Taxes can be hard to understand, especially for people who own small businesses. However, knowing the basics can help you organize your finances and make sure you follow the tax rules.
If you own a business in Orange County and want professional tax help, you might want to talk to an Orange County CPA firm. Let us go over the most important tax ideas that every small business owner should understand.
Table of Contents
Understand the basics.
- Income tax: This is a tax that is based on the net income of your business. The rate changes based on the type of business you have (sole proprietorship, partnership, company, LLC, etc.) and the tax rules that apply to it.
- Sales tax: If you offer things or services for sale, you might have to collect sales tax from your customers and send it to the government. Different places have different sales tax rules and rates.
- Employment taxes: If you have workers, you need to take payroll taxes like Social Security and Medicare taxes out of their pay and send them to the government. You will also have to pay the company part of these taxes.
- Property tax: You have to pay property taxes to the city or town if you own business land.
Choose the right business structure.
How your business is set up has a big effect on your tax responsibilities. Here are some common structures:
Sole proprietorship.
If you run your business as a sole proprietorship, you and your business are officially the same person. On your personal tax return, you list the money you made and spent from your business.
Partnership.
A partnership is a business that is run by two or more people. Partners split up profits and losses and report them on their own tax forms.
Corporation.
A legal body that is different from its owners. Corporations have to pay taxes on their gains, and owners may have to pay taxes on the earnings they get.
Limited Liability Company (LLC).
This is a type of mixed organization that protects its owners from responsibility. Depending on the choice made, an LLC can be treated as a sole proprietorship, a partnership, or a company.
Keep track of records.
For tax reasons, it is important to keep correct and well-organized financial records. Here are some important records you should keep:
- Income records: Keep track of all of your income sources, such as sales, fees, and other money you make.
- Expense records: Write down all of your business’s costs, like rent, bills, pay, supplies, and marketing.
- Banking records: Keep track of all the money that goes in and out of your business accounts.
- Items bought and sold: Keep copies of all receipts and bills for purchases and sales.
File your taxes.
Tax dates are different in each area. To avoid fines, it is important to stay prepared and pay your taxes on time. If you are not sure about any part of filing your taxes, you might want to talk to a tax expert.
Additional tips for small business owners.
- Learn about tax credits and deductions: Learn about the tax credits and deductions that can lower your tax bill.
- Keep up with tax laws: Tax laws change all the time. Keep up with the latest changes to make sure you are following the rules.
- Think about tax planning strategies: Talk to a tax expert about how to make the best tax plans so that you pay the least amount of tax possible.
- Use tax software: Tax software can help you keep track of your taxes, do the math correctly, and file your forms online.
If you know the basics of business taxes and use these tips, you can confidently deal with taxes and pay the least amount of money possible. Remember that getting help from a trained tax expert can give you good information and make sure you follow the rules.
