If you’ve started a new San Rafael business in 2018, one critical area to start thinking about early is your taxes. Starting a business comes with many tax implications, as well as many benefits.
The exact type of logistics and benefits comes down to many different variables involved with your business, from the way things are set up to the way you pay your taxes.
At Books In Balance, we help many new Marin County businesses begin organizing their paperwork to minimize tax issues down the road. Here are some of the main areas we recommend shoring up as soon as possible.
Essential Tip #1: Sole Proprietor, Partnership, LLC, or Corporation
Should you be a sole proprietor, LLC, or corporation? That depends on a number of factors, such as number of people in the company, whether you’re selling products or services, and how much liability is involved with your business. For example, a handyman may not have employees or products to ship but that work comes with significant liability. Those sorts of variables will define the best type of business entity for you, which then trickles down to the tax processes and advantages related to the specific type.
Essential Tip #2: Home Office Deductions
For new businesses, it’s highly likely that some portion of your work takes place at your home. This may just be a small percentage or it may be the entire workday. Because of this, it’s possible to deduct your home office expenses. Of course, this must be a dedicated space for business, and while you can write off things you use within that space (furniture, storage, organization, decoration, etc.) that doesn’t mean that any household expense can be written off. For general utilities, things are written off proportionally, such as the gas bill, rent or mortgage, and housekeeping.
Essential Tip #3: Record Keeping
One of the simplest ways to benefit your tax filing is also one of the most easily overlooked. Accurate records of expenses may seem like a chore at first, but once you get into a habit of doing so, it becomes second nature. How you keep records is up to you. The old fashioned way still works: putting all receipts and invoices in a shoebox. However, plenty of modern online tools can help you get things in order. Cloud-based spreadsheets can be easily updated in near real time. For greater detail, budgeting and expense apps can help organize with users across multiple devices.
Essential Tip #4: Quarterly Payments
If this is your first time running a small business, the idea of quarterly tax payments may seem confusing at first. Quarterly tax payments aren’t required for small businesses but they will make your life easier. These payments project out a quarter’s taxes so that it doesn’t become a bookkeeping nightmare at the end of the calendar year. There are a number of services that can help you arrange and calculate quarterly taxes, ensuring you don’t wind up with huge surprises of the unfortunate kind at the end of the year.
Essential Tip #5: Full Time or Part Time
It seems like everyone in the Bay Area has a side gig. From driving Uber to freelance app development, side gigs can be the start of a future full time business. These types of situations can provide people with payroll day jobs an alternative to quarterly payments. With payroll deductions for your primary salary job, you generally have the option to use additional state and federal deductions. If you have a good sense of what your revenue will be from your side gig, you can have regular day job payroll deductions include this so you don’t have to deal with quarterly payments while still avoiding a year-end tax nightmare.
Organize Now, Breathe Easy Later
It may seem like a lot of effort to get a handle on all these elements up front, especially when you’re balancing launching and running your business. For Marin County businesses, we invite you to come in for a free consultation at the San Rafael offices of Books In Balance. Whether you’ve got a head start or beginning from scratch, get in touch and we’ll be able to help.
Brandon, is a well-seasoned accountant and heads up the team with 25+ years of senior accounting experience. He holds an Accounting degree with a Minor in Business Administration and a Masters in Accounting. He maintains several certifications and holds various industry related licenses in tax preparation and planning. When Brandon isn’t in the office, you’ll find this avid dog and animal lover supporting various Bay Area - and beyond - animal charities.