One of your most significant duties as a small business owner is to pay taxes. You must make your tax payments on time and in full to the federal and state governments. Additionally, penalties and interest fees may apply if you don’t pay your taxes on a quarterly basis.
Small business owners must submit anticipated tax payments to the IRS four times per year. On April 15, June 15, September 15, and January 15 of the following year, these payments are required. Penalties and interest fees that result from not making these payments may soon mount up.
Depending on the amount owed and how long the payment is past due, there may be different penalties for missing quarterly tax payments. The IRS assesses a 0.5% monthly penalty on the amount of delinquent taxes. This fine may rise to a maximum of 25% of the outstanding tax balance. The outstanding debt will also be subject to interest charges until it is paid in full.
Make sure to pay your quarterly taxes on time and in full to avoid these fines and interest costs. Working with a tax expert who can assist you in calculating your expected tax payments and ensuring that they are made on time is the best way to go about doing this.
There are a number of options to take into account when deciding on the best business form for your small business, including corporations and LLCs.
Limited Liability Companies, or LLCs, give owners liability protection while retaining the adaptability of partnerships. Profits and losses from LLCs are passed through to the owners and recorded on their personal tax returns rather than being taxed separately as a separate business. As a result, LLC owners only pay taxes on the real earnings they get.
Contrarily, a corporation is a distinct legal entity that is taxed independently of its owners. Corporations can raise money by selling stock and provide their owners with limited liability protection. However, businesses are subject to double taxation, which means that when profits are paid out as dividends to shareholders, they are taxed both at the corporate and individual levels.
The decision between an LLC and a corporation will ultimately be based on the demands and objectives of your particular firm. You can decide which structure is appropriate for your small business by speaking with a business attorney or tax expert.