Its tax season! (Duh, we all know that, Paige. Don't remind us!)
If you're an LLC--which most small businesses are--you are likely wondering if you need to chat with an accountant, a lawyer, or just use an online product like Turbo Tax or H&R Block.
LOTS OF OPTIONS!
So, I thought I'd let you know what my best tips are for figuring out your next steps to prepare your taxes.
FIRST: Figure out if you're a single member LLC or a 2+ member LLC.
- If you're a single member LLC, you can pay tax on business profits as if you were a sole proprietor. This is great because you can file on your personal taxes. However, if you're a 2+ member LLC, you are subject to the partnership tax rules. You don't have to pay taxes on your business, but you have to prepare an IRS Form 1065 for information purposes only, and then split the profits for each owner's share of the company and file those on each of your personal tax returns.
SECOND: Figure out if your budget is easy or confusing.
- If you're operating a creative business, chances are you don't have a ton of time to figure out your budgeting. Some entrepreneurs hire accounting firms to help them go through their receipts, financial records, banking, and credit cards. Some entrepreneurs have their own budgeting software (like Quickbooks) to keep track of everything. Some entrepreneurs have no idea about anything and don't keep track of their spending or income regularly throughout the year. If you feel like you're about 80% good-to-go with your annual budget from last year, you shouldn't need to pay for extra help with an accountant. However, if you're budget is less than 80% of the way there, then you need help! Ask a skilled accountant in your state for help, and they will guide you through budgeting correctly.
THIRD: Figure out if you have money to pay and accountant
- Accountants are professional service providers for a reason. Turbo Tax and H&R Block are great for people who have simple W2s on their tax returns, and for businesses that have simple budgets. But, if you have a ton of earned income, expenses, depreciable assets, charitable giving, etc, you NEED to chat with an accountant. They are EXPERTS in their field, went to school for a long time to help you, and passed really difficult tests so that they are prepared to answer your questions! Spend the extra money if you can! You never know, they could SAVE you money in the long run! Just remember to hire an accountant that understands small businesses and creative entrepreneurs.
That's it! 1, 2, 3!
If you're a single member LLC that has a simple budget you've kept track of throughout the year, chances are you are fine filing online with Turbo Tax. If you're a 2+ member LLC and/or have complicated budgeting, you should likely hire an accountant!
Happy filing! :)