Starting a new business or venture can be exciting, worrying, hectic and exhilarating all at the same time. There are hundreds of things to take care, dozens of decisions to make. A successful business requires planning, strategy and above all good management and organization.
Here are a few tips to managing your finances and organizing your taxes to make your new venture a more productive and successful journey.
1. Tax Entity
Choosing the right business entity is a way of defining your business and should be done so with the help of a trained professional. You may be a sole proprietor, in partnership or corporation. This depends on the nature of your business and is a major factor in how IRS views your business. Although it depends on the nature of the business as to what entity you choose, but corporation is generally not recommendable for startups because of double-taxation.
2. New Bank Account
It is of utmost importance that you keep your personal and business accounts separate. So it is strongly recommended that you open up a new bank account for your business and record your finances in different ledgers. This will not only help you in your taxes, but will also let you get a clear idea about your costs and profits.
3. Pay Quarterly Taxes
It isn’t always required, but you should opt to pay for your taxes quarterly, especially in the first few years of your business. Paying your taxes every four months will allow you to get a better idea of your expenses and a yearly payment might be too hefty for you to easily arrange.
If you are a small business, then it is unlikely that you will be hiring an accountant and will most probably be taking care of your taxes and accounting yourself. As long as you haven’t majored in accounting, invest in software which will help you with bookkeeping and filing taxes.
Quickbook is the most popular software for startup businesses which helps keep track of accounts and manage finances. Turbo Tax is yet another helpful software that helps with American tax preparations. This software helps you file your federal as well as state income taxes online. Both these software can help you manage your finances and taxes even if you are new to it and have no prior experience in accounting, computing or taxes.
5. Documenting All Expenses
Manage all your expenses in an Excel sheet and note down even the minutest of expenditures. Even if you are using your private vehicle for business purposes keep track of the mileage and gas expenses. All expenses incurred on the business should be noted down in expenditures, even down to the meals eaten during work hours to stationery bought for home for work purposes. This will help you get an accurate amount about your business spending and profits and in turn will help when filing for taxes.
Keeping a track may be a little tiring and hectic, but in the long run will greatly help you with your taxes and your overall business growth.