2016 is in the books, which means your start-up’s books are about to take center stage as tax season begins. If you launched your business in 2016, this may be your growing enterprise’s first go `round with tax preparation. As much as you would rather be focusing your attention elsewhere, spending some time getting organized and ready for tax season can actually add dollars to your company’s bottom line, while a lack of attention can cost you just as much.
Here are four simple ways to prepare your start-up for tax season:
- Finalize your 2016 business financial information.You company’s financials are at the center of tax preparation, so getting them in order is essential. Prepare and finalize your income statement and balance sheet, making sure you’re classifying all your expenses in the appropriate categories. If you’re not using QuickBooks Online, XERO, or another accounting platform, resolve to get started in early January – it will make quarterly and year-end tax preparation much easier.
- Check your cap tables and document equity contributions.A big pitfall for many early-stage businesses is a failure to properly document investments and equity contributions. Try to finalize your cap tables by December 31 or as soon after as possible, including the dates when investments were added, the name of the person/entity, SSN or EIN, and ownership percentages. Similarly, make sure that the equity section on your balance sheet is correct, including equity contributions and distributions.
- Comply with corporate formalities. Failing to maintain required corporate records and formalities can expose you to significant liability. Check to see if your corporate filings are in order, including the following:
- Make sure annual reports have been filed in all necessary jurisdictions.
- For S-Corps, owners who are paying themselves a reasonable salary should withhold taxes and receive a W2 before paying themselves any distributions and have an S-election form (Form 2553) filed with the IRS.
- Confirm that you have signed and updated operating agreements and, for C-Corps and S-Corps, keep detailed and complete board minutes.
- Know your tax deadlines for 2017.While April 15th may be the first date that comes to mind when you think of taxes, it may not be the date that’s applicable to your company’s tax filings. 2017 tax return due dates are as follows:
- January 15, 2017: Quarterly tax estimates (4th Quarter) – C-Corps and individuals who have LLCs and S-Corps
- March 15, 2017: Partnerships, LLCs and S-Corps
- April 18, 2017: C-Corps
Of course, there is a lot more involved in ensuring your start-up minimizes its tax liabilities and maximizes any advantages contained in the tax code. Make sure your startup is taking full advantage of new R&D tax credits made permanent by the PATH Act.
If you have any questions or are seeking assistance with your start-up’s tax preparation, please contact us. We welcome the opportunity to assist you.