10 Tax Tips for New Business Owners

10 Tax Tips for New Business Owners

Tax season is upon us, but as a new business owner you must realize that all year is actually tax season. Keeping these tips in the back of your mind will keep you ahead of the game and organized when it comes time to officially file. While reading through this list remember that these are just general tips and should never take the place of advice and guidance from a seasoned tax professional. So before launching any strategy or taking any deduction, consult a pro so you don’t get in trouble with the man. This may be a lengthy read for some, but taking the time to learn how to properly file taxes as a new business owner is worth the extra couple of minutes. 1. Business Structure How you set up your business will effect how you pay taxes on your income. As a sole proprietor you will pay self-employment taxes on the entire amount that you earn. If you decide to go the LLC route, you can then elect what to be treated as a “S Corporation” or “S Corp” for short, which can help reduce your self-employment taxes. You can do this with an S Corporation because you are allowed to pay yourself a “reasonable” salary, which is subject to employment taxes such as FICA, Medicare and Social Security, and then any remaining profits can be taken as a profit distribution or “dividends”, which are not subject to to those employment taxes. For example, you are a web designer and as a sole proprietor made $50,000 last year. You would have to pay employment taxes on the whole...
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