Tax help for new entrepreneurs

Inside Entrepreneurship: If you're starting out, don't forget your taxes

AS THE LAYOFF COUNT continues to rise across the country, many professionals will pursue consulting assignments to help make ends meet. Some of these professionals will find the income and career freedom to their liking and never return to salaried employment again.

Others will try to transform a consulting gig into a full-time position as quickly as possible. After all, entrepreneurship is not for everyone.

One of the more challenging aspects of transitioning from salaried employment to self-employment is managing tax filings and payments. The obligations are definitely manageable, but certainly more administratively intensive than preparing a single annual tax return based on W-2 reported income.

Barbara Petty, founder of Seattle-based ACCMAN Inc., a small-business accounting services firm, says, "It's common for freelance professionals to assume they can operate their business and save all their accounting work until April of the following year. By this point, they may have missed several quarterly tax filings and owe penalties and interest on late tax payments."

Here's a short list of business setup action steps and reporting responsibilities for new freelance entrepreneurs.

AS THE LAYOFF COUNT continues to rise across the country, many professionals will pursue consulting assignments to help make ends meet. Some of these professionals will find the income and career freedom to their liking and never return to salaried employment again.

Others will try to transform a consulting gig into a full-time position as quickly as possible. After all, entrepreneurship is not for everyone.

One of the more challenging aspects of transitioning from salaried employment to self-employment is managing tax filings and payments. The obligations are definitely manageable, but certainly more administratively intensive than preparing a single annual tax return based on W-2 reported income.

Barbara Petty, founder of Seattle-based ACCMAN Inc., a small-business accounting services firm, says, "It's common for freelance professionals to assume they can operate their business and save all their accounting work until April of the following year. By this point, they may have missed several quarterly tax filings and owe penalties and interest on late tax payments."

Here's a short list of business setup action steps and reporting responsibilities for new freelance entrepreneurs.

1. Business structure. The starting point for determining how you will report business activity to the Internal Revenue Service is the selection of a business entity structure. The most popular choices include a sole proprietorship; limited liability company, or LLC; corporation; or partnership. A sole proprietorship, LLC and a corporation with an "S" tax reporting designation may provide tax saving advantages to small business owners.

2. Licenses. In Washington, new companies have to apply for a master business license, which is available at the Department of Licensing, plus obtain a city license. Some cities like Issaquah are linked to the master business license to limit paperwork. Others cities, like Seattle, require a separate application.

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