As a small business owner, you will probably agree that when it comes to filing taxes for the first time, things become too complicated. You do not have enough experience in order to organize everything by the book. However, you can drastically simplify this process just by figuring out all the minor details in advance. By realizing how to file small business taxes for the first time, you can drastically simplify this process.
Today, we are going to talk about the main tax forms that you are required to file as a first-time business owner.
About Being Organized
First of all, you should keep in mind that one of the most vital aspects when it comes to filing taxes is to keep organized accounting records. Additionally, you have to focus much attention on the process of tracking all the transactions that you implement in your business on a daily basis. Of course, you can use online accounting software. However, it is better to trust this process to professional accountants who will help you with this process.
It Depends on Your Business Structure!
It is a general rule of thumb that when you launch your business, one of the most crucial decisions that you have to make is to choose the right business structure. The main reason is that depending on your business structure, your tax liabilities can vary. Therefore, it is important to choose the right business structure for your business. Additionally, there are several types of business structures that can make the business owner responsible for the company’s taxes. Other structures in their turn can keep your business’s tax liabilities separate from your own.
Let’s cover each of the main business structures separately and try to figure out their tax responsibilities.
A distinctive feature of the sole proprietorship is that it is a single-owner business structure. This type of business structure is considered to be the easiest one for structuring your business. The main reason is that Sole proprietorship has fewer government regulations. By running your business as a sole proprietorship, you have to file the following IRS forms:
- Schedule C
- Schedule SE, Self-Employment Tax
A partnership can have more than two owners who share both their profit and losses equally. This structure is taxed at the personal income level, and if a business cannot pay its taxes, then the owner’s assets can be at risk.
With this business structure you have to file the following forms:
- Form 1065, U.S Return of Partnership Income
C Corp is an entity that is completely separated from its owners, which means that the owner is not responsible for its business’s tax debts. However, you should keep in mind that corporations are double-taxed.
Here, you have to file:
- Form 1120, U.S. Corporation Tax Return to report your income and expenses.
Limited Liability Company (LLC)
An LLC combines some parts of corporations and partnerships. However, it is a separate business entity and the owners have to share their tax liabilities.
Here, also taxes pass through the personal income level which means that the business is not double-taxed.
When it comes to filing taxes for the first time, you have to strictly follow all the instructions and rules in order not to miss something vital and face more serious issues in your business. Therefore, it is better to cooperate with professional companies like Prestige Auditors which can help you figure out all the nuances regarding taxes. You can visit Prestige Auditors where you can find more information regarding services provided by our team.