Tax Tips for Startups
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Starting a business is an endeavor full of hard work and uncertainty. Unless you’re backed by Elon Musk or Warren Buffet, you need to balance financial limitations with market opportunities. Until you have a steady stream of income, you need to be nimble, proactive and relentless.
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You have bills to pay, payroll to meet and equipment to buy and maintain. You have to keep on top of marketing needs and advertising costs. On top of all that, there are the startup taxes. You began your business with an idea and a passion. All the other responsibilities not only get in the way, they also may drain your energy.
Are You a Financial Wizard?
If the answer is No, don’t get bogged down by budget matters. When it comes to taxes, for example, let a professional tax accountant in NYC advise you. Miller & Company is a Manhattan accountant with many years of experience helping small businesses with big potential. Startups must do two things very well right from the start:
- Keep meticulous notes for all your expenses — in fact, track all of your finances, incoming and outgoing.
- Find a way to receive all the new business tax deductions you’re entitled to, even if that means hiring a tax accountant — because it often does.
It’s often said that “You have to spend money to make money.” If you decide to skimp on hiring a tax accountant to save money now, it may actually cost you money in the end. An NYC tax accountant like Miller & Company with offices in New York City and Queens can save you money now and as your business grows.
Save on Startup Taxes
When you’ve got your finances straight, your company is much more likely to succeed, and you’ve got fewer things to worry about. When you take the right steps out of the gate, the rest falls into place. Here are some tips for reducing the startup taxes of your new business:
Deduct your startup costs.
Before you even open your doors — real or virtual — you have expenses. Market research, competitive analysis, talent recruitment, staff training, location scouting and legal fees are all tax deductible. Capital costs, on the other hand, have to be depreciated over time instead of taken as new business tax deductions in one year. Learn the difference between capital costs (equipment) and business expenses (supplies).
Choose the most appropriate legal entity.
Your startup taxes can differ wildly depending on what type of entity you create. Sole proprietorships, partnerships, LLCs, S Corps and C Corps all have different tax structures. Talk to a qualified tax attorney or knowledgeable CPA for advice so you make the right decision for your new business.
Set up a bookkeeping system.
It doesn’t necessarily matter what program you use. While Quickbooks is still the industry standard for most small businesses, you have other options, such as FreshBooks, Sage, Xero or Zoho Books. Whichever you choose, stick to it, no matter how busy you get.
Get a company credit card and use it.
The best way to track your expenses is to have them all in one place. That’s what a company card does. When it comes time to do your startup taxes, your bank or financial institution can deliver a summary of your credit card transactions for the year. If you make a purchase by any other means, save the receipt and put it in an easy-to-find place so you can dig it out at tax time.
Don’t mix business and pleasure.
When you start a business, finances can get messy sometimes, especially if you’re self-funding the venture. But by following the two above steps, you can keep your personal expenses out of your business expenses. Come tax time, you want to know that all your new business tax deductions are legitimate.
Pay quarterly estimated taxes.
To run a startup business, you have to plan for known expenses. Follow the same process for your startup taxes. After your first year in business, you have a better idea of what kind of income you can expect. Your personal tax accountant can tell you how much to pay every quarter so that at tax time, after all your new business tax deductions, you may even get something back, instead of being hit with a big tax bill.
Handle your employees properly.
Contract or freelance workers get a 1099 form, assuming you paid them more than $600 for the year. You need to send these forms to your employees by the end of January and to the IRS by the end of February. If you hire full-time or part-time employees, you face an entirely different set of accounting rules. Make sure you get it right.
Plan for your exit strategy.
Find some way to save for retirement. By putting away even a little every month, you’ll always get something good out of your startup experience. Additionally, startup taxes are reduced when you can sock a little something away. It also helps you to think long-term, regardless how young you are.
Do you have questions about Tax Tips for Startups in NYC and Long Island? Would you like to receive a personal Startup Taxes advice customized to your specific needs? To schedule an appointment with the best rated CPA firm in Queens and Manhattan, Paul Miller of Miller & Company LLP, please contact our NYC accounting firm for a FREE consultation.