These days, starting a new business can be very challenging but rewarding as well. From business plans to effective marketing strategies and tax responsibilities, etc, there are plenty of other things you need to consider. Here is what you can do to help get off to a good start.
Go for a business structure
The form of your business determines which income tax, you need to file. Some of the most common business structures are mentioned below:
- Sole proprietorship: this is an unincorporated business that I’d owned by a person. Also, there is no distinction between the taxpayer and the business.
- Corporation: It is also known as a C corporation and is a separate entity owned by shareholders.
- Partnership: This is also an unincorporated business with ownership shared between two or even more individuals.
- S corporation: A business that elects to pass corporate income, deductions, credits and losses to shareholders.
- Must apply for an identification number: It is also called EIN and is a federal tax identification number. This number is used to identify a business and most of the business Today need this number.
- Must pay taxes: The firm of your business determines what taxes should be paid and how to pay.
How can you save on taxes?
Businesses taxes are different than us tax for us citizens living abroad. The first question that every business owner needs to determine is whether he needs to enlist the help of an expert to handle his business taxes and help him plan in advance so that he can take benefits of the certain tax deductions. Some of the most common ways to save on taxes are mentioned just below:
- Adopt an accountable plan
Businesses that have employees and reimburse them for using their vehicles on company business must adopt an accountable plan. This plan save them income taxes and save their company’s payroll taxes. These arrangements will also allow them to reimburse an employee for business expenses without having to treat the reimbursement as income to employees.
- Structure the business the proper way
This is the most overlooked aspect in tax planning. Most of the Businesses that start out small do not change the structure of their business when they must. For instance: if you have to closely held company in which the income passes through you, the business owner, these are set up as an LLC or an S corporation. There is nothing wrong in those structures, but you might be able to gain tax benefits by structuring your business as C Corporation.
- Must defer income and accelerate deductions
There are a lot of steps one can take near the end of the tax year to putt off his income into the next year and increases your deductions in the current tax year. Send all your bills out a few days later in January in the last month of the year. This means getting paid a few days later in January of the next year and being able to defer the income rather than getting paid in December of the current year and having to declare that income quickly.