What Startup Companies Should Know About Filing Taxes

January 6, 2021

Tax season is often not so anticipated part of the year among entrepreneurs, especially if you’re new to filing taxes for a business. That’s the most important piece of advice when filing startup and small business taxes is that you will need to be stickle for paperwork. The key is to set aside time to learn what tax issues usually bother businesses similar to yours, to avoid making the same kinds of mistakes yourself. This article will provide answers to the most common questions you will have when dealing with taxes for the first time.

startup business taxes


Pull Your Financial Records

Staying on top of your bookkeeping includes maintaining a copy of every invoice that goes out and every receipt that comes in. If you are not organized well enough, this may be quite a lengthy process. financial documents that need to be set aside for startup taxes include profit and loss statements, bank and credit card statements, invoices and receipts, and payroll sheets. Many other records will be required, but these few should give you a good start. Gathering these items on the go, assures you have a much smoother tax season every month, as you won’t have to waste time going through it all at once.


Plan your LLC Tax Structure

A limited liability company (LLC) is not a separate tax entity like a corporation, instead, it is more like a partnership (multimember) or sole proprietorship (one member).  Domestic LLCs run by one owner is considered a sole proprietorship. Those with two or more owners are treated as a partnership unless they have chosen to be classified as a corporation.  The LLC itself does not pay any federal income taxes, even though some states do impose an annual tax on these companies. Members of LLC are considered self-employed owners and not the employees of the LLC so they are not subject to tax withholding.


Know What you Can Deduct

When starting a small business, you will want to save money any way you can. For many start-up business owners, this means deducting as many expenses as possible, and the good news is, a lot of start-up costs are easily deductible. The first rule for deductions is that they must be ordinary and necessary, meaning it has to be commonly related to your line of work. This includes the costs of training staff, legal fees, establishing vendors and suppliers, advertising. Traveling for business is another amazing deduction possibility that takes care of plane tickets, taxis, hotels, and meals.


Keep Track of Paperwork and Receipts

Creating the habit of good organization early on as a business owner will help you more than just handling paperwork during tax season, but will also improve your career as an entrepreneur altogether. It is essential to keep track of all the relevant paperwork in one place and save each receipt that came your way. To help you out with these tasks just click here, and you will find the best software available that automatically scans your past year’s purchases for tax-deductible expenses, making it so much easier to keep track of it by having it all in one place.


business taxes


Watch How you Classify your Employees

Defining the people who work for your company is another aspect that comes into question around tax season. Generally, employees have a right to worker’s compensation, unemployment insurance, minimum wage (at least), overtime pay, and payroll taxes. For a start, you have to make sure that all the workers in your company are labeled correctly, as they can work for a company as employees or independent contractors.  If the roles aren’t clearly defined and you mislabel your employees and independent contractors, it could be seen as an attempt to avoid paying payroll taxes, which leads to penalties and back taxes.


Separate Personal and Business Expenses

A deductible expense only does you good if you can prove that the money is spent on what is crucial for running the business. Many business owners are trying to deduct a home office for tax purposes but it has been quite an issue with the IRS. To get a deduction for a home office, it must be organized as a separate office used solely for business purposes. After you make it clear which purchases were made for business purposes, it is very important to separate them from the personal expenses along the way. Not doing this from the start will cost you a lot more down the line, as you will have to go through every receipt, instead of simply building a report from your business banking.

As much as starting your own business sounds exciting, it brings much boring and complicated paperwork alongside, including taxes. Hopefully, this article will help you get through the tax season smoothly, especially if it’s your first time handling it.


Submit a Comment

Your email address will not be published.

Is Your Business Being Found Online?

Laptop Metrics Colorado

Free Digital Marketing Report ($150 Value)

marketing module lineWant to know how your business stacks up against the competition?

Read more articles about Taxes.

Why Your Business Should Hire a Digital Marketing Agency

A digital marketing agency handles promotional and marketing campaigns that help a business attract more customers. Why should your business hire one? What benefits can you get from an external marketing team? In this article, we’ll talk about digital marketing...

Digitally Transforming Your Business Communications to Support Marketing and Growth

Digital transformation is reshaping the way we do business in many different ways. From the way we generate leads and approach the art and science of sales, to the way we communicate internally and externally, there is no denying that digital technologies beg the need...

Internet Marketing: What Is It & How It Can Build Your Brand

  The official birth date of the internet is widely considered to be January 1, 1983. Since then, we have grown accustomed to the web and its capabilities, spending more and more time in front of our computer screens. According to DataReportal’s Digital 2022...

Facebook Competitors: Do They Have a Chance?

It’s a death by a thousand cuts that Facebook faces, both now and in the future of social media experiences. That’s not to say that Facebook (now termed, Meta) is going to go away, just that it’s no longer the big bully on the block. There are scores of social media...

What Is Trust Flow SEO?

First, let’s see what trust flow means for websites – Trust flow is a measure of the quality and trustworthiness of a website, based on the number and quality of inbound links to the site.     A high trust flow indicates that the site is trusted by many...

What Do “Business Development Skills” Mean In a Resume?

Every business needs development, and we can see the development of a business in its marketing.     Marketing is not just about selling or advertising, it's about developing your business by creating relationships with your customers. It's about...

How Much Cornerstone Content Should You Have?

Cornerstone content is the foundation of your website or blog. It's the most important and comprehensive material that you have to offer, and it's what you build everything else around - including your social media strategy.     Cornerstone content is...

5 Things to Consider Before Buying Stocks

  Building a successful business is one of the best ways to achieve financial freedom. Nonetheless, this does not mean that you should stop exploring other opportunities to boost your income. The options abound, and one that you might want to consider is...

Read more articles about business.

5 Things to Consider Before Buying Stocks

5 Things to Consider Before Buying Stocks

  Building a successful business is one of the best ways to achieve financial freedom. Nonetheless, this does not mean that you should stop exploring other opportunities to boost your income. The options abound, and one that you might want to consider is...

15 Websites with Free Stock Images for Commercial Use

15 Websites with Free Stock Images for Commercial Use

Photography is an essential part of any design and finding the right commercial-use photos for free can be a challenge. Sure, you could find the standard stock photos of a person sitting in front of a computer or business professionals smiling in a conference room,...

How TikTok Is Changing The Way Businesses Advertise

How TikTok Is Changing The Way Businesses Advertise

  From old-fashioned word-of-mouth advertising, social networks have improved how businesses publicize their brands. There is a new world of digital marketing on Instagram, Facebook, YouTube, TikTok, etc. According to research, TikTok records over I 000,000,000+...

Understanding of Linux device driver development

Understanding of Linux device driver development

The creation of Linux device drivers is a highly demanded service provided by numerous IT companies. What is Linux? What are the functions of drivers in Linux-based solutions? How to develop these drivers? Find the answers in our article.     About Linux...

Share This