Setting up a new business requires a lot of work, and with so much to do, it can be easy to overlook matters regarding to your new company's taxes. Here are some critical pieces of tax advice for any first-time business owner to follow.
There’s a lot that goes into running even a small business—and a great deal of that work happens before you even open your doors. There’s paperwork to file, decisions to be made, and strategies to consider. For first-time business owners, it’s easy to get caught up in all of the tasks you must complete to get your company up and running, and you may overlook important tax-related tasks that you should be taking care of. If you’re opening a business for the first time, be sure to add these critical items to your to-do list. And, if you need assistance with your new company’s finances—from tax returns to bookkeeping and business consulting—contact Kohl & Company today.
Select a Business Structure
You know how you want your business to run. You know what you want to sell and how you’re going to market that product or service. But will your company be a corporation, an LLC, a partnership, or a sole proprietorship? These business designations will not only impact how your company is taxed, but can affect other aspects of your business’s operations. If you’re not sure which business designation is best for your company, our financial experts can help you to determine that.
Get an EIN
Every registered business should have an Employer Identification Number (EIN). It doesn’t matter if you already have a dozen employees or if you’re running the company on your own for now. The EIN is used to identify your business and is necessary when filing your first business tax return. It will also come in handy if you ever hire employees or contractors in the future.
Select Your Fiscal Year
As you may or may not know, businesses track their financials based on a fiscal year—and that fiscal year may not always align with the calendar year. This also impacts how and when you pay your business taxes. While you’re likely used to paying your taxes based on a calendar year, you can actually choose your own tax year for your business.
There are qualifications and restrictions on this, which you can learn more about here. However, in most cases, selecting your business’s tax year is as simple as filing your first business tax return using your desired tax year. If you decide later that you want to change your tax year, you can request approval using Form 1128.
Always Use Employee Paperwork
A lot of first-time business owners hire their first employees from their pool of friends and family members. While this is a personal choice and perfectly acceptable, it’s important that you not overlook the importance of using the proper employee paperwork. Whether you’re hiring a lifelong friend or your own mother, you should always have them fill out the right forms before they begin work.
If they’ll be an employee, they should fill out both a W-4 and an I-9. If you’re hiring them as a contractor or freelance worker, have them fill out a W-9; you should also write up and have them sign an official contract that outlines the work they’re expected to do, deadlines, fee schedules, and so on.
While this may seem over the top when hiring someone you know and trust, you need to remember that you are a business owner now, and as such, you should always be doing things by the book. Failing to get this paperwork done upfront can lead to a lot of issues later on, so save yourself the hassle and do the right way from day one. Make sure all employees and contractors get a copy of their own paperwork, and keep your copies in a safe and secure location for at least four years, regardless of whether or not the person continues to work for you for that long.
Pay Your Business Taxes
This may seem like an obvious statement, but it’s important that you always pay your business’s taxes—and that you do it on time. As mentioned earlier, your business’s fiscal year will determine when your taxes are due; but it can also be impacted by the business designation that you choose for your company. So, please make sure you’re aware of when your taxes are due and get them filed on time, or request an extension if you need one.
If you need assistance with your business’s tax returns or any other aspects related to your new company’s finances, contact Kohl & Company. We can provide comprehensive accounting services for your business so that you can focus on getting your company up and running while we handle all the numbers. Call and schedule an appointment with our business finance experts today!