For any business, taxes are an important component of operation. They make up a complex world which must be managed with stringent detail.
One of the most basic tax considerations for a business is to obtain any applicable tax identification numbers. A business will typically need a Federal Employer Identification Number (FEIN), which is obtained from the Internal Revenue Service. The notable exception to this is in cases of a sole proprietorship maintained by one individual with no employees, where that individual may be identified for federal tax purposes by their social security number. A business may also need a state tax identification number.
The required tax forms to be filed, and the amount of tax liability a business must pay will depend on the entity type of the business. Therefore, businesses should consult with a knowledgeable accountant or tax attorney prior to formation in an effort to minimize their future tax obligations. Of course, taxes are only one component of many to consider when choosing an appropriate business entity type, so consultation with a business attorney is also highly advised.
The many types of taxes to which a business may be subject include: federal and state income taxes, state franchise tax, state sales and use tax, federal insurance contributions tax, federal and state unemployment taxes, and withholding tax. A business may also be liable for specific taxes such as those on sales of fuel, alcohol, or cigarettes and the generation of hazardous waste.
A business that operates in multiple jurisdictions may be liable for taxes outside of their primary location of operation. Also, some taxes must be paid in advance as estimated taxes. Because of the risk of having to pay penalties and the daunting risk of being subject to an audit, it is wise to retain a knowledgeable accountant or tax attorney to help you understand your local, state, and federal tax obligations.
