What's the most important thing that startups should know about tax (in the US)?


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Tax is a strange thing to deal with. What's the most important thing that incorporated startups in the US should know about tax?

Finance Legal Tax

asked May 20 '10 at 04:07
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Mark Bao
604 points
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  • How is it a strange thing to deal with? – Tim J 9 years ago

4 Answers


7

That if you don't pay it, you go to jail.

answered May 20 '10 at 11:09
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Joel Spolsky
13,472 points
  • Not always true Joel. I think it is very important to be aware of all taxes when forming a business. Placing your business in a state where there is no sales tax can mean increased sales if you are in online retail. Having a tax strategy that lowers your overall tax burden is important. Money paid as taxes can better be spent on marketing, paying your team, and building your business. The important thing is to make sure you find a right fit for your business, and your tolerance for LEGAL tax avoidance. – Frank 9 years ago

1

My father was fond of saying you need
three things in life. A good doctor, a
forgiving priest, and a clever
accountant. The first two, I've never
had much use for them. But the third -
(he raises his glass to recognize
Stern).


-- Oscar Schindler in the movie

answered May 20 '10 at 14:47
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J. Pablo Fernández
412 points

1

That's a very big question. Here are some tips.

First, new companies often owe a minimum amount of tax depending on which state they are in even if they do not make any money. For example, in California, that amount is $800 per year. This can be a lot for a new company who is just starting out.

Next, depending on which state you are in, the type of entity you choose, such as C Corporation, S Corporation, or LLC will have an impact on how your taxes are paid and how much tax you will pay.

Lastly, if you are an officer of a company, you'll need to pay payroll taxes which have to be paid quarterly to the IRS, so an accountant may be necessary depending on the size of your company.

answered Jan 5 '11 at 07:20
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Alex Naegele Lawyer
653 points

1

Get a good accountant. Learning as you go is not advisable.

answered May 23 '10 at 19:17
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Oleg Barshay
2,091 points

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