According to the New Hampshire Business Review, new business filings were up significantly in December. The most important thing for entrepreneurs is building a profitable business. However, many people get this right, but get fouled up in accounting and taxes.

To be successful, new entrepreneurs need to start out with the right framework and tax strategy. It's not enough to hire a decent accountant, entrepreneurs need to set themselves up for success.

Here are the top six things you should know when starting a new business:

1. First, you must decide what type of business entity you are going to establish. The type your business takes will determine which tax form you have to file. The most common types of business are: sole proprietorship, partnership, corporation, and S corporation. The choice is based on what you do and how many people will work with and for you.

2. The type of business you operate determines what taxes you must pay and how you pay them. There are four general types of business taxes: income tax, self-employment tax, employment tax, and excise tax. Your liability for these taxes will depend on your entity’s structure and your business activities.

3. An employer identification number is used to identify a business entity. Generally, businesses need an EIN. These can be obtained from the Internal Revenue Service.

4. Good record keeping will help you ensure successful operation of your new business. You may choose any record keeping system suited to your business that clearly shows your income and expenses. The law does not generally require that you keep any special kinds of records. However, the business you are in affects the type of records you need to keep for Federal tax purposes.

5. Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year is the most common tax year used, but another 12 month period may work better for some businesses (i.e. ski resorts).

6. The business must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses.  The most commonly used accounting methods are the cash method and the accrual method.  Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under the accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

Please contact us in order to insure that you start out with the proper framework. We stand ready to assist you with all of your business tax and accounting needs. Share this list with new business people you know.