Tax Forms for Startups

Company Formation

Taxes and tax forms!  What does a startup need to know as they plan for the upcoming tax deadline?  Be aware of the difference in the form of entity and specific tax forms for startups.  To stay on top of your tax obligations, make sure that you’re not making any of the 7 Biggest Tax Mistakes New Startups Make by David Ehrenberg is the CEO of Early Growth Financial Services.

  1. Choosing the wrong legal entity.
  2. Not understanding your tax obligations.
  3. Not asking for professional tax help.
  4. Blending business and personal finances.
  5. Not deducting business expenses.
  6. Not using the right tools.
  7. Not paying quarterly taxes.

You have launched your business, established the appropriate entity structure, registered with the state, secured an employer identification number (EIN), opened a bank account and set up your business accounting. Tax forms are determined by the form of entity you have chosen:

1. The Corporation-C Corp-basic form of legal entity, ease in formation, but has double tax on corporation and shareholders.

2.  The LLC-has limited liability, taxed like partnership.

3.  The S Corp-is a state chartered corporation-pay no federal income tax, but its taxed directly to shareholders.

Taxes by Founders Workbench has excellent information and some tax forms to resource startups.

Hire an accountant.  A good tech startup accountant can advise on the tax implications of which form of entity you choose.  In addition, he or she can assist in the preparation of your entity’s tax returns and reports to your partners/investors.  Both partnerships and LLCs require the maintenance of separate capital accounts for each partner; a good accountant can be indispensable in maintaining the books and records of your company.

Retain counsel.   This becomes particularly advisable if your company will have more than one owner.  Although forming a standard C corporation can be done very inexpensively through an online service, this will not protect against unwanted transfers by partners of their ownership interests. From: Resources for Tax forms for Startups by Carl B. McCarthy

 Know the Tax Facts and Deadlines  Most entrepreneurs who form an LLC or incorporate a business are not aware of their tax and government filing requirements.  Entrepreneurs often think there are no filing requirements because they are in the startup phase and there is very little or no financial activity.  Unfortunately, this often costs the startup thousands of dollars in penalties and can really mess up a future angel or venture capital financing. So check out this article that gives the various types of tax forms and deadlines.  Tax Deadlines for Startups by Account Alert Management

In closing, businesses use different tax forms than individuals. Most entrepreneurs know this on some level, but few are aware of the specific differences and best practices that apply to them. As a result, many startups pay too much tax or, worse, get into completely preventable tax problems stemming from poor planning. To avoid the most common entrepreneurial tax headaches (and capitalize on the biggest advantages) consider the tips above and read more below.

Resource links related to Tax Structures and Forms for Startups

1.  Resources for Tax forms for Startups by Carl B. McCarthy

2.  Tax Deadlines for Startups by Account Alert Management

3.  STARTUP GUIDE: 5 STEPS FOR PREPARING FOR YOUR FIRST TAX FILING by KRL

4.  Startup Guide: Launching Your Own Business by KRL

5.  7 Biggest Tax Mistakes New Startups Make by David Ehrenberg is the CEO of Early Growth Financial Services.

6.  Taxes by Founders workbench

7.  10 Tax Issues for Tech Startups to Consider Now by Jerry Weil

8.  Tax Basics for Startups by Bonnie Lee

9.  What Can I Write Off as Startup Expenses? And More Free Tax Q&A – Ask the Tax Pro 12/13/12

10.  Tax Tips For Startups and Entrepreneurs by Josh Ritchie