Starting a small business is extremely exciting, but demanding at the same time. You have to know the most vital startup steps. You must choose the appropriate legal structure, which has an impact on the amount of paperwork that you will do and the amount of taxes you will pay. Here are some of the necessary forms and tips that will help you to start smoothly.
You have many options when it comes to legal business structures. However, if you are like many people who are beginning, you are likely to establish yourself as a sole proprietorship, partnership, or limited liability company. If you opt for the first choice, you will have to fill out 1040 Schedule C or 1040 C-EZ. The same applies if you are self-employed. As a partnership, be ready to fill out Form 1065. And file Form 2553 and then each year the 1120S if you choose S-corp. As a corporation, you need Form 1120.
One important thing that you need to note is that each of these entities file taxes at different times with the IRS. Generally, corporations and partnerships do it on Mar. 15. Single-member LCCs and sole proprietorships file their taxes on Apr. 15.
Tax ID Number
The federal and state government requires that you get a valid tax identification number. With these numbers, you can pay taxes.
Apply at the department of taxation of your state. You are also able to submit your SS-4 while in the same office to take care of your federal requirement.
If you have employees, cover all of them. File tax forms depending on their different employment status.
You should engage a payroll provider from the onset if you are not sure of what to do here. They will help you to deal with issues such as W-2 forms and quarterly payroll tax filings.
Ensure you file W-2 for each of your employees that receive any form of compensation. Through this, the government will be able to know the salaries and wages that your company pays to employees and the taxes withheld from them. What’s more, it also provides information to the Social Security Administration about the FICA taxes. You must file them by Jan. 31
Furthermore, each of your employees has to file Form W-4, which notes the amount of money that they have given express permission to be deducted from their income as well as the total amount of taxes that they want to be withheld.
There are other forms that you need to consider if you provide either retirement or health insurance plans. As per the provisions of the Affordable Care Act, you must be well informed of the Form 1095-C or 1095-B. This heavily depends on the number of employees that you have. In case you fail to file these forms, the government will likely fine you. Remember, your employees have the legal right to choose a proficient healthcare provider.
Contractor’s Tax Requirements
You also need to pay attention to the tax requirements of your independent contractors or vendors. If you hire them, be sure you file Form 1099-MISC. This form is mandatory if you pay the contractor not less than $600 per year. You can also use it to report direct sales amounting to at least $5,000 for resale consumer products. The deadline for this is Mar. 15.
If they are covered by 1099, ensure they file form W-9 as well. It is always due on Jan. 31 as well.
The Bottom Line Despite how small you start, you have to file various legal documents to have the right to run your business flawlessly. If you are not going to incorporate it immediately, you will start with a local business permit. As your business grows, you will need to file the other forms, depending on the nature of your work and the number of your employees.