Starting a business comes with various decisions to make. One of these decisions is your business structure. The business structure you select comes with different tax and legal implications, and as such, you should handle it wisely.
One of the common issues that lead to run-ins with the law is business tax. To avoid making mistakes, it is prudent to hire an accountant from Salt Lake City to help you deal with business taxes. Here are the ways your business structure affects your tax returns.
This business structure has one owner. As a single proprietor, there is no distinction between you and your business. You hence file your business’ taxes with your personal tax returns.
You will use schedule C, which breaks down your business’ losses and profits to file your business tax, and then attach this form to your tax returns form 1040. You will also pay estimated and self-employment taxes.
Here, at least two people own the business. They are all entitled to an allocation of the company’s profits and losses. A partnership is a pass-through tax entity, meaning the business taxes go to the partners.
The partners, therefore, pay taxes on the business’ income based on their company share. The partners use schedule K-1 of form 1065 to file their business income tax, and then attach it to their personal tax return form 1040.
This business structure is a separate entity from its owners. A corporation is a double-taxed entity since the business profits are taxed from the owners’ paid dividends, and the business has separate taxes.
Corporations file their business taxes on form 1120 then each owner pays taxes for their dividend share through personal tax returns.
Mistakes in handling your business taxes come with hefty fines. These might cripple your business even before it is off the ground. Get a qualified and credible tax accountant to handle this and ensure you keep your doors open for business.