IRS Tax Suggestions for New Business Owners

IRS Tax Suggestions for New Business Owners

April 06, 2022
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According to the US Census Bureau, there were 430,411 new business applications in January 2022.2 Starting a business sometimes comes with a learning curve that can trip you up, so it makes sense to get as many things as right as possible the first time. One important thing to address is your business tax setup.

  • Choose a business structure. The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:
    • Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
    • Partnership: An unincorporated business with ownership shared between two or more people.
    • Corporation: This is also known as a C corporation. It’s a separate entity owned by shareholders.
    • S Corporation: A corporation that elects to pass corporate income, losses, deductions, and credits through to the shareholders.
    • Limited Liability Company: This is a business structure allowed by state statute.
       
  • Choose a tax year. A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:
    • Calendar year: 12 consecutive months beginning January 1 and ending December 31.
    • Fiscal year: 12 consecutive months ending on the last day of any month except December.
       
  • Acquire an employer identification number. An EIN is also called a federal tax identification number and identifies a business much like a social security identifies a person. Most businesses need an EIN.
     
  • Have all employees complete these forms (And check for others required for your business):
  • Pay business taxes. The form of business you establish determines what taxes must be paid and how to pay them. There are five general types of business tax: income, estimated, self-employment, employment, and excise and you can read in depth about each type here.

Beyond business taxes, another essential element will be your business insurance coverage. When considering the type best suited for your business, consider how coverage for things like property damage, liability, injury, loss of income, and even life and disability could impact your growth and success. It’s rarely advised to run a small business without financial protection, and that means choosing the right small business insurance to meet those risks head-on.

It can be hard for new businesses to succeed. As your trusted financial partner, we’ll help you through the process or connect you with other professionals specializing in that area. Please don't hesitate to reach out to us today.

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This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.

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1https://www.irs.gov/newsroom/these-tax-tips-can-help-new-business-owners-find-success
2https://www.census.gov/econ/bfs/data.html