dalessandro12

I am in California and am just starting to create my business. I am going to do the following:

1) Apply for business license
2) File DBA
3) File for a trademark
3) Apply for sellers permit

I am planning on filing as a sole proprietor as I will have no employees at this time. My concern however is with the taxation side of it.

I will not be "paying" myself and plan on reinvesting any income from the company back into the company. If I am not paying myself, do I need to pay social security taxes on the business income? How does that work?

I do understand that I have to pay state sales tax on my purchases, but just don't want to find out 6 months from now that I owe some other taxes.

Any help is appreciated.
Daniel

 

Reply With Quote

pwapparel

because you will be doing it sole proprietor, whether or not you actually spend the money that you receive, you must claim all income on your personal taxes.

IF on the other hand, you do end up reinvesting it all, those expenses will drive down the income and you will have a very small true increase in your taxable income.

To keep yourself separate, you'd have to at least establish an LLC. Which are becoming more and more popular, cheaper, and easy to manage. PLUS! you don't have the double taxation of a normal corporation. Definitely something to talk about with your lawyer or accountant that you've been in contact with (which is my big hint that you need to do this step 1st!)

 

Reply With Quote

dalessandro12

Im new to this forum and hate to kill the topic, but why should i pick an LLC over sole proprietorship? From what I understand, an LLC works very similar to an SP but has the advantage of limited liability. Also, I have read that in California, LLCs have a minimum annual tax of $800.00 when an LLC. Im not sure what the taxation differences is between an SP and LLC, but I think that I could work with a sole proprietorship until my company gets more established.

Any thoughts?

BTW - My company is going to be home based, ran by my wife and I and we are going to be doing business through online transactions.

 

Reply With Quote