Entrepreneurs 

It's tax time, and if you are trying to figure out personal taxes vs. business taxes, we're going to tackle this topic. So if you are a small business owner today, or even if you're just thinking about starting a company, perfect, this post is for you. 

First off, congrats - this is no small undertaking! That's not being facetious, by any means - that's being 100% honest. Running a business, and making money at it, is hard work. There are no shortcuts, no Cliff notes, no easy streets. Good, sound financial advice is critical to your success. 

Taxes 

So what about when it comes to tax preparation time, and now you have to figure out how to do your personal taxes and your business taxes?

Do you know how to maximize the efficiency of your tax returns by creating a tax strategy for the coming year from a tax perspective? Are you aware of the immeasurable value of that for your business? 

This is what Boyd Group Services is about. Providing many different financial services to choose from, all designed to help you grow and scale your business to achieve optimum success. 

Structuring Your Business 

Sole Proprietor 

How you prepare your business taxes largely depends on how you structure your business. For instance, unless you're a corporation or an LLC that chooses to be recognized as a corporation, your personal income tax return will be combined with your business income tax return from now on.

If you're a sole proprietor, you are a single owner, and your business is unincorporated. Your taxes are combined but straightforward and fairly simple. You use form 1040 and Schedule C. 

C Corporations 

C Corporations are the standard form of corporate tax structure, seen as separate entities from their owners, partners, and/or shareholders. C corporations use form 1120 to pay their taxes. A-C corporation is the only business structure in which the owners or partners file their personal income taxes separately from the business.

On personal income tax returns, your shareholders report profits and losses they experience from the business, but the business is taxed separately.

The standard corporate tax rate is 21%, but with the new administration in 2021 this year, that rate has been proposed to go up to 28%.

This represents a significant increase and may make many business owners choose a different business structure for tax purposes. However, if you plan to grow your business on a larger scale, there are several advantages to C corporation.

Structuring your business correctly from a tax perspective is definitely an area Boyd Group Services can help you with and is one of the most important and integral parts of determining your company's potential success rate.

S Corporations 

An S corporation is what we call a pass-through entity, like most all the other business structures. A pass-through entity is one that "passes through" its profits and losses to the owner, who reports these numbers with their personal income taxes.

They do, however, submit something called an information return. This is IRS form 1120S and basically contains information pertaining to the profits and losses of the company.

As the owner or part-owner of the business, you would have to pay taxes on any salary drawn as well as any dividends paid to you from the S corporation.

Partnerships 

A partnership is a business with more than one owner, who all contribute with labor, property, or money into the business, and who share in the business's profits or losses, as such.

Although this type of business structuring is considered a pass-through entity, owners are also required to submit IRS form 1065 as an information return as well. Partners report the income on their personal income tax returns, IRS form 1040, as any other pass-through entity.

Limited Liability Corporations (LLCs) 

A limited liability corporation or LLC is sort of the anomaly here because you can choose several different ways of tax structuring for this type of business. An LLC is regulated by your individual state and can even change its status with IRS form 8832.

As a single owner, you can request to be treated as a corporation and file your taxes separately from the business. Or, you can elect to be taxed as a pass-through entity and report profits or losses with your personal income taxes. If you have more than one owner, the business is treated as a partnership.

The intricacy of an LLC business structure is an option many business owners may want to explore, and getting the perspective from a tax or financial advisor such as Boyd Group Services can be an immensely helpful tool.

Self-Employment 

Self-employed people are sole proprietors, independent contractors, and those who work for themselves in any other capacity, whether part-time or otherwise.

Self-employed people do not file separately as far as personal, and business taxes are concerned. The way it works is the same as for sole proprietorship, filing IRS form 1040 and Schedule C.

Payroll Taxes 

If you are a business owner and you have employees, you are responsible for payroll taxes, which is a federal tax that is separate from your other taxes. You are also responsible for providing your employees (as well as copies to the IRS) W 2 and 1099 forms at the end of the year.

The amount you pay out as well as withhold must be accounted for in detail on a separate information return. Because the rules for this are complex and the penalties for not complying correctly (or at all) are steep, many companies outsource this department. 

Tax Tips For Business Owners 

All business owners should always keep receipts for everything, as there are always business deductions that can make a huge difference when tax time comes in reducing your taxable business income.

The other piece of advice here is especially when first starting your business, don't be afraid of hiring someone to help you with your financial goals. It is so important to your overall success that you structure and scale your business correctly from the start.

Remember Boyd Group Services when you're ready for this step because we're here to help you grow and succeed. Our owner, Chad Davidson , has the proven method and experience in all things financial that you're going to want on your side. Give us a call today and schedule a free consultation to see how we can help you with your small business.