Many people dream of starting their own small businesses. You ask yourself what is there not to love about it? We will often sit in our cubicles and stare off into the distant sunset, otherwise known as the vacation photos of our co-worker on the nearest divider, and dream of having the lifestyle of being your own own boss. We can make our own hours, pick what days we want to work, take as many vacations as we can plan, and of course, make a lot of money! But what many people are not aware of is that there are important steps that need to be taken in order to prepare for this new venture from a tax standpoint.
- What type of business are you going to start? The typical types of businesses include C-Corporations, S-Corporations, Sole Proprietorships, Partnerships, and Limited Liability Companies. This determines how you will pay taxes on your new business.
- What type of tax will you pay? The four general types are self-employment tax, income tax, employment tax and excise taxes.
- You may need an Employer Identification Number. Please check IRS.gov to find out if you need this number and you can also apply for in online.
- It is important to start your business out with detailed recordkeeping. Many small businesses find that Quickbooks is a great bookkeeping software to keep accurate records. Some businesses will also find hiring a bookkeeper very helpful.
- Will your company be issuing payroll checks? If your new business will be having payroll, it is a good idea to look into hiring a payroll company. Between the IRS and Massachusetts, payroll can get very complicated, it may be worth the expense of using a payroll company.
- Which accounting method will you choose? The two most commonly used methods are the cash method and the accrual method. Both of these methods will have different tax implications, so choose the one that best fits your business.
Following the above steps will hopefully guide you in success when starting your new small business. Please make sure to consult with your tax advisor on all the above information and visit our website to inquire about further information, www.steveveseycpa.com. From all of us at Vesey and Company, we wish you well in your new adventure of being a small business owner.