I’m Starting a Business! What You Need to Know

Starting a business is an exciting but complex endeavor, requiring careful planning and attention to legal and financial details. From choosing the right business structure to managing taxes and accounting, understanding the key steps can set you up for long-term success. This guide outlines the essential considerations for entity registration, financial management, and tax obligations to help you navigate the early stages of entrepreneurship with confidence.

Entity Registration 

Decide what form of business entity you want – consult with a tax professional. 

Proprietorship – Your name or a DBA – Doing Business under Assumed Name.  Apply for DBA  from the state (or county or locality in some states).  Use IRS Form 1040 Schedule C to report income or loss for income taxes. 

LLC  – For tax purposes, can be a single owner, a partnership with multiple owners or a corporation. Can elect S corporation status (requested from IRS within 75 days).  To form an LLC, file Articles of Organization with the state.  Files 1040 Schedule C, 1065, 1120 or 1120S depending on entity type chosen. 

Corporation – file Articles of Incorporation with the state.  Can elect S corporation status (requested from IRS within 75 days).  Files Form 1120S or 1120 for income taxes. 

You may need a business license from your city or county.  

Obtain an Employer Identification Number (EIN) from the IRS.  A proprietor does not need an EIN if there are no employees, it just files under proprietor’s Social Security Number. 

Accounting  

Keep business and personal finances separate.  Open a bank account under the business EIN and open a business credit card or dedicate a personal credit card for business.  If you spent money from a personal account or credit card, then reimburse yourself from the business account so it is recorded in the business.  This keeps all your business transactions all in one place for tax preparation, preventing lost tax deductions.  Quick Books Online (QBO) is the best way to track business expenses, but a spreadsheet can work for very small businesses.  QBO Ledger, the lowest priced option, is only available through accountants. Give us a call. 

Taxes & Payroll

You can deduct any business-related expenses and allocate personal expenses used for business such as  phone, home office, vehicle, office equipment.  If a business claims a vehicle, you can deduct actual operating expenses and a portion of the vehicle cost (depreciation).  For personal vehicles, you can have the business reimburse you for actual expenses or the IRS mileage rate.   

Home office deductions are allowed for areas used “regularly and exclusively” for business management, meeting clients or storing inventory.  If hiring employees payroll, get a payroll expert to assist.  Obtain Form W-9 from subcontractors before you pay them the first time, so you can file 1099’s with IRS at year-end.  See https://www.irs.gov/pub/irs-pdf/fw9.pdf 

If you need assistance navigating the complexities of starting and managing your business, our team is here to help. Contact us for expert guidance on entity registration, financial management, and tax compliance to ensure your business is set up for success.