Starting a business comes with many challenges. Right at the top should be how you will handle accounting for the business and how to plan for the tax implications of being a business owner. We offer proactive accounting and tax services including tax resolution, tax planning, tax preparation, audit representation, and small business financial consulting and bookkeeping.
New Business Accounting
Figuring out how to track and manage your income and expenses is a critical part of your new business planning. If you aren’t an experienced bookkeeper, you may want to consider outsourcing this aspect of your business.
First you need to understand the requirements based on the type of business. If you have a corporation or LLC, you are required to keep your business finances completely separate from your personal accounts. If you are a sole proprietor, that’s not necessary, but it’s still the best course of action.
You’ll also want to make sure you track all of your expenses so you can claim the appropriate deductions at tax time. Handling expenses correctly in the beginning can save you money when it’s time to file your federal income tax return. Make sure you save receipts, bank statements, credit card and other bills, canceled checks, invoices, W2s, Forms 1099 and any other type of financial statement, proof of payment or tax return.
CPA Services of Florida is a Certified Public Accounting firm that offers full accounting, bookkeeping and financial reporting services for individuals and businesses. We will help you make a plan for the financial management of your business so you start off organized from the jump. If it’s too late for that, don’t despair. We can help you get your book in order at any time. We’ll help you as much or as little as needed, so you can keep your focus on managing and growing your business.
Planning for Start-Up Costs in Your News Business Accounting
The initial expenses for setting up your business, or start-up costs, are those that you incur or pay while creating, investing in or acquiring an active trade or business. You can deduct up to $5,000 of business start-up costs and up to $5,000 of organization costs in the first year the business is open. Having initial expenses of more than $50,000 reduces the amount you can deduct. This means proper planning makes a big difference. By talking to accountant as soon as possible, you can get advice that will help you plan the timing of expenses as well as ensure you have the proper documentation for your expenses.
Don’t forget to save all your receipts! The IRS only requires receipts or records of payment for expenses of $75 or more. However, smaller expenses add up and you may miss deductions if you don’t save the paperwork. This will also help you get in the habit of saving all financial documents.
Paying Employees and Getting Paid
As the owner of a business that sells a product or service, you need a way to get paid. You will want to consider all ways your customers will want to pay – online and in-person and by cash, check and credit cards as well as digital payments. You may need a point of sale (POS)
You’ll also need a way to pay employees, if you intend to have them. Whether you hire workers or use freelancers or contractors, you’ll need a way to pay them. Set up your payroll system carefully – categorizing people as either employees or contractors has different tax implications.
Determining Your Tax Obligations
You’re a business owner now, so what does that mean for your taxes?
If you are self-employed as the head of a partnership, LLC or sole proprietorship, you will likely need to claim income on your personal tax returns. You will also need to withhold taxes from your income and, if you owe more than $1,000 per year, you’ll need to make estimated quarterly payments. The business may also need to file a return, depending on the set up.
If your business is a corporation, you will file the business taxes completely separately from your personal taxes.
Don’t let all of this confuse you. If you have questions, we can help.