When you are in the startup stage, taxes and IRS issues may be the last thing on your mind. You will probably be more concerned about other aspects like finding the right investors and breaking into the market. But believe it or not, you can get into big trouble with the IRS if you ignore taxes right at the start. Even if you don’t get into trouble, you may end up missing the opportunity of lowering your tax bill. It obviously makes sense to have an expert to help you navigate the taxation aspect of your startup journey. And this is one expense that you should not cringe about, considering the benefits it can bring and hassles it can save for your new business. Let us list some good reasons why every startup must absolutely onboard a tax attorney.
File as the right legal entity
When you start your business, you need to decide the type of entity it would be. Deciding the legal structure of your business is important from the tax perspective as it determines how you file and pay them. Essentially, businesses in the US fall into the following categories:
- Sole proprietorships
- S corporations
- C corporations
- Limited liability companies (LLCs)
The choice of business entity decides the kind of tax advantages you can get as an entrepreneur. A tax attorney is the right professional to guide you in this context. They will recommend the best choice based on your present circumstances and growth objectives.
Complying with the state taxes
With the trend of virtual business, it has become a common practice for startups to have employees and customers in more than one state. But what they often fail to realize is that operating in multiple states has tax implications. They may have to file taxes for each of these states, which can get complicated if you are a novice. The rules differ from state to state and keep changing as well. So if you want your new business to steer clear of trouble with the IRS, having an expert on board is a smart idea.
Keep business and personal expenses separate
Entrepreneurs with limited business experience may end up mixing their business and personal expenses. This is a wrong approach because you will muddle up your returns with all the wrong calculations. Though having a professional accountant can address the concern to a significant extent, it is wise to hire a lawyer who can guide you on how to save up on taxes. Moreover, they will have some innovative solutions for your IRS problems even before you mess up. It is to be noted that mixing up finances can invite audits, even if you do it unintentionally. And that is the last thing you would want to happen when you are at such a crucial stage.
Avoid common tax mistakes
There are some common mistakes that new business owners often make. Something as simple as missing your deadlines can land you in deep trouble. Similarly, not sending all the requisite documents or making wrong calculations can also invite trouble from the IRS. Similarly, you can seek attention for the wrong reasons if you accidentally claim deductions that are not legitimate. Once you have a tax specialist lawyer on board, you need not worry about these mistakes. The professional will handle the IRS dealings on your behalf, while you can focus on the other critical initiatives for your new business. At the same time, you can rest assured that you will not have to face any fees or penalties for doing anything wrong.
Avail the legitimate tax savings
While you would want to avoid problems due to tax mistakes, saving up is another motive for entrepreneurs. In fact, this is the stage when every single dollar saved matters as you can invest it for business growth. An expert attorney can counsel about the measures you can adopt for cutting down your tax bill to a significant extent. From guiding you about the legitimate deductions to explaining the refund procedures, there is a lot they can do to help you maximize your tax savings.
As a startup entrepreneur, you will be tempted to take a DIY approach with your taxes. But that is the last thing you should do because it can cost you more in the long run. On the other hand, hiring an expert is a worthwhile decision because they can take your business in the right direction and prevent any issues with the tax authorities.
Author Bio: Financial legislation and company laws have been the core competences, Bryan has always been practising. A full-time company attorney, and a part-time blogger, he shares all his expertise with all he can.