Everything Founders Need to Know About Taxes in 2025

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🔹 1. Choosing the Right Business Structure

Understanding how your business entity affects your tax responsibilities:

• Sole Proprietorship – Simpler setup, but full liability
• Partnership – Pass-through taxation, shared liability
• LLC – Flexibility and limited liability
• C-Corp – Separate tax entity, potential for double taxation
• S-Corp – Pass-through taxation with corporate benefits

💡 Tip: Your choice of entity will impact how you're taxed and how much paperwork you'll file.

🔹 2. Getting Your Tax ID (EIN)

• What is an EIN and why it’s required
• How to apply online via the IRS (free)
• Using EIN for payroll, banking, and vendor payments

🔹 3. Startup Tax Deductions You Shouldn’t Miss

Some of the most valuable deductions for early-stage companies:

• Business registration and legal fees
• Software, hardware, and office equipment
• Marketing & branding costs
• Home office expenses
• Travel, meals, and subscriptions (within IRS limits)
• R&D expenses (can qualify for credits)

🔹 4. Bookkeeping & Accounting from Day One

• Importance of separating business and personal expenses
• Best tools for startups: QuickBooks, Xero, Wave
• Choosing between cash vs. accrual accounting

🔹 5. Quarterly Estimated Taxes

• When startups need to make quarterly payments (Form 1040-ES)
• How to estimate based on profit (or projected revenue)
• Avoiding IRS penalties

🔹 6. Payroll Taxes & Contractor Reporting

• If hiring employees: Withholding federal income tax, Social Security, Medicare
• Filing Forms W-2 (employees) and 1099-NEC (contractors)
• Setting up payroll through trusted providers (e.g., Gusto, ADP)

🔹 7. Sales Tax & Nexus Rules

• Understanding your state’s sales tax obligations
• Multi-state businesses & physical/economic nexus considerations
• Registering for sales tax permits

🔹 8. Federal and State Tax Filing

• Which IRS forms you’ll file (e.g., 1120, 1065, 1040-Schedule C)
• State-level corporate income/franchise tax requirements
• Deadlines to watch for

🔹 9. Recordkeeping & Audit Protection

• How long to retain receipts, invoices, and financial statements
• Using cloud accounting tools for secure, compliant backups
• What triggers an audit (and how to avoid one)

🔹 10. When to Hire a Tax Professional

• Filing multi-state or international taxes
• Planning for equity compensation and investors
• Preparing for funding rounds or acquisitions

📞 Need help getting tax-compliant as a startup? Contact Hana Tax for personalized support.