Four Things to Know about Taxes and Starting a Business

Four Things to Know about Taxes and Starting a Business
When starting a new business, owners have many taxrelated things to do. Here are few things to
know before launching your company.
1. Choose A Business Structure–From Sole Proprietorships to S Corporations there are many
forms of businessstructures. So, when starting a business, an owner must determine what
form of business entity it will be. This decides which tax forms a business needs to file.
2. Determine Business Tax Responsibilities – What taxes you need to pay and how to pay
depends upon the type of business you operates. There are the five general types of
business taxes
 Income Tax– Except partnerships all business entity must file an annual income tax
return. They must pay income tax as they earn or receive income during the year.
 Self-Employment Tax – It refers to 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.
 Estimated Taxes- If the amount of income tax withheld from your salary or pension
is not enough, or if you receive any income which is not subject to withholding tax,
you may need to pay estimated taxes
 Excise Tax – These taxes are applicable for business which deals with: manufacture,
sale or use of certain types of goods and products.
3. Choose A Tax Year Accounting Period – An accounting yearortax year is a period for
keeping records and reporting income and expenses. A business can choose either a
Calendar year or a Fiscal year.
4. Set Up Recordkeeping Processes–Good recordkeepinghelps business ownersto monitor
progress and also to prepare financial statements and tax returns.
Source IRS
Essential Tax Services
13168 Piedmont Vista Drive
Haymarket, VA
Zip: - 20169
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