Electing to start a business can be one of the most stressful and yet rewarding decisions that a person could make. New business owners often have so many issues to deal with that managing their tax liabilities could become an afterthought. However, it is important to understand the tax implications of operating your own business. If you require assistance managing the tax liability for your new business, contact an experienced Roseville accountant for startups.
At Cook CPA Group, we are devoted to providing you with the accounting services you deserve to help your new business navigate its way to a successful start. Our accountants possess decades of combined experience handling various types of financial issues for businesses across California, and we would be honored to work with you.
Tax Guide for Startups
The owner of a startup has various initial tasks to worry about when creating a new business. Setting a firm foundation for your business will make it easier to operate your business without having to worry about unpredictable occurrences like issues with your tax reporting. The following is a list of tax tips for prospective business owners.
Choosing an Appropriate Business Structure
Determining an appropriate business structure for your startup is an important part of establishing a business. Cook CPA Group can help you decide on a business structure that works for you depending on the goals you have set for your business.
There are multiple types of business structures to choose between, from limited liability companies to operating as a sole proprietor. It is also important to note that the business structure you choose will affect how your business is taxed and the manner in which you must operate your business. For example, starting a C-corporation means that you will have to satisfy several procedures required of corporations.
Selecting an Accounting Method
The type of business structure chosen by a business owner may also play a role in determining the accounting method that must be used. There are multiple types of accounting methods that a business owner may use to document income from goods or services sold.
One type of accounting method is cash accounting. Cash accounting is when income is recorded when it is received or spent rather than when it is incurred. For example, if you provide a client with services in May but you only receive payment for those services in July, the cash accounting method allows a business to record that income in July.
Alternatively, when using the accrual accounting method, you record income for services when it is earned instead of when it is received. In the previous example, you would have to record income for services rendered in the month of May. While cash accounting and accrual accounting are the most common types of accounting methods, there are others that may be more suitable for your business.
Keeping a thorough records for your startup will make it easier for you once it is time to file a tax return for your business. You should keep records to monitor the profits and losses of your business, any possible deductions available, to claim tax credits that you may be entitled to, and for various other reasons.
Detailed records can also let you know which areas of your business are thriving and which areas may need more attention and better procedures. This can also help you determine where you should use funds set out for marketing and similar purposes.
Setting Aside Income for Self-Employment Taxes
Every business owner must ensure that they calculate their self-employment tax liability. While employees of business typically have their taxes automatically withdrawn from their paychecks, self-employer workers must withdraw these taxes from their earnings manually.
Self-employment taxes go towards Social Security benefits and Medicare. If a self-employer individual fails to pay these taxes, it will have a negative impact on their retirement benefits once they reach the age of retirement. Additionally, there are other consequences to failing to pay your self-employment taxes. For example, the IRS may decide to withhold your tax refunds until you pay your taxes.
Under other circumstances, the IRS may decide to file a substitute return if you do not pay self-employment taxes. This scenario should be avoided as the IRS will likely not utilize the deductions and tax credits that you deserve.
There are many other issues pertaining to new business owners that Cook CPA Group is prepared to help you solve.
California CPA for Start Up Business Owners
If you need accounting assistance for your startup, contact an experienced California accountant for startups. Cook CPA Group understands the difficulty that accompanies starting your own business and we are here to help alleviate the process.