Launching a business is both exhilarating and challenging. One of the fundamental aspects of business administration is tax compliance.
Not only is it a legal necessity, but it's also pivotal for the financial stability of any business.
This guide delves into tax compliance essentials and illustrates how the Whop business dashboard simplifies your financial management journey.
⚖️ Why Tax Compliance Matters
While it’s crucial to stay on top of state and federal regulations and fulfill tax obligations, that isn’t the only reason tax compliance is important.
Staying abreast of your tax responsibilities also contributes to the stability of your business and ensures that it’s growing.
It reflects positively on your financial health, which in turn supports the credibility and growth of your brand.
Tax Compliance Obligations
The first thing to think about when it comes to tax compliance is what sort of business structure your operation falls under, since the form of the business defines what income tax return you’ll need to file.
These are the most common types of business structure:
- Sole proprietorship. An unincorporated business owned by an individual, this structure doesn’t differentiate financially between the taxpayer and the business itself.
- Partnership. Also unincorporated, but the ownership of the business is shared by two or more people or entities.
- C Corporation. A corporate structure which is separate from its owners, this business is owned by shareholders.
- S Corporation. Different from a C corporation in that it passes corporate income, losses, deductions, and credits through to shareholders.
- Limited Liability Company. LLCs combine features of a partnership and corporation to create a structure that lowers personal risk and increases flexibility.
On top of filing the right returns, you also need to decide on what your tax year is going to look like.
A calendar is often the easy choice since it represents the year beginning January 1 and ending December 31.
The alternative is to define your own fiscal year, which is simply 12 consecutive months ending on the last day of any month bar December.
If you don’t have an EIN, or a federal tax identification number, you should prioritize getting one.
It’ll help you keep various things including your business’ mailing address, location and responsible party up to date as far as the Internal Revenue Service (IRS) is concerned.
A small business headed and run by you is a relatively simple prospect to manage, tax-wise.
If you have employees, there are a few more hoops to jump. Make sure that your employees complete forms I-9 (Employee Eligibility Verification U.S. Citizenship and Immigration Services) and W-4 (Employee’s Withholding Allowance Certificate).
And of course, you’ll have to actually pay your tax. Here are some of the most common forms of tax businesses have to pay, although one or two may not be as relevant if you’re selling solely on Whop:
- Income tax: These vary based on your business structure and earnings but are generally levied on your profits.
- Self-employment tax: If you use a sole proprietorship or partnership structure, members are accountable for self-employment taxes.
- Sales tax: If your business engages in sales, sales tax may have to be collected and remitted to the authorities.
- Employment tax: If you have any employees on the payroll, make sure you look into payroll taxes including Social Security and Medicare.
- Property tax: This can depend on where your business property is located, so make sure to check on property taxes and property laws in your jurisdiction.
- Excise tax: These may apply if your business sells physical goods of certain categories such as alcohol, tobacco, or fuel.
What Whop Can Do For You
The idea of keeping up with your tax obligations is all well and good, but it can seem like a lot of work when you get down to it.
Good recordkeeping is the key here, but that’s often easier said than done.
Fortunately, your Whop business dashboard allows you to get a head start on tax compliance by keeping detailed, real-time statistics of your account.
When it comes time to account for your fiscal year, you can simply use the Whop business dashboard to download a full export of payments across any date range.
Given that we can even aggregate all of this data across multiple different payment processors, you’ll find that getting your house in order for tax compliance is now far easier than ever using the Whop business dashboard.
Whop as a Merchant of Record: Streamlined Operations and Sales Tax Compliance
If you sell on Whop we also offer Merchant of Record (MoR) functionality to all our vendors.
Very simply, this means that instead of you having to worry about it - we take over the responsibility for all the sales tax collection and compliance for your customers - wherever they are around the world, or whichever US state they are in.
This distinction offers considerable operational benefits:
Complete Transactional Oversight
Whop takes on the full responsibility when a customer makes a purchase. From the instant a customer clicks 'buy,' Whop ensures every transactional detail is managed efficiently.
Comprehensive Financial Compliance & Automated Sales Tax Collection
Whop shoulders the responsibility of collecting sales tax, handling chargebacks, and processing refunds. By complying with local consumer laws and ensuring PCI compliance, Whop offers an added layer of trust and reliability.
Focus on Product Enhancement
Whop's role as an MoR means sellers can direct their energies towards refining and expanding their digital offerings. With Whop handling the operational intricacies, vendors can zero in on product excellence and customer satisfaction.
Related article: What Is a Merchant of Record (MoR)?
How to Set Up Whop as Your MoR
Starting with Whop is straightforward. If you haven’t already registered your company, begin the process here.
1️⃣ After outlining your company’s fundamentals, choose ‘Get started’ followed by ‘Add payment method’.
2️⃣ A prompt will allow you to select your country and determine if you’d like Whop as your MoR (⬇️ see the image below).
Curious about the costs associated with Whop's MoR services? Explore the fee structure here.
Tax can be a lot of work and even intimidating in the worst case, but keeping up with your tax obligations is vital for your business.
Not only will you stay on the good side of the IRS, but your brand image is enhanced and the financial stability of your business will be underlined by ensuring tax compliance.
Anyone can create a business and start selling products or services on Whop in minutes, and tools like the Whop business dashboard can save a lot of time when it comes to the tax crunch.
The dashboard puts all the data you need for tax compliance at your fingertips with a minimum of fuss.
If you have any questions about selling digital products or your tax compliance feel free to get in touch with the team at Whop for any help or support you require.
👉 Visit Whop.com/sell/ to get started selling on Whop with just a few clicks.
📚 Check out our Sales Tax or Merchant or Record (MoR) documentation to find out more about how we can help you with Sales Tax compliance.
Article reviewed and checked for accuracy on 08/25/2023 by FJ
