Folsom, CA Accountant for Start-Ups
Cook CPA Group
Creating a start-up can be both a rewarding and daunting endeavor. On one hand, starting your own company can bring the thrill of creating something new to offer the world and the freedom to make your own decisions. On the other hand, you have to keep track of various expenditures, which may not be natural for new business owners.
Accounting doesn’t have to be a source of stress for you as you embark on your own start-up journey. Allow the licensed CPAs with Cook CPA Group to help you manage your finances and taxes. To set up a time for a free consultation with the accountants at Cook CPA, call our offices at (916) 259-5496 or get in touch with us via our website.
Choose an Appropriate Business Structure for Your Start-Up
There are a few different business structure options available to start-up owners. Each entity type has its own advantages and disadvantages pertaining to how the business is taxed and how the business must be operated. All of these factors may or may not serve the needs of your start-up and should be taken into consideration. When choosing the business structure for your start-up, think about which one most closely aligns with your goals, both short-term and long-term. The types of business structures that start-ups can choose from are:
- Sole proprietorship – This is known as the simplest type of business, which means that it is also the easiest to maintain. It carries the least amount of legal restrictions.
- General and limited partnerships – Partnerships offer the greatest potential for gaining capital. However, it can be difficult to find consensus among the multiple authorities involved in this type of business.
- Limited Liability Company (LLC) – This option allows for more flexibility than any other business type option, yet it also requires the most comprehensive operating agreement since there is a high degree of flexibility.
- Corporation/S-Corporation – Businesses that are classified as corporations allow for company stocks to be shared easily and are most easily expanded. However, corporations are highly regulated by the government.
Prepare for Self-Employment Taxes
Start-ups are required to pay self-employment taxes. Employees of standard companies have taxes taken out of their paychecks automatically; start-ups, meanwhile, have to pay taxes on their income manually. These taxes go toward Social Security and Medicare.
In 2019, the standard self-employment tax rate is 15.3% on the first $132,900 of income, and any additional income on top of that is taxed at a rate of 2.9%. This does not apply to businesses that have chosen to categorize themselves as a corporation; corporations do not have to pay self-employment taxes, but they are subject to payroll taxes.
Filing taxes for your start-up can be done by recording the start-up corporations on a Schedule C form and then filing it along with Form 1040. Your self-employment tax can be calculated using a Schedule SE, which distinguishes self-employment taxes from income taxes. A licensed CPA can help make the process go as smoothly as possible and ensure that all necessary information is present and entered properly.
Other Accounting Issues for Start-Ups to Consider
There are a lot of moving parts involved with managing a start-up, which means that there are a lot of choices to be made about various aspects of a start-up’s financial life. Start-up owners should be aware of all of the factors that go into the overall health of their young business. Below are a few prominent examples:
- Accounting method – A start-up should choose the accounting method that best serves the needs of their company. One of the most popular types is known as cash accounting, which involves recording income when it is received or spent instead of recording it when it is incurred. Another popular method of accounting is the accrual method, which means that business owners record income for services when they are earned, not when they are received.
- Employer Identification Numbers – Certain types of start-ups may need to apply for an Employer Identification Number (EIN), which is necessary to do conduct certain actions, such as applying for business licenses, opening a business bank account, and filing tax returns electronically.
- Deductible costs – Many costs incurred while operating a start-up are tax deductible, and start-up owners should make themselves aware of which costs those are. The cost of training new employees, advertising expenses before your business is opened, relationship-building costs with vendors and suppliers, and legal fees are all able to be deducted from your taxes.
Folsom Tax Return CPAs Available for Start-up Accounting
The experienced Folsom, CA, accountants at Cook CPA Group are prepared and eager to help you and your start-up succeed. We understand the needs and goals of all businesses, no matter their size or age. If you are interested in setting up a time to come into our offices for a free consultation, please do not hesitate to get in touch with us at your earliest convenience. You can call us at (916) 259-5496 or contact us through our website.