Taxes affect businesses at the local, state, and federal levels. There are a number of rules to keep track of, but for the LLC to remain in corporate compliance, learning them is essential. These tips help companies ensure they remain in good standing.
If a company hires employees, this first tip is critical. Employers are responsible for withholding part of an employee’s pay for tax contributions. For first-time business owners hiring their first employees, this may take a bit of a learning curve.
This withholding is for federal income tax purposes and is laid out in the Federal Insurance Contributions Act, or FICA. An employee of the company must stay organized about FICA and withholding obligations.
Keep Track Of Franchise Tax
It’s not just federal taxes that are a part of corporate compliance; state taxes are also a factor. In the United States, the general term is “franchise tax,” but individual states may have their own titles such as registration fee, excise tax, or license tax. However, not every state has a franchise tax for businesses classified as corporations. For example, West Virginia, Missouri, and Kansas are states that don’t levy a franchise tax on businesses operating within the state.
For those states that do require these tax contributions, the franchise tax is an additional tax to keep track of on top of regular state taxes.
Maintain Internal Structures
While an LLC needs to stay on top of external tax requirements from the IRS, there are also internal tax factors to consider. Corporations have the strictest corporate compliance rules, but LLCs have guidelines as well. Keeping an operating agreement up to date by holding annual meetings, issuing membership shares, and recording all membership interest transfers are some things LLCs may document and provide to show corporate compliance.
Internal structures are most successful when business owners maintain a checklist of activities to follow for corporate compliance with taxes.