Why are Tax and Accounting Services Necessary for Startups?
| 5 minutes read
As a small business entrepreneur, you probably agree that dealing with taxes and accounting is at minimum a routine… and even a headache at times when you do not have much time for that. It can be hectic to examine through tax paperwork and regulate the proper forms that need to be filled out. It would also be best if you thought about cash flow, tax payment deadlines, and a lot more. If you’re a growing startup and want your business operations to run smoothly, you should invest in hiring tax and accounting services for startups. We will answer the questions like, What is the role of accounting in a startup? Do startups need accountants? And many other related questions.
If you hire accounting services, these are some basic facilities you will be facilitated, some are.
- You will save some time and focus on other work
- There will be minimum chances of error
- Tax filing will be done on time
- Your account and other finances will be updated all the time
Welcome to Unboxing Startups, we will discuss finance, tax, and many other things as per the requirement. As we all know how crucial the tax and other accounting things are, startups need to file taxes and keep the accounting calculations updated.
Kindly stay with us until the end because today we will unlock some key information that is hard to find anywhere. Sit back and have a cup of coffee, and let’s begin the journey.
Today, we’re sharing detailed information that you need to know about tax filing for your startup. Our goal is to support your startups with the best possible information, so you can concentrate on the processes and systems that will set you up for success in the future.
Hiring a pro team will take the stress off your shoulders (we will not name any particular services). We are sure if you start finding you will get the best for your startup. And the team will help handle all the department of finances.
Step-By-Step Guide for Startups
Here is an overview of the step-by-step process that must be followed if you set up your financial system and prepare for taxes in the future.
How is Your Business Structured?
The type of entity used for your startup will impact the way your taxes are filed. It is crucial to know your entity in advance to choose the ideal tax and accounting services for startups to match your requirements. The most common types of small businesses include a Sole Proprietorship, Partnership, and Limited Liability Company known as LLC.
Record Your Transactions: Don’t waste your time and wait for the next season of filing. The bitter truth is that tax preparation should be happening throughout the year. As transactions come through your startups, therefore you need to track your cash flow going in and out because records are the base of successful tax filing.
The detailed records that are needed may vary depending on the business entity you are using. As a common rule, you need all information related to both income and expenses:
- Sales transactions (receipts)
- Interest from bank accounts
Always keep in mind that ALL income received needs to be recorded. So, make sure that you register and keep all the records as the business receives from various modes of payment.
Expenses need to be tracked and recorded. While it might look like a hassle to track every penny spent or invest, these expenses can add up to significant tax deductions. You should know how the money was spent; also you need to back up the transaction with documentation, such as an invoice.
- Marketing costs
- Vehicle expenses
- Fees and commission paid out
- Outsourced services, including Form W-9 (As per US Govt.)
- Office supplies
- Travel, including transportation, hotel, and food/entertainment
- Utilities, internet, and phone services
- Insurance premiums
- Employee salaries, including Form W-2, Form W-3, Form 940, and Form 941 (As per US Govt.)
Important Information: Some of these forms need to be completed and distributed before it’s time to file your taxes (there might be some other forms required).
Choosing the Right Tax Forms: One of the complex aspects of tax preparation is the variation of tax forms used by the IRS. There is no need to file every single form available! Instead, talk to a reputed tax and accounting services for startups provider so you can choose the forms that apply to your business entity.
Let’s take an example; certain forms need to be filled out for an LLC that isn’t required for a Sole Proprietorship. Tax forms might include FUTA taxes, Income Tax Return, Profit or Loss from Business, and more. Suppose if your business is set up as a Corporation, you might need to file forms regarding Shareholders, Schedule E, etc.
Why DIY is a Tricky
Choosing the applicable forms as per your business is just the first step. Once you know which documents are required for your startup, then you need to fill out the required information. You can also search online to find seminars regarding the various fields and entries that need to be managed on each form. Even though a DIY approach for tax preparation looks like an affordable solution, especially for startups, the fact is that you are leaving money on the table due to errors and deductions. One small change or missing information on a tax form can have a huge impact on the money that is paid each year.
If you don’t have tax preparation experience, then the best solution is to hire experienced tax services to take care of the paperwork on your behalf. You only need to provide the business and financial information to your accounting team.
What Can You Expect from Tax & Accounting Services for Startups?
Considering a full-service, outsourced accounting team means that you will share all cash flow transactions with your accountant throughout the year. There are zero reasons to wait until tax season before having a conversation about your tax preparation.
Here is a complete overview of the year-round support available for your startup:
- Before Tax Season: The primary goal is to establish a strong, effective accounting system that makes it easy to track all your expenses and income throughout the year. The appropriate software will make it easy to gather the critical information that will help to file your taxes every year—ongoing tracking access to take advantage of the available tax write-offs. Also, your accountant will provide information regarding how tax laws are changing each year, so you can update yourself with the latest rates and other details that affect your startup.
- Time to File Your Taxes: During tax season, your selected accountant will review the final financial reports and other appropriate information. And if you need both a business tax return and a personal tax return, it is best to have the same person handling both filings.
- After-Tax Season: When tax season is over, it gives a special feeling that your accountant team is just a phone call away if you need any help. Many business entrepreneurs find it beneficial to have an accounting team assisting with payroll processing and ongoing bookkeeping services.
Now, the final question that comes in, whether do you need Small Business Tax Services (SBTS)? And how much is the starting cost for SBTS?
Ask yourself, how will you know when it is the right time to invest in small business tax services? In the early stage, paying for professional tax preparation might look like a big expense. But trust us, it is worth the investment to hire an accounting team from the beginning.
Tax and accounting services for startups give you the foundation needed that will help your company embellish. An effective financial and accounting system gives you a clear picture of the financial health of your startup. An accountant can help with more than necessary tax preparation, which is why it makes sense to start with these services right away.
Accountant service fees can range from roughly $175 to $820 for business income tax.
Suprotik Sinha is the Content Writer with Synkrama Technologies. He writes about technologies and startups in the global enterprise space. An animal lover, Suprotik, is a postgraduate from Symbiosis Institute of Mass Communication (SIMC) Pune. He carries 6+ years of experience in Content Writing, and he also worked in mainstream broadcast media, where he worked as a Journalist with Ibn7 ( now known as News18 India) and Zee Media in Mumbai.
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Corefactors has seen struggles in maintaining leads for a business, tracking the team’s progress, and accessing reports in a conventional excel sheet. While all of this led to the inefficiency of the business functioning, it also added the difficulty of juggling between various platforms. Intending to shove away the roadblocks in the way of business sales, marketing, and communication, Corefactors understood the gap. That’s how Teleduce emerged into the business as an “ Integrated CRM to empower marketing, sales, and support teams with inbuilt cloud telephony.”