It is vitally important to understand your tax obligations when starting a small business, including effective record-keeping and deductions. FindLaw's “Business Start-Up Taxes” section includes information and resources to help new entrepreneurs get up to speed on accounting practices, obtaining an employer identification number, business deductions, self-employment taxes, and related matters.
Federal Business Taxes: Introduction
A new business should be prepared for the kinds of taxes that they will be required to pay. There are four general kinds of federal taxes relating to business:
State and Local Taxes: Introduction
In addition to federal tax obligations a new business should be aware of state and local tax obligations. These obligations may vary greatly between states or cities and it is critical that you investigate or contact local authorities to determine your obligations early in the process of forming a business. Typical obligations include payment of the following:
Taxes: The Importance of Record-Keeping
Apart from the legal obligations a business may have to maintain accurate records there are a number of reasons a shrewd businessperson will want to keep comprehensive records. Financial records can help you monitor your business's progress. Profit can be difficult to determine without a clear record of income and expenses. Accurate records can also help determine which business activities are producing the largest profits for your business, allowing you to direct your energy and assets to those activities that give the highest return.
Accurate records can assist in the preparation of financial statements for use in tax filings or to apply for a loan or credit on behalf of the business. Maintaining record of the source of receipts can help ensure that proper deductions are claimed and deductions questioned by a tax authority have the appropriate support. Comprehensive records assist with the preparation of tax returns and provide a defense against any suspicion of wrongdoing.