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Four Things to Know about Taxes and Starting a Business | Business

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Four Things to Know about Taxes and Starting a Business
Business, Commentary

 

New business owners have tax-related things to do before launching their companies. IRS.gov has resources to help. Here are some items to consider before scheduling a ribbon-cutting event.

Choose a business structure

When starting a business, an owner must decide what type of entity it will be. This type determines which tax forms a business needs to file. Owners can learn about business structures at IRS.gov. The most common forms of businesses are:

  • Sole Proprietorships
  • Partnerships
  • Corporations
  • S Corporations
  • Limited Liability Company

Determine business tax responsibilities 

The type of business someone operates determines what taxes they need to pay and how to pay them. There are the five general types of business taxes.

  • Income tax – All businesses except partnerships must file an annual income tax return. They must pay income tax as they earn or receive income during the year.
  • Estimated taxes – If the amount of income tax withheld from a taxpayer’s salary or pension is not enough, or if the taxpayer receives income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, they may have to make estimated tax payments.
  • Self-employment tax – This is a Social Security and Medicare tax. It applies primarily to individuals who work for themselves.
  • Employment taxes – These are taxes an employer pays or sends to the IRS for its employees. These include unemployment tax, income tax withholding, Social Security, and Medicare taxes.
  • Excise tax – These taxes apply to businesses that:
    • Manufacture or sell certain products
    • Operate certain kinds of businesses
    • Use various kinds of equipment, facilities, or products
    • Receive payment for services

Choose a tax year accounting period

Businesses typically figure their taxable income based on a tax year of 12 consecutive months. A tax year is an annual accounting period for keeping records and reporting income and expenses. The options are:

  • Calendar year: Jan. 1 to Dec. 31.
  • Fiscal year:12 consecutive months ending on the last day of any month except December.

Set up recordkeeping processes

Being organized helps businesses owners be prepared for other tasks. Good recordkeeping helps a business monitor progress. It also helps prepare financial statements and tax returns. See IRS.gov for recordkeeping tips.

This information is not intended to be a substitute for specific, individualized tax advice as individual situations will vary.  Royal Alliance Associates, Inc., Georgetown Capital and its advisors are not engaged in rendering tax advice.

These links are provided as a convenience and for informational purposes only. We assume no liability for any inaccuracies, errors or omissions in or from any data or other information provided on the pages, or for any actions taken in reliance on any such data or information.

Prepared by the IRS.  For more information go to www.irs.gov.

Securities and investment advisory services may not be available in all states.

Representatives offer Securities and Advisory Services through Royal Alliance Associates, Inc., member FINRA/SIPC and a registered investment advisor.

Insurance services offered through Georgetown Capital Group, which is independent of Royal Alliance Associates, Inc. with separate ownership, and is not registered as a broker-dealer or investment advisor.

 Joseph V. Curatolo, President of Georgetown Capital Group

5350 Main Street, Williamsville, NY 14221

Phone #(716) 633-9800  Toll Free 1 (800) 648-8091  Fax #(716) 633-9789

www.georgetowncapital.com

 

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