Tax Refunds & Advice

If you are going to start a small business, you need to be aware of how this will effect your tax situation. As you may or may not know, different business structures are required to adhere to different tax related laws. This makes it important to choose the business type that will work to your greatest advantage when it comes to taxes.

A lot of people start out as nothing more than a sole proprietor. This is common because it does not change much as far as taxes are concerned. Not to mention the fact that the paperwork is kept to a minimum. If you are in this situation, you will have to file quarterly tax payments as well as a year end return. With that being said, as your business grows you will probably want to move away from this and form a more legitimate operation.

To gain a bit of added protection, many sole proprietors form an LLC. If they are the only member, this allows them to keep their tax situation the same while being able to take advantage of the safety that an LLC offers.

In today’s day and age, S-Corporations are becoming quite popular. Generally speaking, these corporations must make quarterly payments as well. The main difference between an S-Corporation and an LLC is that you may be able to escape paying self-employment tax; which can be a lot of money depending on your income.

For further details, visit the IRS website. They offer information on each business structure, and what they mean from a tax point of view.

Before you open your own business, consider the tax advantages and disadvantages of each business structure. This will allow you to save as much money as possible, while putting your business in position to succeed.