Why Colorado Entrepreneurs Must Take Business Taxes Seriously4 min read
There are many reasons why budding entrepreneurs have recently been drawn to Colorado as opposed to other locations. Colorado is home to a booming economy, with towns like Denver offering both a great deal of comfort and a bustling downtown area. For that matter, lots of entrepreneurs have been drawn to the unique, interesting personality presented by Colorado in general. The progressive nature of the state has recently allowed it to be at the forefront of everything from the tech industry to the legal cannabis industry. But as progressive as Colorado can be, it isn’t without its restrictions and requirements expected of small business owners. The Colorado government wants to lure entrepreneurs, due to the way they boost the state’s economy, but that doesn’t mean that they’ll offer benefits for nothing in return. Business taxes are expected of Colorado entrepreneurs, and though these taxes are not meant to obstruct your growth as a small business owner, they can pose certain concerns for those who are starting a business for the first time.
It’s crucial for a small business owner to stay on top of their business taxes. Making errors when keeping records and paying taxes can bring you and your business under the scrutiny of the IRS. This could lead to your business being derailed before it really begins. For that matter, even if you handle your taxes correctly, you may not be handling them in the manner that is most financially beneficial to your business. This is why we’re looking into some of the questions new entrepreneurs may have regarding business taxes in Colorado, and how they can best handle their taxes.
Understand What Falls Under Business Taxes
There are certain taxes that every business owner needs to think of, as they are overseen by the Internal Revenue Service; there are also taxes that Colorado business owners, in particular, must consider. The IRS oversees income tax, with all businesses outside of partnerships having to file annual income tax returns; estimated taxes, which business owners must make payments through regularly throughout the year; self-employment tax, which is a Social Security and Medicare tax meant for, as the title suggests, self-employed individuals; employment taxes, which business owners must file if they have employees; and excise taxes, which do not apply to all business owners but may apply to yours depending on the products or services you offer or use. This doesn’t even take into account the taxes that are collected by the Colorado Department of Revenue. Ultimately, this can all lead to a good deal of confusion, especially for small business owners that are just starting out. At times, the IRS and Colorado Department of Revenue may have a difficult time separating cases of genuine confusion with cases of intentional fraud. Fraud is a major issue for any small business to contend with, as the Association of Certified Fraud Examiners 2919 Report to the Nationals on Occupation Fraud and Abuse revealed that business with less than 100 employees experienced the greatest percentage of fraud cases at 28%. They also took the largest median loss at about $200,000. The last thing a small business owner wants is to deal with concerns regarding their taxes and potential fraud.
Get Organized And Stay On Track
There is, of course, less room for error when you remain as organized as possible. A small business owner should take some time each month to pick through their records and ensure that they are managing their receipts correctly, as well as their mileage logs and general expenses. Another important part of staying organized as a business owner is making sure that you’re keeping your personal finances separate from your business finances. This can sometimes be daunting when you’re self-employed, but it’s crucial to avoiding complications that may completely derail your business tax records. Using accounting software, as well as a payroll tax system, is another part of refining your organizational skills. Essentially, this kind of move, while yet another sometimes-costly investment in your small business, is a part of moving your business from the place of a passion project to a truly independent business. This kind of growth is incredibly important; according to a Randstad US survey, 58% of workers reported that they quit because their companies lacked growth opportunities, and 57% left because they needed to take their careers to the next level. You’ll want your business to offer the types of growth opportunities that will keep the right employees around. You can’t do this without expanding your business, both through practical elements like staying organized, and marketing through tactics like SEO strategy — which, according to 61% of marketers, is a high inbound marketing priority. There are many aspects of growing a small business, and while some are complex, others are much more straightforward.
Bring In Outside Components
Many small business owners want to keep all operations internal, if possible. However, this often isn’t possible at all. Certain aspects of your business should be outsourced, and you will need to lean on outsiders at one point or another. In the beginning, a small business owner should already be considering hiring independent contractors versus permanent employees, as they can often be less expensive in the long term. As time goes on, you should also look into working with a qualified accountant when working through your taxes. Additionally, when handling business taxes specific to Coloradans and beyond, a tax lawyer would also be useful. Tax lawyers can help you ensure that your taxes are filed correctly and on time, while also prioritizing your business so that you can make as much money as possible.
Starting a small business is never simple. However, if you take a responsible approach and bring in outside parties when necessary, business taxes should not stand between your business and long-term success.