We know a thing or two about starting your own business… including the tax, bookkeeping, and payroll implications. Here are some tips!
Business Structure
One of the first things you need to decide as a new business owner is the type of structure for the business. Is it a sole proprietor? Partnership? Or a corporation? Deciding this will determine which tax forms to file.
Business Taxes
There are 4 types of business taxes: Income tax, self-employment tax, employment tax, and excise tax. A lot of the time, the type of business structure determines the types of tax a business pays. You may need to make estimated tax payments throughout the year.
Employer Identification Number (EIN)
Most of the time you will need to establish an EIN from the IRS, which you can apply for online right on the IRS.gov website.
Accounting Method
This is a set of rules that is used to determine when to report income and expenses, and it must be consistent. Typically, you can use the cash or accrual method.
Cash Method – Report income and deduct expenses in the year you receive or pay them.
Accrual Method – Report income and deduct expenses in the year that you earn or incur them, even if you get the income or pay the expenses in a later year.
Payroll
If you are going to hire employees for your small business, you are required to withhold payroll taxes from employees’ paychecks to pay applicable federal, state, and local taxes. Typically, what is needed to be withheld are FICA, federal, state, and local income taxes, if applicable.
Bookkeeping
You will need to record all information regarding the transactions and financial activities of your business. This would also include developing a system that establishes how you’ll get paid, pay your employees and determine sales tax procedures.
If you have any questions regarding taxes, bookkeeping, or payroll for your new business, please don’t hesitate to ask.
