Tax Mistakes To Avoid When Starting A Business

Starting a business isn't easy. You have to establish a model, secure premises, build a customer base and – if everything goes well – hire help.

Apart from the normal challenges of small business ownership, there's another major obstacle: taxes. Between state and federal, there's no shortage of documents to file to ensure that everything is legal and in order.

It's unfortunately quite easy to make a tax-related mistake that can cost money and threaten your business. Here are a few common errors that new business owners fall into:

• Choosing the wrong legal entity. Whether you establish yourself as the sole proprietor or create an S Corporation can make a big difference in the amount of tax you pay. It's important to learn the differences before you start filing.
• Keeping business and personal dollars separate. When your business is first getting off the ground and you are the only person there, it's easy to lose track of whether money is coming from your personal funds or those of the company. It's important to keep this straight by the time tax season rolls around, though, or you might find yourself in serious legal trouble.
• Forgetting deductions – or claiming too much. New business owners may not realize that they are allowed to deduct a number of expenses, such as money spent on gas and other expenses for work-related trips, according to the U.S. Small Business Administration. However, don't accidentally (or purposely) deduct too much, or you may invite an audit.

Are you looking to start your own business in Arizona? The Law Offices of Donald W. Hudspeth, P.C., have years worth of experience guiding entrepreneurs through the formation of new businesses. Call us today to learn more.

Categorised in: Business Law

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