What Should I Know About Taxes for a New Business or Side Gig in Newton Square, PA?
When you work as a regular employee, paying taxes on your income is straightforward, but it’s less so if you own your own business or participate in the gig economy. Tax compliance and careful tax management are critical to operating a successful business, and the skilled guidance of a respected tax pro in Newtown Square, PA, can contribute significantly to the success of your work.
Determining the Entity of Your New Business
If you’re starting a new business, a primary concern that directly relates to taxation and overall financial liability is how you structure it. There are several basic tax structures, each with specific tax pros and cons.
A Sole Proprietorship
A sole proprietorship is owned and operated by one person, making it easy to create and maintain. While a sole proprietorship allows complete control over your business, it leaves you personally responsible for all debts and obligations. The income you generate in a sole proprietorship is taxed as personal income, which leaves you responsible for paying self-employment taxes.
A Partnership
A partnership is a business that two or more people own. These businesses are generally taxed as pass-through entities. This means the business isn’t taxed, but each partner is responsible for covering the income taxes that apply to their share of the profits. Those who qualify can deduct 20 percent pass-through tax on their business income.
Limited Liability Company
Limited liability companies (LLCs) offer many of the protections of corporations but experience fewer legal formalities. Most LLCs in Pennsylvania are taxed as pass-through entities, which can support a tax break.
Corporations
If you structure your business as a corporation, it is subject to more complex governmental requirements and formalities, but you’re likely to experience an overall reduction in tax rates.
Our skilled tax professionals have business insight to help you determine the proper structure for your business enterprise, remain timely and compliant regarding taxation, and maximize your tax deductions and savings.
Starting a Side Gig
If you take up a side gig, such as driving or delivering for a rideshare company, you are a contract worker, meaning you are responsible for paying your taxes. The IRS reports that you must file a tax return if you earn at least $400 net as a contract worker in any given year.
Having an experienced tax professional on your side helps to ensure all the following:
- Take advantage of all the tax deductions available to you
- Accurately account for the income you generate
- Understand your tax responsibility and plan accordingly, which can include making estimated quarterly tax payments
Consult with Our Experienced Tax Professional in Newtown Square, PA, Today
At Phoenix Tax Consultants, we are committed to helping you effectively cover all your tax bases when starting a business or side gig. This can make a significant difference in the overall success of your endeavor. For more information about what we can do for you, don’t hesitate to contact us online or at 610-933-3507 today.