When you know the ins and outs of cleaning business taxes for your LLC, running your company is a lot easier.
When you started your cleaning company, you may have heard a little about how to handle your cleaning business taxes, but chances are good that there’s a lot of tax knowledge that can help you.
You don’t need to be a tax specialist, but making the right moves can save your company (and you) a lot of money. And while it’s important to have your inventory and your workforce in order, your paperwork can make a big difference in your revenue and profits.
Of course, there are professionals to help guide you through your cleaning business taxes, but the more you know, the more able you are to streamline the process. Here are some of the things you need to know.
What every business owner should know about cleaning business taxes
When you’re thinking about cleaning business taxes, you’ll want to start from the very beginning when you register your company with the state. You have two options. You can file as a limited liability company (LLC), or a corporation. Whichever one you choose will dictate how you pay taxes. If you run a corporation, for example, the business gets taxed, and you also pay personal income taxes, whereas an LLC is only taxed once.
Generally, small businesses are better off registering as LLCs, in part because LLCs involve much less paperwork and in part because you, the owner, have more control over your business (as opposed to shareholders). LLCs are also beneficial due to their “pass-through” status, where the profits are considered income and filed as part of your personal tax return. LLCs also limit your personal liability for the business should something go wrong (though corporations offer this protection as well).
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Paying cleaning business taxes as an LLC doesn’t have to be as confusing as it sounds. Here are five things to keep in mind when forming your LLC and paying your taxes.
1. LLCs are automatically treated as sole proprietorships
Depending on the number of owners, they may also be treated as partnerships, and taxed as such. However, an LLC may elect to be taxed as a C-corporation or, if the business qualifies, an S-corporation. Whichever one you choose will determine your tax liability. In most cases, it’s more advantageous to pay taxes as an LLC if you only have a few people running your business.
2. An LLC’s revenue is subject to employment tax.
A C-corporation or S-corporation is not subject to those same taxes. On the plus side, an LLC is not responsible for corporate taxes, which can sometimes be more than employment taxes.
3. You can deduct cleaning business taxes
As long as you’re registered as an LLC, you can deduct these taxes from your return. This can save you a lot of money over time. And remember that you can deduct the cost of forming your LLC as well!
4. An LLC can lease your personal assets.
For example, if you run the cleaning business out of your home, the home may qualify as an office, which can be a tax write-off if you have all the appropriate paperwork in place. Just remember that you can only do this for legitimate business expenses and you must have receipts for anything you intend to write off.
5. An LLC is not exempt from paying property taxes.
Whether you run your business out of your home or another office somewhere else, you will likely still have to pay property taxes whereas a corporation would be considered exempt.
The risks of improper filing
While an LLC protects your personal assets, that doesn’t excuse you from the stiff penalties you might incur should you pay your cleaning business taxes late or not at all. (It’s always better to file late than not at all!) From the moment you register as an LLC, the IRS has a pulse on you, and if you don’t file taxes or don’t file them correctly, the IRS may come to collect. Hopefully, this doesn’t happen, but if it does, it could result in significant debt for you or even jail time.
If you do decide to hire a professional to handle your cleaning business taxes, make sure you find someone reputable. Even if you have someone else prepare your taxes and they make a mistake, you may still be held liable by the IRS. When selecting a qualified tax preparer, it might be a good idea to ask for references, too, if this person hasn’t come to you already recommended by someone you know and trust.
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