March 18, 2013. Businesses come in many shapes and forms. Sole proprietorships are the most common, and become “Schedule C” businesses at tax times. Corporations are great because they have many tax benefits as well as certain protections under the law. So many sole proprietors find it advantageous to organize their business as a corporation. You can be a “c” or “s” corporation, and each has its own unique advantages.
In this blog post, let’s go over some basic tips about setting up a business in San Francisco from the perspective of tax preparation. As a top San Francisco business tax service, we get many questions along this line.
- Get an Employer Tax Identification number from the IRS. These are available not just to corporations but also to sole proprietors. This has the added advantage of protecting your privacy as an individual, and in a certain sense helping against identity theft.
- Register the business as a fictitious name, and/or with the state of California.
- Get ready to charge sales tax! If you are selling physical products, you will need to contact the Franchise Tax Board and get an authorization to sell products (and charge the required sales tax).
- Figure out who is an employee and who is a contractor. That can be complicated, but the tax authorities can be very particular about this issue (consult your tax advisor).
- Find a business-friendly payroll service. Many banks provide this, as do online services like Intuit.
- Keep good records! Separate your business expenses from your personal expenses; the easiest way to do this is to have special business checking / bank accounts and even a special business credit card. Even if you do not have a true business card, designate one credit card for ‘business only’ expenses.
- Figure out a record-keeping strategy. Most businesses use Quickbooks, but whatever system you use, start to keep good records. Your CPA firm (and the IRS) will thank you for this!
Forming a Business in San Francisco: Have Fun!
Don’t forget. We only get so many hours in a day, so many days in a week, etc. So whatever business you choose to do, make sure you have fun at it. Having organized accounting and business records does one amazing thing: save you time. By saving you time, it can make tax time and accounting time that much less. So plan now, so you can have more time later (for your business, your family, or your hobby).
Reach out to Safe Harbor LLP by email if you want to reduce your taxes!
