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DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 793
Experience:  Years of Experience in Business & Personal Taxes
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Hi I dont file my taxes and I want to start a new business

This answer was rated:

Hi I dont file my taxes and I want to start a new business and I want to incorporate what do I need to know and how do I go about this

DanielleCPA :

Welcome and thanks for your question!

DanielleCPA :

By don't file taxes, do you mean that you aren't currently required to file taxes?

Customer:

No Its the law to but I get paid under the table

Customer:

So ill have to pay Im sure causr im single and no kids

DanielleCPA :

Ok. Is the new business unrelated or are just incorporating what you are doing in your current line of work?

Customer:

Unrelated

DanielleCPA :

Ok.

DanielleCPA :

Your first step should be to file Articles of Incorporation with the California Secretary of State. There is a $100 fee and you can use this form. Some people choose to have an attorney help them with this step.

DanielleCPA :

Your next step will be to obtain a Federal Employer Identification Number. You can complete the application online at the IRS website. They will issue you a new FEIN immediately.

Customer:

Okay then what

DanielleCPA :

Register for California taxes.

DanielleCPA :

Give me a moment - I'm trying to find a good link for you with that info.

DanielleCPA :

If you will be making sales subject to sales tax, you will need to register with the State Board of Equalization. Information on that registration process and a link to the online registration can be found here. If you will have any employees (including yourself if you will be paying yourself as an employee with a W2), you will also need to register for payroll taxes. You can register online here and detailed information on that process will be found here.

DanielleCPA :

If those taxes apply, you will need to file periodic returns (could be monthly, quarterly, annually) based on the frequencies assigned to you by those agencies.

DanielleCPA :

Note you will also need to file annual corporate income tax returns with the IRS and the California Franchise Tax Board, but there is no separate process for that. California has a minimum $800 annual tax, but they waive that in the first year.

DanielleCPA :

Here is a nice guide from the Franchise Tax Board for new businesses.

DanielleCPA :

You may wish to make an election for the Corporation to be treated as a S Corporation. This offers the advantage of not paying tax at the federal level, although a corporate tax return is not required. The income of S corporation passes through to the owners and is reported on their personal 1040s. You can make an S election using Form 2553.

DanielleCPA :

Do you have any questions on the above information?

DanielleCPA :

That covers the process and the recurring requirements - please let me know if you need clarification on any of this.

Customer:

Okay thank u

DanielleCPA :

You're welcome.

Customer:

So a s corporation is my best bet then

DanielleCPA :

In my opinion, yes. It is a great option for small business owners.

DanielleCPA :

One clarification - I see a typo in my answer above. Corporate tax returns ARE still required for S Corps. There just is no tax on the federal level. In California, you are still subject to the $800 tax.

DanielleCPA :

A S Corp is still your best bet, though, in my opinion.

DanielleCPA :

It offers you much more flexibility in withdrawing funds than a traditional C Corp.

Customer:

Oh okay ill go read if I have more questions u will be hearing from me thanks agian

DanielleCPA :

You're welcome.

DanielleCPA and 2 other Tax Specialists are ready to help you