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Startup taxation

by uncertain, Window Shopper

  • Created: October 25, 2010, 5:51 am
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4 comments

Greetings All,

 

I'm new to this process. I've just started to read about it and I don't understand many things ... If I incorporate my business what will happen to my taxes? I understand that my incorporated business will become a separate entity and it will be taxed separately.  What I am confused about is if my business is not profitable do I still pay taxes and what are those taxes?

TIA

Tags: Discuss Popular Topics, Filing and Paying Taxes
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jbeidle | Contributor | 10/27/2010 - 6:32 am

Uncertian, If you have incorporated you can choose to be taxed seperately like a regular corporation or you may elect pass through taxation by making an S election. Many small business owners will use this election to offset business losses against other current sources of income or various other tax planning concerns. I have a series of Tax Tips Videos on my website and some other useful resources available through my social media buttons on the site. Just click on the link below my name. If you find the content helpful please let others know.
Professional Web Site: http://TaxPanningStL.com

uncertain | Window Shopper | 10/25/2010 - 5:51 am

Thanks much for your advise. If I'm an employee of my incorporated startup and initially I'm paying myself just $1 would my business still pay SS tax?

phanio | Contributor | 10/25/2010 - 5:51 am

Show Replied Text…
Thanks much for your advise.If I'm an employee of my incorporated startup and initially I'm paying myself just $1 would my business still pay SS tax?
Probably not as there is a minimum and a maximum that SS taxes are due. But, when you file your annual income taxes (both for the corporation and yourself) - you will work through the details. But, at $1 - even if you did have to pay - if would not be more than a half cent or so. Just know that if you are an employee - which you would be of your corporation - the business pays one-half of your SSN and FICA and then takes the other half out of your salary and submits both amounts to the IRS.
Professional Web Site: http://www.businessmoneytoday.com/

phanio | Contributor | 10/25/2010 - 5:51 am

Federal and most state taxes are based on on income. If your c-corp does not make more than it spends to earn that income - then it would not pay taxes. However, since your c-corp will have employees (you) - it must pay payroll taxes on your behalf - its share of Social Security, FICA and unemployment if required. Now, you will be an employee of the company. Thus, the company will pay you a salary. Then you must pay taxes on that income just as if you worked for any other business. Also know that the salary you pay yourself and employees is a legitimate business expense and will lower the taxable amount of income for the business. I suggest you either find a good small business accounting book, take a local college course in accounting or find a decent CPA.
Professional Web Site: http://www.businessmoneytoday.com/