Your startup has secured capital, filed for business licenses, and maybe even identified an office space and your first hires. Ready to go, right?
Not so fast. First-time entrepreneurs need to pay close attention to tax policy and how it affects them. There are lots of tax implications for an entrepreneur to keep in mind. Here’s a primer on five tax strategies every entrepreneur should consider before launching a new business.
- Decide on your business structure. Depending on state law, you can file as a corporation, an LLC, a sole proprietorship, or other options. Each has its own liability and tax implications. The experts at Numbers House can help you pick a business structure that best suits your tax and liability needs.
- Know your liability. A small-business owner can be on the hook for a load of taxes. They include employment tax, property tax, income tax, and personal property taxes. How your business is structured dictates your tax liability, record-keeping methods, and tax due dates.
- Choose an accounting method. Entrepreneurs need to decide on an accounting method. You can choose cash accounting, in which you report income and deductions on a yearly basis. Another choice is the accrual method, which allows the payment of taxes on profits earned but not yet realized.
- Mind your books. A key to streamlining your taxes is to keep good books from the moment your business opens. This includes all payroll taxes, property taxes, capital or personal property investments and deductions, and sales income and profit information.
- Consider employee classification. If you contract labor, you can avoid paying some taxes such as workers compensation, unemployment insurance, social security or payroll tax. Be cautious, though. You must still report their income and file a 1099 with the IRS and the definition of an employee or independent contractor can vary from state to state. Deciding how to classify your employees is a key tax consideration.
Tax law can be daunting and even discouraging, but our experts can sort through the red tape so you can concentrate on building your business. Contact Numbers House for more information on tax implications and best strategies for a startup business.