Complying with local, state and federal tax regulations is one of the most critical aspects of financial management for the small business owner. Failure to comply with these regulations may result in substantial penalties or even the closure of your business. The following information is not intended as a comprehensive discussion of tax regulations; it is merely an overview of some of the most common types of tax requirements.
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Federal Employer Identification Number
All Internal Revenue Service (IRS) forms filed in the name of the business require the use of a Federal Identification Number (FEIN) sometimes referred to as a "tax ID number." If your business is a corporation or a partnership, or you anticipate hiring employees (no matter what the legal structure of your business may be), you should obtain a FEIN by filing a form SS-4 with the IRS or call 1-(800) 829-1040 for information.
Different types of businesses (i.e., sole proprietorships, partnerships and corporations) have different income tax requirements. One of the primary considerations in choosing a legal structure for your business is the tax implications of a particular structure. Each of the various types of legal structures have different requirements regarding filing dates, forms required and tax calculations. The fact that a business does not show a profit does not release it from its obligation to file the proper income tax forms.
Any business with employees of any type must comply with federal and state payroll requirements. This is true even if you are the sole employee of a corporation which you own. It is critical that you understand the various deadlines and requirements, or that you use the services of someone who does.
The major types of payroll taxes in California are:
- Income Tax Withholding (federal, state, and, if applicable, local)
- Federal Social Security Tax (FICA)
- Federal Unemployment Tax (FUTA)
- California Unemployment Tax
- Single Business Tax (SBT)
The sale of many types of tangible goods in California incurs a sales tax. It is the responsibility of the business to collect this tax, keep accurate records and remit the funds according to established guidelines. Failure to comply with the sales tax requirements can result in serious financial consequences for the business.
For more information, contact the Tax Collector's Office in the city and/or county where your business will be located.