It's Your Business
By: Adolph Levin
If you're starting or purchasing
a business, or presently operating a business, you should find a
competent lawyer, or accountant to advise you business matters,
if you can't afford one, you must familiarize yourself about the
pertinent Federal, State and Local regulations and ordinances
that will affect the operation of your business. If you contact
the appropriate agencies, they will provide you with the
necessary information and assistance needed to see that your
business is conducted in a legal manner.
You may find it helpful to
contact these US Government agencies:
Commerce Department, Immigration
and Naturalization Service, Internal Revenue Service, Labor
Department and the Small Business Administration.
The State offices that may be
appropriate are:
Business Permits (or similar ),
Economic Development Department, Department of State, Insurance
Department, Taxation Department, Labor Department and Department
of Worker's Compensation. In addition, you should contact City,
Town or Village Department of Consumer Affairs, Business
Development and Finance Department for their assistance.
If you are purchasing a
business, you should be uncertain whether you may be assuming
any taxes or other liabilities of the seller by acquiring the
business. You should also determine whether you would be
incurring any taxes yourself by purchasing the tangible or,
intangible assets of the business.
You may decide to operate the
business as a sole proprietor, in partnership with another
person(s), or as a corporation. As a sole proprietor or partner,
you include all or your portion of the business profit on your
personal income tax returns. In general, the profit from a
corporation, (after salary) is taxed twice, once to the
corporation and a second time when distributed to the
shareholder as dividends
As a sole proprietor or partner,
you are Personally responsible for all debts of the business,
while a corporate shareholder has limited liability as to
corporate debts. The IRS requires that sole proprietors
use their Social Security Number for identification unless they
have employees or must file other special returns. In this case,
the IRS and most banks treat them the same as a partnership and
an EIN, or Employer Identification Number must be secured from
the IRS.
Every business must file an
annual income tax return. The type of business entity you use
determines which taxes you are required to pay.
Sole proprietors file Form 1040,
pay income taxes on the business profit, and also file a
Schedule C and pay self-employment taxes on the profit. A
partnership files Form 1065 and pays no tax, as the profit is
taxed on the partners' Forms 1040. Corporations file Forms 1120
or 1120A or 1120-S as appropriate and may have to pay taxes on
their profits. The corporate shareholders pay taxes on their
salaries and/or dividends received when they file their Form
1040. If you have employees, you may be required ,to pay Social
Security and Medicare taxes and withhold Social Security,
Medicare and income taxes from your employees' wages. You may
also be required to pay Federal Excise and/or Unemployment
taxes. In addition, depending on State or, local law, you may be
responsible for paying Disability, Worker's Compensation, Sales
and other taxes as legally required. @1999
Adolph Levin is a retired IRS Agent and provides Accounting,
Tax Preparation and
Planning and representation before the IRS and State and Local
tax authorities.
He can be reached at (718) 357-6483 or via email to
leva1@juno.com
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