Are you thinking of incorporating a new business? Do you have a business that is on extension? Do you have a real estate partnership?
Owning and operating a business can be a challenge in and of itself. The various filing requirements and tax implications can add a level of complexity that blindsides many business owners and creates its own sets of challenges.
That September 15th deadline, or some will say, 9/15 deadline for your tax return is right around the corner. Have you filed your annual report yet? Each state has a different rules, deadlines, and fees.
There is a misconception that incorporating in a particular state may save you from filing in the state in which you do business. This is simply not so. If you have a Delaware corporation operating in Massachusetts for example, you need to file a Delaware tax return AND Massachusetts Tax return. In addition to the tax returns, there are often corporate excise taxes and franchise taxes; these vary by state and can often be a labyrinth of red tape for many small businesses. Failing to file the appropriate forms can lead to a variety of late charges and the involuntary dissolution of your business.
One also needs to consider how the business income is taxed. Income can sometimes pass through the business to your personal taxes or taxes can be paid by the corporation. In either case, it would not exempt you from filing the corporate tax return. Then there is the question of how one takes the money out of the business. If not done properly, this can create additional tax liabilities to the shareholders. There are elections one can make.
This one really trips people up; has an owner or shareholder passed away? Well, you can’t take it with you. This begs the question, who gets the business income now and how is this share of the business treated differently? This happens often with real estate partnerships and can multiply the number of parties involved quickly.
Finally, there are a number of additional filing requirements that can vary greatly. You might have a payroll in which case you have to file monthly, quarterly, and annually. There is sales tax which might be due every month or once per year in Massachusetts; however, rates and frequency vary from state to state and even county by county. The same is true of meals taxes. Filing requirements and rates can vary from town to town, not to mention state by state.
The 9/15 deadline is right around the corner, if you have questions about your tax returns feel free to leave a comment below. Also, you may go to our Facebook or Google+ pages, or you can call Alex at 781-849-7200.