From creating an LLC for tax protection to keeping track of all business expenses, here are 8 answers to the question, “What are some tax filing tips for new startups?”
- Create An LLC for Tax Protection
- Determine Your Tax Obligations
- Don’t Wait Until the Last Minute
- Pay Attention to State Taxes as Well as Federal
- Hire An Accountant Or a Tax Preparer
- Deduct All You Can
- Keep Note of How You Classify Employees
- Keep Track of Business Expenses
Create An LLC for Tax Protection
A tax-filing tip for new startups is to consider creating an LLC (Limited Liability Company). By forming an LLC, it gives the company limited liability for its debts, protecting members of the company from personal liability. One uncommon example of this is that funds raised by crowdfunding can often be run through an LLC for tax-protection purposes. This allows investors to receive rewards or profits from the business venture in a legal and financially secure way.
Determine Your Tax Obligations
The most important tax filing tip I would recommend for new startups is to determine their tax obligations first. Know what tax forms they need to file and when to file them.
I have seen many startups that are confused about their tax obligations, so it is important that they familiarize themselves with the rules and regulations that apply to their specific type of business, whether they are a sole proprietorship, partnership, LLC, or corporation, as well as which domain their business falls into, whether it is retail, wholesale, or service-based or any other, because each type of business has its own set of tax obligations such as income tax, payroll tax, self-employment tax, and so on.
o it is extremely important that they understand their business structure and how it operates. Once they do that, they will be better off filing their taxes accurately and on time each year.
Don’t Wait Until the Last Minute
Don’t put off filing your business taxes until the last minute. Many people tend to procrastinate on unfamiliar or lengthy tasks; however, the longer you wait, the more rushed and stressful the process will be. Get ahead of your taxes, and take proper care and time to ensure you have all the necessary documents prepared before filing with time to spare.
Susan Shaffer, President, Pneuma Nitric Oxide
Pay Attention to State Taxes as Well as Federal
One tax-filing tip for new startups is to understand the differences between federal and state taxes. This is important because entities registered in one area may be subject to different requirements, such as filing taxes differently or having stricter requirements on record-keeping.
For example, if businesses are based out of Texas, they must pay franchise tax in addition to other taxes applicable at the federal level. Business owners should make sure that they are aware of all taxation requirements so that they can prepare their returns correctly and avoid claims from auditors.
Hire An Accountant Or a Tax Preparer
If you’re a first-time business owner, then I cannot stress enough how much you don’t want to try to wing it yourself unless you have at least some background in finance and accounting.
Business taxes aren’t the most complicated thing in the world, but they are significantly more complicated than personal taxes, and I’ve seen many entrepreneurs get dinged with fees for improper filing. You likely only need to do this once, unless you just want the peace of mind of having someone else deal with it for you, but for the first filing, you should definitely get professional help that can inform you of the best practices for the future of your business in regards to taxes.
Deduct All You Can
One of the most important tax-filing tips for new startups is to make sure that you are deducting all of the business expenses that you are legally allowed to. This means making sure that you are keeping good records of all of your expenses and documenting them properly so that you can easily reference them when it comes time to do your taxes.
In addition, make sure that you are taking advantage of all the tax deductions that are available to you. This includes things like depreciation of equipment, charitable donations made by the company, and other things that can help reduce your tax bill.
Keep Note of How You Classify Employees
Keep note of how you classify your employees and what each classification means. Do you have a team of independent contractors? Or do you have a handful of full-time employees? Keep track of each employee and their classification and how you can leverage each circumstance when filing your taxes.
Keep Track of Business Expenses
Keeping track of business expenses and categorizing them correctly is key to filing taxes accurately. Business owners should keep receipts, invoices, and other business-related documents to help them accurately track and report business expenses. Additionally, business owners should research business expense deductions that are allowed for their business type.
This will help ensure business owners strive to save on taxes by taking all available deductions. Knowing the types of business expenses that are deductible, such as travel and business meals, can help business owners save money when filing their taxes.