Staying on top of taxes and tax concerns is crucial when you start a business. Conducting business in the United States without properly managing tax payments to the local, state and federal government can result in massive fines, persistent bank liens or the government stepping in to shut you down.\
We’ve listed critical forms and requirements to address and gathered tips to help entrepreneurs and new small business owners ensure all tax obligations are handled correctly.
Entrepreneurs have several immediate administrative concerns when starting a business. We’ll look at the necessary forms to file and the steps you must take to set up and monitor your venture’s tax obligations properly.
Your business’s legal structure affects the taxes you’ll pay, the forms you’ll file and the financial and legal benefits you’ll receive. There are many business structures to choose from. However, most small businesses establish themselves as a limited liability company (LLC), a sole proprietorship or a partnership of some kind.
Your business location and structure will dictate how and where you must register your company. You will have to file within the state where your business will operate. The SBA’s business registration website provides ample online resources to help you register your business correctly in your state.
Various legal structures use the following forms when filing their taxes:
Various business structures file taxes with the IRS at different times, with partnerships and corporations generally filing on March 15 and sole proprietorships and single-member LLCs filing on April 15.
The federal government and many states require businesses to have tax identification numbers (TINs), often referred to as employer identification numbers (EINs). Businesses need EINs to pay federal and state taxes:
If you hire employees, you must file several tax forms based on your team members’ employment statuses.
Anthony Mezzasalma, a certified public accountant with Mezzasalma Advisors, advises all businesses to work with a reputable payroll provider to handle quarterly payroll tax filings, W-2 forms and other vital aspects of managing a staff. The best payroll services automate crucial payroll processes and ensure you don’t inadvertently violate payroll tax laws.
Independent contractors have unique tax requirements. Here are the forms you should know about:
Form 1099-NEC and Form 1099-MISC are often confused. Employers give a Form 1099-NEC to independent contractors and self-employed people who provide services. Form 1099-MISC reports miscellaneous payments like rent and prizes.
Following the passage of the Affordable Care Act, businesses must be aware of Form 1095-B or Form 1095-C, depending on how many employees they have. These forms are required if your business offers health insurance as part of its employee benefits plan. Failure to file these forms will incur penalties from the government.
You’ll also have tax considerations and obligations if your business provides retirement plans to employees. The best employee retirement plans will provide complete administration and tax support to help you.
The U.S. tax code is a labyrinth requiring years of study. Any business tax missteps can lead to significant financial problems. Take the following steps to ensure you avoid tax headaches:
As a small business owner, you want to focus on growing your business. However, preparing and submitting the appropriate tax and legal forms is part of that process. Educating yourself and working with qualified professionals to mitigate risks and eliminate problems is crucial.
Casey Conway contributed to this article. Source interviews were conducted for a previous version of this article.