Starting a new business in New York can be an exciting endeavor, but it also comes with a host of responsibilities, including understanding and managing various tax considerations.
Taxes play a crucial role in the financial health of your business, and being well-prepared can save you from potential pitfalls down the road.
Choosing the right business structure is your first tax-related decision. You can opt for a sole proprietorship, partnership, LLC, S corporation or C corporation. Each structure has its tax implications. Sole proprietors report business income on their personal tax returns, while corporations face separate taxation. Weigh the pros and cons of each to determine which suits your business needs.
Income tax is a significant concern for businesses. New York has a progressive income tax system, and the tax rate depends on your business structure and income level. Keep accurate records of your income and expenses to calculate your tax liability accurately.
If you have employees, you must withhold federal and state income taxes, Social Security and Medicare taxes from their wages. Additionally, you are responsible for paying state unemployment taxes and workers’ compensation insurance.
Quarterly estimated taxes
To avoid a hefty year-end tax bill, New York businesses often need to make quarterly estimated tax payments. Calculating these payments accurately can help you maintain a manageable cash flow throughout the year.
Starting a new business comes with many challenges, which factors into why 18% of small businesses fail in their first year. Staying ahead of taxes helps businesses focus on other elements needed for success.