Whether it’s your first time starting a business or you’re an old pro, making sure you dot your i’s and cross your t’s keeps your new venture in compliance from day one.
While this checklist won’t cover every single item on your administrative to-do list, it’s a great start towards getting your new project off on the right foot.
Set the stage for organized recordkeeping
Running your own business requires meticulous recordkeeping – both paper documents and electronic files. Before you find yourself swimming in a pile (or virtual pile) of muddled records, set up an organizational system that works for you.
Common documents you’ll need to track and save include:
- All government forms
- Bank statements
- Receipts for expenses and assets (note that you cannot use a credit card statement in lieu of a receipt)
- W-9 Forms if you hire independent contractors
- Mileage logs
- Any record related to tracking income or expenses
Making an entity decision
Choosing the right entity structure for your business is not necessarily something you need to make a final decision on before you launch, but depending on your personal goals and business objectives, there are benefits to determining the best organizational form as soon as possible.
>>>Thinking about forming an S Corp? Read this for more information.
Determine appropriate tax deductions and strategy for your business
Missing potential deductible expenses or claiming deductions incorrectly are two of the most common tax mistakes new business owners make. It’s a good idea to familiarize yourself from the get go regarding which deductions are allowed and which aren’t.
Generally speaking, any expense incurred to promote or maintain your business can be used as a write-off. Common examples include:
- Legal advice
- Tax prep
- Business consulting
- Continuing education
- Business meals
For deductions on your business vehicle and home office, you will want to discuss with your accountant whether to deduct actual expenses or use the standard mileage rate or the flat per-square-foot allowance.
Note: SEP contributions cannot be deducted as a business expense. Only retirement plan contributions for your employees qualify.
Paying Uncle Sam
Don’t forget that tax withholdings work differently when you own your own business compared to being a W-2 employee. You will be responsible for quarterly estimated tax payments to the IRS and failing to make payments throughout the year can lead to a penalty when you file.
Note: Be aware that you are also responsible to pay the employer portion of your personal Social Security and Medicare taxes.
As a business owner, you are responsible for sending 1099s to anyone you hire as an independent contractor – and there are two 1099 compliance questions you will need to certify on your tax return.
Best of luck with your new enterprise
Welcome to the exciting world of business ownership! While there are certainly adjustments to be made when you’re running your own show, there is nothing quite like taking full control of your goals and dreams.
We wish you all the luck on your entrepreneurial path.
Get help with tax planning for your new business
Our team believes a tax return should be the result of strategic planning, and never a surprise. Understanding your goals is critical to determining the “right” strategy, and it’s never too early to begin the planning process.
Start your journey to tax-efficiency by requesting a free consultation with our team here: online contact form.