New Business Structure and Tax Considerations

When forming a business it is wise to know your options. You can incorporate, form a partnership or establish yourself as a sole proprietorship. Each structure has it's own benefits and depending on what your goals are you may find one better than another.

If you are just starting out in business with little or no experience then I recommend the simplest form of business to get you going. A sole proprietorship is not only the easiest to set up but it is also the most inexpensive. Remember you can always change it later. Once you are generating revenue you can reinvest in your business and establish a more secure structure such as a corporation.

Let's talk about sales tax. Basically sales tax is a percentage of each sale your state charges to your customers. There are two criteria that need to be met. A customer must purchase a product or service from you and they must reside in your state. If that happens then you are required to collect the tax and forward it to the respective agency within your state. Prior to collection you must have an account set up with your state. Because this is regulated by each state differently you should refer to your state comptrollers office for more information. You can click on the link to your right to find more details on your states local requirements.

Next let's discuss Income Tax. Income tax is paid to the federal government based on all revenue and income generated by an individual or business. As a business owner you have certain deductions you can take that an individual cannot. Some examples include a portion of your home rent or mortgage costs, vehicle mileage, business leases, equipment and supplies. Even training and educational programs like this one is tax deductible. The main thing is to keep good records and get professional advice as needed.