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Startups must pay taxes like every other business. For an entrepreneur, the system can be confusing, and it may seem easier to neglect this aspect in the business’s infancy with the assumption that you’ll take care of it later. However, this is a bad idea; procrastination will result in financial instability and legal difficulties down the road, which is why it’s so important to build a good foundation early on. Here are a few tax management tips to ensure you get a good start.

Ensure Your Startup’s Financial Health With These Tax Management Strategies

1. Choose a Structure Early On

A crucial part of building a foundation is selecting a structure for your company. The three basic options are C Corps, S Corps, and LLC. Almost all for-profit corporations are C corps: under this structure, the owners and the company are taxed separately, which removes many legal restrictions on who is eligible to be a stockholder. In an S corporation, on the other hand, income and losses alike are passed to the stockholders. This helps limit the amount of taxes the company must pay, but it also will limit who can be a stockholder. An LLC isn’t technically a corporation at all, though it still offers liability protection to the owners. It also has greater tax flexibility, but it is often subject to self-employment taxes.

2. Separate Personal & Business Expenses

tax managementMany startup owners may not see the need for this because their personal financial health is already tied to their company. However, separating personal and business expenses early is critical for later growth: if you don’t do this, tax filings will become infinitely more difficult, and you’ll have to exert far more effort and time to separate items on your receipts. It’s better to have separate credit accounts for personal and business expenses.

3. Hire Professionals to Help You Avoid Penalties

In the complicated world of business taxes, having an experienced guide can be invaluable. Many startups face the roadblock of finding they’ve done their taxes incorrectly, and then they must pay penalties to the IRS. An expert knows what to look for, so they will ensure that everything is accurate to save you the most money possible.

 

If you’re seeking expert assistance with tax management, payroll services, or bookkeeping, contact the team at Cloyd & Associates PSC. Located in London, KY, they focus on customer service and personalized, one-on-one assistance that has enabled them to build relationships with their clients and offer the best help possible. Learn more today by visiting them online or calling (606) 864-8110.

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