Starting a new business venture shouldn't be any more taxing than it needs to be — which is why you should start thinking about business taxes long before you file your first business tax return.
If you're not accustomed to keeping receipts for your purchases, now is a good time to start. Most business expenses — whether it's a new laptop computer, or a leased company vehicle — as well as utility costs — from electricity charges to phone bills — can be written off at tax time. This means a percentage of your payable tax can be reduced simply by declaring your necessary purchases. 1
Speaking of receipts, it's best to start an effective filing system now. Separate your personal expenses from business expenses to make it easier to calculate when filing, and to give a clearer picture of your financial picture if you're ever audited. You may also want to invest in accounting software to record receipts, for the peace of mind of having accurate calculations.
To help keep track of business finances, it's also recommended to open a business banking account and apply for a business credit card. This will help you keep business spending and deposits completely separate. You'll end up thanking yourself down the road if you take a few moments to do this now.
Another key difference between working for someone else and working for yourself is that you likely won't have tax deductions automatically taken off your earnings in the latter scenario.
means you should have a clear idea of what your annual income may be, so that you can set aside sufficient cash to pay your taxes.
Tax planning may not be as glamorous as marketing and generating profits, but it's still an essential part of running your business! Get a jump on taxes now, and you won't be scrambling at the deadline.
1 The examples provided above are for informational purposes only. Be sure you investigate your own business properly and consult with qualified tax advisors to be sure you are properly identifying expenditures.