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.

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

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.

Seven Powerful Ways To Market Your New And Existing Products

Producing goods requires a lot of planning. From the conception stage down to factory production and product registration involve time and resources. But the big question is the marketing angle? How do you market your product, either existing or new? What type of...

6 Effective Tips That Will Help You Improve Your MSP Business

Every MSP business wants to excel and be a number one choice for clients. The dream would be to be well organized, a ship running around the clock with no hick-ups. I’m talking about having your customers configured perfectly, your team working efficiently and...

Understanding Crucial Parameters to Consider While Opting for Web Development

In this highly competitive digital era, your business without a website is like a rudderless ship. Over the last few years, thanks to the Internet, we have witnessed a technological revolution. Your organization has no identity without a website. Remember that a...

What You Should Know About Shopify Plus

Shopify Plus is a fully hosted, cloud-based e-commerce platform that can accommodate up to 3 million visitors per second and about 10,978 orders per minute, with a 99.99 percent uptime, allowing merchants to concentrate on business expansion. It's perfect for...

Top Reasons Why You Need To Insure Your New House

A lot of people fear the term ‘insurance plan’ which isn’t surprising because for many, it’s an extra expense off of their salary again. What many people don’t see is that insurance plans aren’t just some bills you have to pay monthly. It’s also an investment for your...

3 Ways to Increase Your Company’s Visibility

To increase your company’s visibility, you must do more than just create quality content, work with influencers and engage customers you must also build a stunning website, optimize your content for mobile applications and constantly improve your search engine...

4 Reasons Why Having a Good Cybersecurity Is Essential for Your Business

Any business, whether physical or online, has its challenges. Some of the known challenges include staffing issues, marketing and distribution, and unseen costs. While some challenges have been in place since time immemorial, some have risen due to technological and...

Innovative Ideas to Generate More Revenues for Your Nonprofit Fundraising

Get Creative to Make More Revenue for Your Non-Profit A general misconception about Non-profit organizations is that they make money only through donations made by people. Though this is partly true, it is not the only method. Nonprofits generate income through sales,...

Read more articles about business.

Top Reasons Why You Need To Insure Your New House

Top Reasons Why You Need To Insure Your New House

A lot of people fear the term ‘insurance plan’ which isn’t surprising because for many, it’s an extra expense off of their salary again. What many people don’t see is that insurance plans aren’t just some bills you have to pay monthly. It’s also an investment for your...

How to Join in the Digital Transformation Easily for Your Business

How to Join in the Digital Transformation Easily for Your Business

It shouldn’t come as a shock that the overwhelming majority of the world is going digital. Everything from working at home through virtual call software, to online school modules, to ecommerce, to digital art. The never-ending transition is making it more apparent now...

Top Ways to Grow Your Medical Practice in 2021

Top Ways to Grow Your Medical Practice in 2021

Operating a medical practice in this day and age can be quite a challenge. You have to deal with all of the struggles to keep your business running while balancing it with the profit you want to gain. In line with this, your business model should be growing to treat...

Understanding The Importance Of Employee Management

Understanding The Importance Of Employee Management

Managing people of different ages, backgrounds, experiences, and personalities is such a demanding task. Managers spend most of their time in employee management to ensure that their people are content, performing well, developing, and are achieving their personal...

Useful Tips for Choosing the Right Franchise Business

Useful Tips for Choosing the Right Franchise Business

Your first thoughts when it comes to being a business owner often illicit images of small business ownership, but there’s a path to entrepreneurship that a lot of interested people never even consider - franchising. Franchising, or franchises, are well-known...

Share This