Almost everyone is familiar with paying personal income taxes, but taxes for businesses are unfamiliar territory for most people. Understanding your tax responsibilities and learning what you can do to avoid over-payment is a challenge to handle alone, but with advice from a CPA firm that has experience with helping start-up companies succeed, you ensure your business is financially sound and fully compliant from the outset. A local Long Island accountant can help brick and mortar or online businesses meet their tax obligations.
Know Your Business Type
What kind of business are you establishing? Tax laws treat sole proprietorships, corporations, S-corporations, partnerships, and self-employment as different entities. You will fill out different tax forms for each of them, and your choices here have a significant impact on your tax responsibilities. You will always need to pay an income tax, but self-employment taxes, sales taxes, and payroll taxes may also factor into your tax plan. At this stage, a CPA’s financial advice is invaluable. Choosing a local firm is also wise; a Long Island CPA, for example, can advise you not only on federal tax laws but also state and local tax expectations you must meet.
Obtain an EIN
Employer identification numbers are to businesses what Social Security numbers are to individuals: a means of identifying the organization, ensuring it fulfills all tax obligations, and granting benefits where applicable. Most businesses and partnerships require an EIN, particularly if you have employees or work directly with independent contractors. Your financial advisor or CPA can also help you through the process of getting an EIN.
Maintain Accurate Records
Record-keeping is essential for businesses at every stage of growth, but it is particularly critical for new businesses. Fledgling companies generate a large volume of paperwork, but a record-keeping system that makes it simple to stay organized helps keep the process manageable. Records are also vital for future mergers and acquisitions, filing status changes, and other events that may occur in your company’s future. Hiring a professional to maintain financial records for your business prepares you for whatever may affect your company.
Keep Records Consistent
Consistency counts when reporting taxes, recording income, and tracking expenses. Tax obligations are not a one-time event but an ongoing responsibility, and your records must be consistent over time to demonstrate compliance. Typically, businesses use one of two methods for accounting. For businesses using a cash method, the company reports income during the tax year it’s received and deducts expenses when the business pays them. An accrual method, on the other hand, reports income when it’s earned even if it was not yet received; similarly, expenses are deducted during the same tax year they occur regardless of whether they have yet been paid.
Choose a Reliable CPA
From hiring to marketing to research and development, the list of concerns for new business owners is already long. Adding business tax compliance to this list of challenges takes time away from other areas that need an owner’s attention. Instead of attempting to do it all, many start-up owners place their new company’s finances in the hands of a trusted expert by choosing an accounting firm that sees to tax compliance and preparation for them. Your CPA firm can also handle payroll, budget preparation, forecasts, and other financial needs.
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