Are you considering starting your own business? Thousands of people start a brand new business every year. Building a business involves many essential steps to ensure your company is structured correctly. Many startups file their taxes and do not hire an outside accountant. This may work in the beginning; however, as a business grows, more problems will arise. Here are some helpful tax tips if you are starting your own business.
Determine the Structure of Your Business
Creating a new business is an exciting experience, and there are many things that you need to keep in mind. First, you must figure out the type of business you are going to establish. The most common business entities are a Sole Proprietorship, Partnership, Corporation, S Corporation, or a Limited Liability Company (LLC). Each type comes with different legal and tax implications. The type of business will be necessary when filing your tax return, as it will determine the tax form you will use.
Track Your Expenses
Many businesses fail simply due to bad bookkeeping or simple errors. Not tracking expenses or failing to record earnings can cause a great deal of damage to your business. Consider hiring an outside bookkeeper or CPA for your business. A professional CPA will adequately record your earnings and expenses. Additionally, an experienced bookkeeper can also help with other essential elements of your business, such as payroll, business assets, and other vital activities.
If you are hiring employees, you must know how to classify them and establish payroll. Payroll is one of the most important bookkeeping tasks of any business. If you have employees, you need to withhold federal and state taxes, Medicare, and Social Security. Even if you run a sole proprietorship and are the only employee, you still must pay the proper estimated taxes.
Get an Employee Identification Number
To identify your business for tax purposes, you will need to obtain an Employer Identification Number, also called a Federal Tax Identification Number. You can apply for this online on the IRS website. Be sure to check with your state to determine if you need a state number or any other specific forms.
Keep Detailed Records
To help you out during tax time, you need to keep adequate records. Be sure to keep a detailed record of all your income and expenses. This will help you stay on top of deductible expenses on your tax return. Additionally, it will also help you monitor the progress of your business and provide a financial overview of your company.
Contact Bowman & Company CPA Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.