FAQ's

One of the first decisions you’ll make when starting up is your business structure. The structure you choose impacts taxes, liability, control, and how to pay yourself from your business.

You can structure your business as a: 

• Sole proprietorship
• Partnership
• Limited liability company (LLC)
• Corporation (C Corp or S Corp)

Some business structures are more complicated to manage than others. Depending on how you structure your company, you may have significant filing and reporting requirements.

Before selecting a business entity, lay out your business goals and consider the pros and cons of each.

Not all businesses are required to open a separate business bank account. But that doesn’t mean you shouldn’t do it regardless.

Mixing personal and business funds can cause you to file taxes inaccurately, become disorganized, and overspend. You may accidentally use business funds to make personal purchases if you combine funds.

Convinced? To open a business bank account, you must:

• Choose a bank
• Gather necessary documents (e.g., articles of incorporation)
• Open the account

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Not every aspiring entrepreneur can afford to bootstrap their business. You may need to think about financing options if you want your small business dream to come to life.

If you’re interested in borrowing funds (which may require collateral), you can apply for a:

• Business line of credit
• Business loan
• Small Business Administration-backed loan

Instead of borrowing funds, you may want to find investors to invest in your business, like venture capitalists or angel investors. They won’t help for free, unfortunately. You likely need to offer them business equity or control in your company. 

Another popular financing option is crowdfunding. Crowdfunding is a financing method where you ask for investments or donations, generally from a large group of people. Keep in mind that you probably need to offer an incentive if you want crowdfunding to be effective (think about company-branded swag, early access to products, or personal shoutouts!).

You can also ask friends and family for loans or investments. Treat funds from family and friends seriously by creating a contract and payment plan (friends and family are worth their weight in gold, but only if you pay back borrowed funds!).

To file your business tax return, you need your Taxpayer Identification Number (TIN), financial records, and the proper tax return form. 

The form you file depends on how you structured your business:

• Sole proprietors attach Schedule C, Profit or Loss From Business, to Form 1040 to file their small business tax return.
• Partnerships must file Form 1065, U.S. Return of Partnership Income. The partnership must also submit a copy of Schedule K-1 (Form 1065) to the IRS and distribute Schedule K-1 to each partner.
• Corporations use Form 1120, U.S. Corporation Income Tax Return, to file taxes. 
• S corporations file taxes using Form 1120S, U.S. Income Tax Return for an S Corporation.
• LLCs file taxes using a form that corresponds with how you’re taxed (i.e., sole proprietorships, partnerships, or corporations).

Yes! You can claim a tax credit or deduction to lower your tax liability. 

Both deductions and credits help you offset the cost of qualifying business expenses. Deductions reduce your total taxable income. On the other hand, a business tax credit is a dollar-for-dollar tax liability reduction.