1. By Carmen I. Velazquez
Online Copywriter
October 15, 2012
2. Are you a new business owner and
want to learn how to start your own
business and what steps you should
follow to set it up? If your answer is
yes, then you are in the right
workshop….
let’s get started!!
3. The first step in starting your own business is to
decide what form of business entity to establish.
Whatever business you decide to form that will
determine which income tax return you have to
file. There are five different types of businesses:
1. Sole Proprietorship
2. Partnerships
3. Corporation
4. S Corporation
5. Limited Liability Company (LLC)
4. Let’s go over the 5 different types of
businesses that you can start:
1. Sole Proprietorship is someone who owns
an unincorporated business by himself or
herself an may be liable for the following:
◦ Income Taxes then you must use Form 1040 and a
Schedule C or a Sch C-EZ.
◦ Self-Employment tax – Sch SE
◦ Estimated Tax – Form 1040-ES
5. ◦ If you have employees you will be liable for Social
Security and Medicare Taxes and income tax
withholding and Federal Unemployment Taxes
(FUTA-Form 940) and (Form 941 and From 943.
◦ Filing Information Returns for payments to
nonemployees and transaction with other persons
(See Information Returns)
◦ Excise Taxes
6. Partnerships – Is the relationship existing
between two or more persons who join to
carry on a trade or business. Each person
contributes money, property, labor or
skill, and expects to share in the profits and
losses of the business. You may be liable for:
◦ Annual Return of Income (form 1065 US Return of
Partnership Income
◦ Employment Taxes – Form 940, 941, 943 (Fed Tax
Deposits and
◦ Excise Taxes
7. If you are a partner in a partnership then you
may be liable for:
◦ Income Tax Form 1040 (US Tax Return)
◦ Self-Employment Tax Form 1040 (Tax Return)
◦ Estimated Tax – Form 1040-ES Estimated Tax for
Individuals
8. Corporations – In forming a
corporation, prospective shareholders
exchange money, property or both, for the
corporation’s capital stock. A corporation
takes the same deductions as a sole
proprietorship to figure its taxable income
and you may be liable for:
◦ Income Tax Form 1120 US Corporation Income Tax
Return
◦ Estimated Tax 1120-W Estimated Tax for
Corporations
◦ Employment Taxes Form 940, 941, 943
◦ Excise Taxes
9. S Corporations –are corporations that elect to
pass corporate income, losses, deductions and
credit through to their shareholders for federal
tax purposes. Shareholders report the flow-
through of income and losses on their personal
tax return and are assessed tax at their individual
income tax rates. You are liable for:
Income Tax – Form 1120S and 1120S K-1
Estimated Tax 1120W and Form 8109
Employment Taxes Form 940, 941 and 943
Excise Taxes
10. Limited Liability Company (LLC) – is a
business structure allowed by state statute.
LLCs are popular because similar to a
corporation, owners have limited personal
liability for the debts and actions of the LLC.
Owners are called members. The federal
government does not recognize an LLC as a
classification for federal tax purposes. An LLC
entity must file a corporation, partnership or
sole proprietorship tax return.
11. One of the most important requirements for
any of these 5 types of business is the
requirement to request an Employee
Identification Number (EIN) or a federal Tax
Identification Number. This is a free service
by the IRS. Check with your state to make
sure you need a state number or charter.
The Form you must complete is an SS-4 and
you can request it online or by calling the IRS
1-800 -829-1040 for assistance.
12. Another requirement for a small business is
recordkeeping. This will help you monitor
the progress of your business, prepare your
financial statements, identify source of
receipts, keep tract of deductible
expenses, prepare your tax returns and
support items reported on tax returns. You
must maintain these records for as long as
they may be needed, however, keep all
records of employment taxes for at least 4
years.
13. You must determine your taxable income on the
basis of a tax year and file an income tax return.
What is a tax year?..There are two types of tax
years:
◦ Calendar Year – which is 12 consecutive months
beginning January 1 and ending December 31.
◦ Fiscal Year – is 12 consecutive months ending on the last
day of any month except December. A 52-53 week tax
year is a fiscal tax year that varies from 52 to 53 weeks
but does not have to end on the last day of a month.
14. Accounting Periods and Methods:
Each taxpayer (business or individual)
must figure taxable income on an
annual accounting period called a tax
year. The calendar year is the most
common tax year. Other tax years are
a fiscal year and a short tax year.
15. The most common accounting method is the
cash method and an accrual method.
Cash Method – you report income in the tax year
you receive it and deduct expenses in the tax
year you pay them.
Accrual Method – you report income in the tax
year you earn it, regardless of when payment is
received and deduct expenses in the tax year you
incur them, regardless of when payment is made.
16. Contact Information:
Carmen I. Velazquez
Online Copywriter
Tel. 321-304-9239
Call for appointment and scheduling of a
workshop to assist all Small Business owners.
