The Ultimate Tax Guide for Restaurant Owners
As a restaurant owner, you’d probably rather be doing anything than taxes. However, managing your finances and doing taxes are among the most important business operations. Plenty of great restaurants have folded because of tax issues, and you don’t want your eatery to suffer the same fate.
There’s a lot to learn about managing your taxes when you’re a small business owner. Indeed, you could never learn all you need to know from a single article. However, this guide is a great place to start. Here, we’ll cover some of the most important things you need to know about doing your business’s taxes and how to maximize your tax returns. Bon appetite!
Know the different tax classifications.
One of the first steps to launching your restaurant is choosing your business entity’s tax status. There are several statuses to choose from, and the best classification depends on your business and finances.
The chances are that it will be best for you to open your restaurant as a limited liability company (LLC). An LLC protects your personal finances in the case your business is held responsible for financial damages or tax liability. Essentially, an LLC separates your personal finances from your business. That means if someone goes after your business, your business, rather than you personally, will be responsible for any liabilities.
Document all your business spending.
It’s critical to keep track of all your business spending for tax purposes. Every dime you spend on your company, from emerald green menu covers and tax folders to your restaurant advertising efforts, could add up in the form of tax deductions.
So, don’t be shy about investing in what your restaurant needs for operations and marketing. Business cards, laptop computers, toner, and sea salt are all critical to your restaurant operations. Invest in your business confidently, knowing you’ll get your ROI during the coming tax season.
Keep your relevant paperwork organized.
Sometimes, a simple accounting mistake can lead to a business being audited by the IRS. Indeed, being audited isn’t a reflection of your character or competency as a business person. It’s just something business owners sometimes go through.
It’s a good idea to keep all your receipts, invoices, and expenses organized. Indeed, you should have tax return folders with all your important financial paperwork in them, ready for tax preparers and auditors to pour over them. You’ll be surprised how custom tax folders bearing your company’s name can leave a lasting impression on an auditor. We’re not saying this will affect how they do their job. However, it might affect how they view you, which could help you significantly.
Hire an accountant.
Doing taxes isn’t fun and doesn’t come naturally to most people. If you’re in the majority of people who would rather pretend taxes didn’t exist, it’s a good idea to hire an accountant to help you with your bookkeeping. Indeed, they can do all the tax preparation work that you’d rather watch paint dry than do.
Tax season is probably the least favorite time of year for restaurant owners. They have to keep their business running while gathering invoices and income reports. It can be a daunting process.
There’s so much to learn about taxes. You have to ensure you pay enough or risk being penalized. You also need to keep track of every red cent you spend on your business because it could lower your tax liability next tax season. You might want to hire an accountant to help you with your taxes if finances aren’t your forte. The last thing you want is a tax error to cost you your business. Doing your taxes is like the “adulting” portion of being a business owner. It’s not fun, but you sure feel more confident and responsible after you do them.
