Q&A with James Porter
Startup businesses can face some thorny issues concerning taxes
Q: What records are important to retain during the first year of a business? Do I need to keep every receipt?
A: In the first year of a business, the records created may include legal documents, which should be kept permanently. Other receipts or purchase documents relating to depreciable assets, like buildings, vehicles, office furniture and fixtures, ideally should be retained as long as the assets are held in order to prove basis upon disposal of the asset. The receipts for general expenses should be kept for three to seven years, as the Internal Revenue Service can require receipts for proof of deduction. Often, keeping receipts in a digital format will suffice for tax purposes and save space for the business owner.
Q: How does a new company notify state and federal tax agencies that it has opened for business?
A: Each state has differing methods of notification. If the business is new and needs a separate legal entity in which to operate, the first point of contact would be registering with the secretary of state. Then the business will need to apply for a Federal Employer Identification Number by submitting a SS-4 Form electronically through the IRS website or by mail. This will allow the business to open its own bank account as well as hire employees. The state of Oklahoma has a business registration packet available on the Oklahoma Tax Commission’s website. This also can be done electronically on the website for most new businesses. An existing business needs to check each state’s rules if it begins doing business in another state. There are forms available at each state’s department of revenue website to determine whether a business needs to register with the state for sales, franchise or income taxes.
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