Tax Advice for First-Time Business Owners in Ormond Beach
Building your own business can be exciting and rewarding. However, there are also a lot more responsibilities involved than just selling your goods or services, especially when you’re first establishing your business. As a business owner, you have to attend to many small details that can have major implications for your company. Not least among these are the decisions related to your business’s taxes. If you’re setting up a business for the first time, keep reading to get some key tax advice for new business owners in Ormond Beach.
Choose a Business Designation
When registering your business, one of the first things you’ll have to do is choose a business designation, also sometimes referred to as a business structure. There are many types of business structures, including:
- Sole proprietorships
- And more
Each designation has its own pros and cons and will impact how your company is taxed, so it’s important not to rush into this decision. You should fully research each business designation to understand its implications on your finances, and whether or not it’s the right structure for your company. If you have yet to select a business designation, our business accountants can help you review your options and choose the one that makes the most sense for you and your company.
Select a Fiscal Year
When it comes to your personal taxes, your tax year generally isn’t something you get to choose; it aligns with the calendar year, and there’s not much you can do to change that. However, business’s tax year can actually differ from the calendar year. Based on your records and accounting methods, you may be able to adopt a fiscal year that ends in a different month than your desktop calendar does. Of course, altering your fiscal year from the calendar year isn’t always the best choice for everyone, so we recommend that you work with a business tax professional to discuss qualifying for a separate fiscal year, and the pros and cons of doing so.
How do you select a different fiscal year? It’s as simple as filing your first tax return with your desired tax year. If you haven’t filed your first business tax return yet, then you can still select a fiscal year appropriate for your business’s accounting methods. If you have already filed a return based on the calendar year, you can still change it; file Form 1128 with the IRS to request this change.
Get Your EIN
Many first-time business owners don’t do this. They assume that, because they don’t have any employees yet, they have no need for an Employer Identification Number (EIN). However, this is something that you should do as soon as you can. This number is used to identify your business, regardless of how many employees you have. It also makes it much easier to start hiring employees in the future if you already have your EIN in place.
Make Sure Employees Complete Forms
Again, this is a common mistake among new entrepreneurs. Oftentimes, your first employees might be personal connections—your friends or family members who are helping you get up and running. Because of this personal relationship, many first-time business owners avoid formalities like new-hire paperwork. However, it’s important that every person you hire—whether it’s your brother, your roommate, or your own mother—fills out the appropriate forms.
Additionally, make sure you understand the differences between an employee and a contractor. Employees should fill out a Form I-9 and a W-4 before they begin working for you. Those hired as independent contractors should instead complete Form W-9. Make sure that you also have a written contract for all independent contractors. This contract should outline:
- Work to be performed
- Applicable fees
- Date contract will end
- And more
No matter who your contractors are, having this paperwork filled out for them will protect both them and your business. Make sure to keep copies of these forms in a secure location for at least four years after the contractor stops working for you.
Pay Your Taxes
Of course, the time will come when you need to pay taxes on your business’s income. As we already stated, the business designation you choose will impact how your company is taxed; your fiscal year will also affect when those taxes are due. Most businesses use the calendar year for their fiscal year, which would make the tax deadline March 15th; you have the option to extend your tax return to September 15th. Please note that, for business owners, it is generally recommended to make quarterly estimated tax payments to the IRS to avoid underpayment penalties when you file your return.
Paying your business taxes is often much more complicated than personal taxes, and you shouldn’t attempt to do it alone. Contact Camputaro & Associates today to schedule a consultation with one of our business tax experts in Ormond Beach.
Camputaro and Associates
Certified Public Accounting Firm
136 N. Orchard Street, Suite 8
Ormond Beach, FL 32174