Starting a New Business? Here Are Some Things You Should Know

Starting a new business can be stressful – especially when it comes to finances and tax preparation. As you start your new business, it is very important to understand your tax liabilities, deductible expenses and accounting system. This will enable you to start off on the right foot and develop smarter tax preparations early on—before the mistakes can add up to major tax issues.

Here are four things you should take into consideration:

1. Understand Tax Liabilities Associated with Your Legal Entity
Whatever legal entity you choose to establish your business under will have a significant impact on your tax liabilities. Each type of business will have its pros and cons when it comes to tax burdens. Make sure you choose the right format for your company (sole proprietorship, DBA, LLC, S corporation or C corporation). Understanding the specific tax liabilities of each option will help you make that decision, along with other important factors.

2. Get the Most Out of Your Deductions
When starting a new business, you have to stretch every dollar you can. That also goes for maximizing your business deductions when tax time rolls around. Understand that startup expenses and ongoing expenses are eligible for deductions, both ordinary and necessary. Work with a professional tax advisor like Ferguson, Timar & Co. to take advantage of every possible deduction.

3. Keep Track of All Startup Expenses
There are numerous expenses that can be deducted from starting a new business. Understand what you can and cannot deduct, and then keep accurate accounting records, receipts and expense reports so that you have the necessary information at hand when you are preparing your taxes.

4. Know Your Self-Employment Tax Liabilities
Self-employment tax is comprised of Social Security and Medicare taxes and is applicable to any employees (especially you, the owner) whose income is not subject to employer withholding. You can deduct a portion of the self-employment tax, as well. When you understand and prepare for your self-employment tax liabilities, you will be better off.

Before you start your new business or if you’re in your early years, it’s beneficial to work with a small business tax preparation professional to help you understand liabilities and maximize deductions. Ferguson, Timar & Company specializes in small business tax preparation and consultation. We will help your business get off to a good start and be prepared for all of your tax burdens as you grow and increase profit. Contact us today for a consultation.