Speaking from experience, starting your own business is a stressful, risky, and all-consuming experience. But honestly, that’s how it should be—living the American Dream of making it on your own should be the result of hard work. The first year of running a new business is often the most difficult, as the one-time costs of starting a business, advertising, and the steep learning curve of business ownership can be disheartening. But that first year is so incredibly important in order to establish your business’ legal structure, your accounting practices, and to make a first impression. Another important first activity is preparing your start-up’s first tax return.
Your Filing Depends on Your Business’ Structure
The type of tax return your business must complete and the deadline to complete it depends on the legal structure of your start-up.
- For a sole proprietorship, in which you are essentially self-employed, you are required to file your personal tax return, and attach a Schedule SE. This is the Self Employment Tax form. In addition, you must file a Schedule C to disclose whether you made a profit or loss for the year. Your self employment tax goes toward Social Security and Medicare and essentially replaces the taxes that would have been withheld from your paycheck by your employer. In addition, your 1040-ES Form will include vouchers, which you will use to make prospective quarterly estimated tax payments to the IRS.
- For a partnership or Limited Liability Company (LLC), the entity must file Form 1065, U.S. Return of Partnership Income. The due date to file Form 1065 is April 15th for partnerships or LLC’s that make calendar-year tax payments. In contrast, the filing deadline for fiscal-year partnerships or LLC’s is the fourth month following the end of their calendar year.
- Corporations must file Form 1120, U.S. Corporation Tax Return, while S Corporations must file a Form 1120S. If the Corporation or S Corporation is a calendar-year taxpayer, the filing deadline is March 15th each year. If the Corporation or S Corporation is a fiscal-year taxpayer, the deadline is the third month after then end of each fiscal year.
If you are considering starting your own business, or need tax advice regarding your new business, contact the Law Offices of Robert S. Thomas. I have been a tax attorney for over twenty years and have a Master of Law Degree (LLM) in Taxation. I can help you structure your business or provide you comprehensive advice about the tax advantages available to your business. Call our office today at 847-392-5893 to set up an appointment, or visit our website.