4 Startup Taxes You Need to Pay

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When you launch a startup, you need to accept that you will have to pay taxes on your profits. Taxes vary from country to country. It’s hard to discuss tax systems around the world, so we’ve chosen the US as an example. It’s the largest startup market, and some similar taxes to the US can be found in other countries as well. Read about the startup taxes you’ll need to pay.

4 Startup Taxes You Need to Pay – Table of Contents:
Income tax
Federal income tax
State income tax
Franchise tax
Other startup taxes
Tax Forms to Use
Common Startup Tax Mistakes
Summary
Income tax
Income tax is a common practice in most countries and applies to both individuals and businesses (including startups). In the case of a business, income tax is paid on payments received from the sale of azerbaijan whatsapp number database and services, but also on income from other sources. What is considered taxable income? Taxable income is the amount of income subject to tax, after deductions and exemptions. A business’s gross income is the income from all sources minus the company’s cost of goods sold.

Federal income tax
If a startup operates as a corporation in the United States, it is subject to federal income tax. Regardless of whether the corporation has made a profit or not, it is required to file an annual tax return. This must be filed by the 15th day of the fourth month after the end of the fiscal year (April 15). Any federal income taxes due must also be paid by this same date.

State income tax
In the case of the US, you need to be aware that each state has its own tax system. Therefore, you will usually not be able to avoid paying state income tax as well, which in turn means that you will have to file annual state tax returns. Unfortunately, in this case, you will often need the support of an experienced tax advisor. There are some states where no state income tax is levied, but these are exceptions to the rule.

Franchise tax
Tax laws in the United States vary from state to state. As a result, you may choose to base your startup in a place where your taxes will be lower. However, it’s worth noting that some states require startups to pay an annual franchise tax. If you’ve registered your business in a state where such a tax applies, you’ll have to pay it. This is the case in Delaware, for example, where the minimum annual franchise tax is $400 and you pay an additional $50 to file an annual report.

startup taxes
Other startup taxes
The above list could, of course, be expanded. Depending on the type of activity of your startup and its headquarters, the company may be required to pay other taxes as well. It is best to consult a tax advisor with extensive experience before deciding to launch your startup.

Tax Forms to Use
Each state and local government may have its own tax forms, so you’ll need to get information about the required documentation from your local tax authority. Again, it’s helpful to consult a tax advisor who can not only explain the intricacies of tax law but also tell you what forms you need to file with the IRS. If your startup is structured as a corporation, you’ll need to file a tax return on tax form 1120.

Common Startup Tax Mistakes
Tax issues are not easy for many entrepreneurs. The biggest problem is that new entrepreneurs often do not keep close track of their expenses, and expenses, after all, affect income tax. Income after expenses are deducted is net income, which is subject to federal income tax.

Some startups also fail to collect all state taxes. Additionally, they sometimes confuse sales tax with income tax. Not all startups reliably document tax-deductible expenses, as required by the IRS. These are, of course, just a few of the tax mistakes that often appear, but they can have major legal consequences.

Startup Taxes – Summary
Most startups are subject to certain taxes. These must be paid on time, as failure to do so can cause problems—from IRS penalties to trouble attracting investors to delays in your stock market launch. Every startup founder should keep this in mind.