If you have never owned a small business, you might not know what the ins and outs of the process looks like. There are many things to think about. You might be determining the services that you will offer, whether or not you need employees, what inventory will look like and more. What you should definitely think about is what you need to do to ensure you are set up for taxes. Propel Your Accounting is here to share some tips to ensure that your small business is ready for tax season from the beginning.
Tax Tips for Small Businesses
You want to get your small business off on the right foot. This will help you achieve as much success as possible. Here are some tax considerations that you should make right out of the gate:
– This Isn’t a Hobby: The first thing you want the IRS to understand is that you are starting a business, not a hobby. There is a big difference. Hobbies don’t turn a profit. You need to have a business plan that clearly shows your marketing and management efforts in a document so that the IRS can see that you are expecting to turn a profit. Your business needs to be profitable 3 out of 5 years.
– Don’t Forget Bookkeeping: One thing that is absolutely essential to the success of your small business is bookkeeping. You need to keep detailed records of your income as well as your expenses. Keep track of anything that you have purchased to get your business off the ground. This might be mileage, equipment, inventory, travel and more.
– Record Income as It Rolls In: Many small businesses can take advantage of the cash method which means that they are recording income as it is received rather than billed. It also means that expenses can be reported when paid. This is something that businesses making less than 27 million in the prior three years.
– Utilize a Home Office: A great deduction for many small businesses is a home office deduction. If you have a portion of your home that is used exclusively for your business transactions, production or meetings, you can deduct a portion of rent, mortgage interest, utilities, cleaning and more.
– Choose Your Entity Wisely: Before you race to incorporate as a small business, consider the implications of that. You will then likely be responsible to pay payroll taxes on your income. It might be more beneficial to continue filing as someone that is self-employed.
Bookkeeping, Accounting, Business Consulting & HR / Admin Services in the United States of America
If you are getting your business up and running, but have questions about bookkeeping, taxes, business structure and more, you can turn to Propel Your Accounting for the help that you need. We will ensure that you’re doing all of your recording and documenting right. It is our goal to help you achieve success. Call us today!
