By Thomas Arrison, Certified Public Accountant
Quick Hitters
Tax Professionals
Owning your own business can be confusing and lonely. Legal and tax difficulties can appear at any time. If you hire a tax professional, they can help with your tax return and estimates. A good tax professional will also advise you on running your business and work with you to make it more profitable. They also can advise you on legal ways to reduce your taxes. Don’t depend on your friends and family when you are self-employed.
Checking Accounts
It is best to set up a separate business checking account for the business. Pay all your business bills from the business account and all your personal bills from your personal account. Transfer money from the business account to your personal account so your checks won’t bounce
Health Insurance
You can get health insurance from several sources. Cobra should be available to you from your former employer. Chambers of Commerce offer health insurance options and there are various other organizations that offer this benefit. Your payments for health insurance are not deductible on Schedule C as a business expense, but could be deductible on the first page of your Form 1040.
Employees
Do your best to avoid hiring employees. The requirements you must meet when you have employees are significant and time consuming. Contact your tax professional if you are seriously thinking about hiring employees.
Sales taxes
Very little of this blog talks about a business that sells things. Be aware that if you sell a product you must collect and pay sales taxes in most states. Some states, such as Connecticut, have a sales tax on services as well.
Partnerships
Avoid partnerships if at all possible. They are harder to keep together than marriages.
Registrations
In Massachusetts you are required to register with the town or city clerk where you live if you use a fictitious business name. That would be any name other than your own. If you are an LLC or corporation you are required to register. If you do register, you can expect that the city or town will eventually show up at your door and want to tax your business assets.
Pensions
You can set up a pension as a self employed individual. The amount you put aside depends on your net income. There are various kinds of pensions. The SEP is often the best choice for a business with no employees. Other alternatives are available, such as the 401(k) but cost more to set up and maintain.
About Thomas Arrison
Thomas has been a CPA for over 30 years. Since 1992 he has provided individual and business tax and accounting services at Arrison & Olden, PC in Littleton, MA. He also has his own blog, Thom’s Tax Talk, a compendium of tax tidbits and information
