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Here are 10 things new business owners need to know

Depending on what type of business you start, starting a business can be expensive and complicated. A strategic business plan helps you solve questions like what are my capital resources, how will my product or service reach the market, or how will I manage my day-to-day operations. These are very important issues for any start-up, and should be noted, however, there are some other “must know” issues that are just as important for new business success.

First, having the right business form to choose from can have a significant impact on your bottom line. This is because different business forms are taxed separately. Different types of business structures include sole proprietors, LLCs, partnerships, S corporations, or C corporations. Each with its own set of rules, because it depends on how you pay taxes. Next consideration, whether I should get an Employer Identification Number (EIN), has been a popular topic in startups. In general, regardless of your business form, it is important to apply and obtain the EIN. This is because while running the business you will likely make some payments that require a return of information. The forms used to report these payments must include the recipient’s identification number.

Another important consideration is deciding your tax year. A tax year usually consists of twelve months. The IRS allows two types of tax years. The first calendar year is the year, which begins on January 1 and ends on December 31 of each year. This is the second financial year. “A fiscal tax year is 12 consecutive months that end on the last day of any month except December. A 52-53 week tax year is a financial tax year that lasts 52 to 53 weeks but does not end on the last day. Falls a month “(IRS Pub 538). Although most startups choose calendar years, it’s good to understand the difference between the two. Once your business grows, it may be wise to turn to the financial year because of the many potential tax benefits that they can reap.

In the next three considerations, business owners know how they will be responsible for paying federal and state taxes, what tax forms you need to file, and how to properly hold employees accountable, because It has to do with taxes. The IRS requires different business forms to file different tax returns (Schedule C, 1120, 1102s, 1065) at different times during the filing period. Also, depending on whether you have a W-2 employee or an independent contractor, different types of information return requirements will apply. You may face state and local sales tax payment and reporting requirements. It is also important because it is arguably the most difficult area to start a small business.

Finally, understand the proper method of accounting (cash vs. accrual), what business expenses are deducted, and what records to keep, and the last three to “know how much”. Depending on which accounting method you choose, you may be able to pay more in taxes. To carry out this commitment requires a thorough understanding of the available accounting methods and how they affect your particular situation. Understanding which expenses are deducted will help you keep proper records, as well as help your tax professional maximize your credits and deductions. Remember, a tax pro is usually limited to the information you provide. Tax professionals can understand the implications of some deductions, but without your input they may not know that deductions apply.