All businesses pay a federal income tax, whether its as its own entity or through the income tax of the owner. But, sales tax is a completely different story. Sales tax is determined by each individual state and the requirements for multiple state businesses are often complicated. Those requirements get further complex when you are an online business as you may not have any physical presence in the state itself. Whether or not your online business has to pay sales tax all depends on the states’ definition of one word: nexus.
If you have ever watched the TV show, Shark Tank, you know just how aloof business evaluations can be. The mere fact that a valuation can be negotiated shows just how much subjectivity business evaluations hold. But regardless of how you come up with the number, the valuation of your business is vital. The value of your business can help you determine your company’s financial and competitive standing. For larger public corporations, a valuation is typically created through the stock price. What about private corporations? There are three easy ways to find the value of your business regardless of size.
One of the first steps to creating your own business is picking your name. You can change your name in the future, but almost every entrepreneur is set on getting it right the first time. Maintaining your business name can significantly help your brand consistency. Whether it’s your first business or one of many, you’ve probably spent a bit of time thinking of the perfect name, and have inevitably asked – what some common business name mistakes to avoid during this important choice? (more…)
The IRS, nearly every state tax agency, and even some cities require employers to withhold a certain amount from their employee’s paychecks to cover income tax, social security, and medicare obligations. These are payroll taxes, and it’s your responsibility, as a small business owner, to collect and send them in. The amount varies from state to state, and in some cases city to city, but there are three main steps to collection.
Everyone you hire fills out a W-4, which gives you some basic information like family size and other deductions. (more…)
Payroll may seem like a straightforward topic, but there is a lot more to it than just tracking hours and cutting checks. Unfortunately a lot of small business owners don’t realize that and, before they know it, they’re up to their ears in tax forms and reports they’ve never even heard of. Calculating, and staying on top, of payroll can actually be pretty complicated, especially if you don’t have a background in accounting. So what do small business owners absolutely need to know about setting up a payroll system?
You must withhold taxes
The federal, state, and local governments can all levy tax on income, and it is your responsibility as an employer to withhold the necessary amounts from your employee’s paychecks and send that into the proper agency. (more…)
An Employer Identification Number, also called an EIN or a Federal Tax Identification Number , is a unique set of digits assigned to a business by the IRS. With it, tax agencies can easily track the financial activity of your company, and make sure that you pay your taxes. But, if you run a sole-proprietorship, the IRS can already do that using your personal social security number. So in what cases do you need an Employer Identification Number?
When you hire someone
The only time you can really get away with using your social security number is when your business is considered a sole-proprietorship, and you’re the only employee. The IRS figures, in cases like that, the company’s profit flows directly to you, and you pay your taxes from that. But that changes the minute you bring anyone on to help run the company, and that includes a business partner. Once you start hiring, your company must have an EIN.
When you form an LLC or Incorporate
Incorporating or forming an LLC separates you and the business. (more…)
Reinstatement is what you have to do to get your business out of an inactive or bad standing with the state. And this time of the year, we’re getting tons of requests and questions about reinstatements from people who let their corporation or limited liability company to lapse, but want to get things rolling again before we get too far into 2015.
Luckily, the reinstatement process is pretty straight-forward, though depending on the reason for the lapse, it can get a little pricey.
How does a company become inactive, or get put in bad standing?
There are a few different ways this can happen. But one of the most common reasons behind a bad-standing is simply the business’s owner forgetting to pay their annual fee. (more…)
Welcome to the first ‘Business Basics’ of the year! We are starting 2015 off strong by looking at privately held companies. The structure of privately held business is often misunderstood. People wonder what distinguishes a privately held company from a publicly one, or believe that any business run by a non-government entity constitutes a private company. That isn’t the case, and so to clear up any confusion, we’ve answered some of the more commonly asked questions we get about private companies.
What is the difference between a privately held company, and a public one?
A privately held company is also known as a ‘closed company,’ because the ownership of the business is closed. In other words, you can’t just decide to buy a chunk of the business off of the market. (more…)
The end of the year is right around the corner, and every year we hear small business owners panicking about December’s rapidly approaching end, wondering what they have to do to end the year right. Not to worry – ending the year is actually pretty easy, as long as you don’t wait until the last minute to get everything done! So if you haven’t already, start thinking about…
Submitting any filings or dissolutions
Some of the most common questions we are asked revolve around the best time to form an LLC or incorporate. And while there are no ironclad answers to those questions, the beginning of the year is normally a good time to send in that paperwork. Deadlines and renewal dates are easier to remember, staying on top of your taxes is simpler, and you can even file your paperwork early and miss the beginning of the year rush if you opt for a delayed filing. (more…)
This week we are looking at reasonable compensation, a legal necessity for anyone running a Corporation. Reasonable compensation is connected to one of the most fundamental parts of working for a company – getting paid – and yet it’s so widely misunderstood. When you form an Corporation, you create a separate, legal entity that ‘earns’ money. You then pull your wage from those earnings and pay whatever payroll taxes you owe.
In order to close a loophole wherein those running the corporation could ask for an extremely low salary, pay next to no payroll taxes, and then close the wage gap with distributions, the IRS requires that all corporate officers and executive be paid ‘reasonable compensation.’ But what constitutes reasonable compensation is a little more murky.
Who needs to be concerned with reasonable compensation?
Anyone that is runs, or helps run, a C-Corporation or S-Corporation must be reasonably compensated for their work. (more…)