7 Essential Tax Tips for New Entrepreneurs

7 Essential Tax Tips for New Entrepreneurs

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Before opening a business, entrepreneurs should familiarize themselves with their federal tax obligations. Understanding taxes is key to the success of any kind of business. Following are some basic tax tips that can help get a business off to a good start.

1. Business Structure

When venturing into business, one must first choose the structure of their business. The most common structures include sole proprietorship, partnership and corporation. A person can choose to be either an S corporation or Limited Liability Company. A business person reports their business activity using IRS forms which are right for their business type.

2. Accounting Software

Every business, whether big or small, deserves some financial respect. A dedicated business owner should purchase the latest accounting software that will help them prepare financial statements, reconcile bank and credit card accounts, and assist them with budgeting and projections.

3. Tax planning

Regardless of the kind of business a person runs, they must understand the tax implications of operating the business. New business owners should hire a tax professional to assist them to make correct projections and to equip them with more tax tips that will help them save money.

4. Business Taxes

There are 5 types of federal taxes. They include income tax, sales tax, excise tax, employment tax and self-employment tax. The type of tax a business pays depends on the type of business a person chooses to set up. Every business person should familiarize themselves with applicable business taxes.

5. Accounting method

Businesses must use a consistent accounting method. The common methods used include the cash method, and the accrual method. Accounting periods are normally every calendar year, although a person may incorporate a fiscal year if they choose. But there are rules as well as pros and cons that should be discussed with a tax expert.

6. Employer Identification Number

All business entities except sole proprietorship are required to have an EIN for federal tax purposes. Sole proprietors who hire employees are also required to obtain one.

7. Estimated Tax payment

Every business person must understand how starting a business plays into tax return numbers. Businesses that make profits for the year may be required to make estimated tax payments.

As always with finances, it’s important for a business to keep a clear record of their taxes. The more organized a business is in terms of tax matters, the more the owner can focus on making the business successful.

So if you are looking for a rewarding business venture, share this article on social media channels such as Facebook. It’s very informative and helpful.

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