Six tips for people starting a new business

Understanding the tax responsibilities that come with starting a business venture can save taxpayers money and help set them up for success. IRS.gov has compiled a list of six tips to help people through the process of starting a new business.

Choose a business structure.

The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:

• Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
• Partnership: An unincorporated business with ownership shared between two or more people.
• Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
• S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
• Limited Liability Company: A business structure allowed by state statute.

Choose a tax year.

A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

• Calendar year: 12 consecutive months beginning January 1 and ending December 31.
• Fiscal year: 12 consecutive months ending on the last day of any month except December.

Apply for an employer identification number (EIN).

An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need one of these numbers. It’s important for a business with an EIN to keep the business mailing address, location and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form.

Have all employees complete these forms:

• Form I-9, Employment Eligibility Verification U.S. Citizenship and Immigration Services
• Form W-4, Employee’s Withholding Allowance Certificate

Pay business taxes.

The form of business determines what taxes must be paid and how to pay them.

Visit your state’s website.

Prospective business owners should visit their state’s website for info about state requirements.

Starting a new business can be an exciting endeavor. We are here to help! Kaufman Accounting is your one-stop-shop for business accounting services. From formation to monthly bookkeeping to business planning, we are here to meet your needs. Contact us today to schedule a meeting with one of our top CPA’s!