Tips for people starting a new business

Understanding the tax responsibilities that come with starting a business venture can save taxpayers money and help set them up for success. Contact your local tax attorney for advice and answers to help you through the process of starting a new business.

Here are five tips for new business owners.

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. A partnership is a flow thru entity, meaning that income, losses, deductions and credits flow thru to the partners based on agreed upon allocations.
• 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 – much like a partnership. An S Corp must file an election with the IRS to be treated as an S Corp.
• 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 Jan 1 and ending Dec 31.
• Fiscal year: 12 consecutive mos ending on the last day of any month except Dec. 

Apply for an employer identification number.

An “EIN” is also called a federal tax identification number. It’s used to identify a business. Most, but not all, businesses need one of these numbers. 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. Be sure to engage a knowledgeable tax attorney and CPA/bookkeeper to assist in setting-up the tax payment structures before you start the business.

Starting a Business? Contact us!

If you plan to start a business, call McFARLANE LAW – A Tax Law Firm for assistance.

With offices around the Phoenix valley, Tucson, and Flagstaff.

We represent clients at all administrative agency and appeal levels, the Arizona Tax Court, and the federal US Tax Court, and throughout Arizona: Phoenix, Glendale, Peoria, Scottsdale, Mesa, Tempe, Chandler, Queen Creek, Yuma, Casa Grande, Tucson, Sierra Vista, Bisbee, Flagstaff, Prescott, Payson, Coconino County, Yavapai County, Maricopa County, Pima County, Cochise County, Pinal County.