What People Need to Know When Starting a Business

Business | IRS | Taxes | Sole Proprietorship | Partnership | Corporation | LLC | October 16, 2024

This Week's Quote:

"Dream big and dare to fail." 
     - Norman Vaughan

What people need to know when starting a business

The IRS knows that understanding and meeting tax obligations is vital to the success of all businesses, especially a new one. IRS.gov has the resources and information to help people through the process of starting a new business. 

Here are some tips for new entrepreneurs.

Choose a business structure

The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:

• Sole proprietorship: An unincorporated business owned by an individual. There's no distinction between the taxpayer and their business.

• Partnership: An unincorporated business with ownership shared between two or more people.

• Corporation: Also known as a C corporation. It's a separate entity owned by shareholders.

• S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.

• Limited Liability Company: A business structure allowed by state statute.

Choose a tax year

A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

• Calendar year: 12 consecutive months beginning January 1 and ending December 31.

• Fiscal year: 12 consecutive months ending on the last day of any month except December.

Apply for an Employer Identification Number (EIN)

An EIN is also called a Federal Tax Identification Number. It's used to identify a business. Most businesses need one of these numbers even if they don’t have employees.

It's important for a business with an EIN to keep the business mailing address, location and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form.

Have all employees complete these forms

• Form I-9, Employment Eligibility Verification U.S. Citizenship and Immigration Services

• Form W-4 Employee's Withholding Allowance Certificate

Pay business taxes

The form of business determines what taxes must be paid and how to pay them.

Visit the state website

Prospective business owners should visit their state's website for info about state requirements.
 
Credit goes to Internal Revenue Service, Tax Tip of the Week.
 
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
 
This Week’s Author, Belinda Stickle