Starting a business is an exciting and challenging endeavor. To give your unique vision the best chance of success, you’ll need to keep a close eye on your business' finances. By taking steps like preparing for your taxes throughout the year and working with a payroll service, you'll avoid additional stress. Follow these tax planning tips to give your business a sound financial start.

Do:

Keep records.

Keeping accurate financial records for your business is essential for tax planning. Records might include sales invoices, purchase receipts and orders, contracts, or correspondences regarding transactions. Without records, you might put yourself at risk for an audit or miss out on deductions.

Working with an accounting service is a smart way to manage your record-keeping. They might also use an app or accounting software to make it easier.

Classify your business correctly.

If you haven’t classified your business correctly, you might end up overpaying during tax season. Work with an accountant to decide on whether your business should be classified as a C corporation, S corporation, limited liability partnership or company (LLP or LLC), sole proprietorship, or single-member LLC.

The decision will depend on your goals and priorities. Factors that might affect your decision include tax savings, record-keeping requirements, and how much growth you anticipate. 

Don’t:

Lose track of deductions.

Keep track of the deductions that are worth filing for versus the ones that are not. For example, home office deductions tend to be messy and more work than they’re worth if you're audited by the IRS. 

Alternatively, technology deductions—which apply to new computers, printers, and other necessary office supplies—can lead to big savings. However, the rules around technology deductions change regularly, so an accountant can advise you on whether or not this strategy makes sense for your business. Similarly, you might be eligible for moving deductions, which are often relevant for young businesses. 

Mix personal and business expenses.

As a business owner, it’s easy to sometimes mix business and personal expenses. However, if the IRS detects this through an adult, they may investigate your personal accounts and create unnecessary stress. Separating your accounts will also create separate credit histories, likely making it easier for your business to receive loans.

Simplify your small business’ tax planning with accounting services from Wilson, Rea, Beckel & Associates, CPAs, LLC in Pagosa Springs, CO. For over 16 years, these accounting professionals have helped customers with a range of financial services, including tax prep, payroll assistance, and new business formation. They stay on top of the evolving regulatory requirements and the latest technology to provide convenient and efficient service. For trustworthy financial assistance, call (888) 264-2281. Learn more about their services online.