If you don’t think about taxes until your company starts earning revenue, you’ve waited too long. While the IRS may not be especially interested in your company until you’ve been funded and have some capital, you need to think about taxes from the outset — to avoid tax trouble down the line, and to save money through deductions.
To stay on top of your tax obligations, make sure that you’re not making any of these 7 common tax mistakes:
- Choosing the wrong legal entity. You may choose to use sole proprietor, partnership, or some form of corporation as the legal entity for your startup. There is no “right” choice — only the best entity choice for your company. Learn the advantages and disadvantages of each before making this important choice. For example, owners of C corporations pay a corporate income tax as well as their individual taxes. Knowing the tax laws associated with each of the entities will help.