Business Loans & Financing
Most business entities require a written business plan. This is essential in ensuring your loan provider that you have a solid business model. A loan can be obtained from small business investment companies, banks, federal grants, and direct loans from investors.
Recordkeeping Requirements
It sounds simple, but good bookkeeping is key. Consistency and attention to detail is highly important. Incorporation/organization papers should be updated regularly. Newly adopted plans need to be included in order to be valid. Record all corporate minutes and shareholder meetings.
Basic Tax Filing Requirements
Income taxes are required for sole proprietorships (filed on form 1040 - Sch. C), S-Corps & partnerships (file 1120S & 1065, but income report on 1040 through K-1), and C-Corporations (file 1120 and pay own taxes).
Sales taxes need to be filed with the state if taxable goods/services are sold
Payroll taxes need to be filed with the state and IRS if there are ANY employees.
Deductions
It is extremely important that you keep track of ALL expenses that you are incurring. Have a system / process in place. This will make it a lot of easier to ensure that you are constantly keeping an accurate record of your expenses. Make sure you that are consistent and regularly update. Why is this important? YOU CAN'T SAVE ANY MONEY ON TAXES IF YOU HAVE NO DOCUMENTED DEDUCTIONS!
A list of common business deductions:
- Office suppplies
- Telecommunication (Internet/Phone/Fax)
- Meals
- Travel (even seminars)
- Rent for outside office
- Payroll
- Legal and professional fees
- Costs to form your business
- Initial seminars and training
- Auto expenses
- Home Office
- Bank service charges/Credit card fees
When deducting auto expenses, there are two methods of deducting. The first method refers to "actual expenses". Actual expenses are exactly what it sounds like...expenses that have a direct monetary value. This is calculated by expenses x % Business use. Keep track of all auto related expenses, business & total mileage. The value of the car partially determines the total deduction. The vehicle should also be owned by the business entity. The second method refers to "standard mileage rate". This is calculated by Business Miles x IRS Rate. Make sure that you keep track of business & total mileage. The deduction is based on mileage driven only and the vehicle can be owned by anyone.
Retirement Plans
Retirement plans are an effective way of reducing taxable income. Keep in mind that not all plans suite all businesses. Business income, business structure, and desired amount to be contributed all come into play when determining the properly retirement plan. The most common plan types are:
Documentation
All reimbursement plans should be in your incorporation/formation documents. Also keep logs of vehicle mileage. In regards to bookkeeping, hold on to all receipts, canceled checks, and bank / credit card statements.
Bookkeeping
You'll need to decide whether you want your bookkeeping to be done manually or by a software. Regular reconciliation and efficient organization is critical. It is better to have more documentation, rather than not enough. Regularly review your books to do a "reality check".
Ideas to Take Away
All expenses which are directly related to your business are deductible, but you need to keep track of all your expenses and have adequate documentation in order for the IRS to allow your deduction. Bookkeeping may be tedious, but it is a required part of being a new business owner.
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