20 tax tips for small businesses

20 tax tips for small businesses
The Internal Revenue Service sent letters to thousands of small-business owners recently, questioning whether they underpaid their taxes last year. 

Titled “Notification of Possible Income Under Reporting,” the letters were mailed to small employers this summer requesting that they review and confirm that they accurately reported their income on their 2012 tax returns.

In response to this action by the IRS, American University professors Donald Williamson and David Kautter have created a list of “Tax Best Practices for Small Businesses,” a checklist designed to help small business entrepreneurs stay up to date on all tax-related issues, and away from the scrutiny of 
the IRS. 

Here’s what Williamson & Kautter recommend small-business owners should do: 

1. Keep good records about who is an “employee” and who is an “independent contractor.” 
2. Keep track of places where you may have "nexus" (“physical presence”) (even unknowingly), to properly comply with state rules governing sales and income tax collection. 
3. Invest in a good software accounting system — to track your records and regularly provide updates to new IRS rules. 
4. Hire a tax accountant who has experience in your type of business, whether it’s a coffee shop or a construction business. 
5. Keep good records on how much was paid and the date placed in service, for any equipment, vehicles or other business assets. 
6. Avoid using funds from employee payroll tax withholding (or any taxes, for that matter) as a short-term loan to tide your business over during a shortfall in your cash flow. 
7. One of the biggest traps for small-business taxpayers is estimated taxes — pay quarterlies on time, calculate quarterlies correctly, and know the safe harbors that can protect you against underpayments.  Miscalculating any of these steps can be a major headache, so small-business owners should speak with someone, most likely a tax accountant or enrolled agent, who knows the rules cold. 
8. If you are the owner, and your spouse, child, mother-in-law, or other close relative works in your business, you should make sure your relative abides by the same employment rules as your unrelated employees. When someone pays you in cash, it doesn’t mean that payment is nontaxable.
9. Select a “tax year” for your business that reflects the natural ebb and flow of your business’ receipts and disbursements. This way, you won’t get caught in a cash crunch when tax time comes. 
10. You (or your accountant) should retain all relevant tax records for at least three years, and if your records relate to property and depreciation, you should keep the records until the property is disposed of, plus an additional three years. 
11. Keep detailed records on how you use your personal or business-owned vehicle for business versus personal purposes. 
12. Hire a reputable third-party administrator (such as Fidelity or Vanguard) to manage your 401(k) plan and other tax-favored employee benefits. 
13. Make sure you (and your tax accountant) are familiar with the tax rules, including the favorable tax credits and deductions that are unique to your business. 
14. If it becomes necessary for your small business to open a foreign bank account in order to pay vendors or others in a foreign country, make sure you (and your tax accountant) are vigilant in following the new rules on foreign bank accounts enacted in the Foreign Account Tax Compliance Act, or FATCA. (FBAR reporting)
15. If your hope is that your business will continue after you die, under the leadership of another family member or designated heir, you should take steps to protect the business against a forced sale in order to pay inheritance taxes. 
16. Don’t become foolishly emboldened into thinking the IRS will have to “prove” you have done something contrary to the tax law. The "burden of proof" is always on the taxpayer, not the IRS. 
17. Become familiar with the tax rules surrounding starting, running, selling and shutting down a business. Determine whether you should operate as a Partnership, Corporation, S-Corp, LLC, or Sole Proprietorship. Your tax accountant should be closely familiar with these rules. 
18. Have a one-on-one conversation with your accountant about the Affordable Care Act. 
19. If you can’t pay the taxes you owe the IRS, or other tax agency, you should contact your accountant right away. The situation won’t get any better by ignoring it.
20. When someone pays you in cash, it doesn’t mean that the payment is nontaxable. The IRS has state-of-the-art statistical technology and models based on spending habits and bank accounts to build a case against alleged tax scofflaws.

Courtesy:  accounting today | October 2013 accountingtoday.com

Donald Williamson & David Kautter

Hobby Loss vs. Business Checklist

Hobby Loss vs. Business Checklist
Criteria of a business vs. hobby:  There are numerous standards that the courts use in determining whether your activities constitute a business or hobby.  Generally, it is based on the facts and circumstances of each case.[a]  You must show that you entered the activity with the objective of making a profit.[b]  This is true even if there was a small chance of making a huge profit.[b]

Whether or not an activity is presumed to be operated for profit requires an analysis of the facts and circumstances of each case.  Deciding whether a taxpayer operates an activity with an actual and honest profit motive typically involves applying the nine nonexclusive factors contained in Rev. Reg. §1.183-2(b).  Those factors are:

1. The manner in which the taxpayer carries on the activity: If the activity is carried on "in a business like manner and maintains complete and accurate books and records" it is indicative of the activity being for profit.
2. The expertise of the taxpayer or his advisors: "Preparation for the activity by extensive study of its accepted business, economic, and scientific practices, or consultation with those who are experts therein, may indicate that the taxpayer has a profit motive where the taxpayer carries on the activity in accordance with such practices." 
3. The time and effort expended by the taxpayer in carrying on the activity: If a taxpayer devotes a significant amount of time to the activity, it indicates the activity is for profit. The fact that a taxpayer does not devote a significant amount of time to the activity does not adversely affect the for profit determination so long as the taxpayer "employs competent and qualified persons to carry on such activity." 
4. Expectation that assets used in activity may appreciate in value: If the taxpayer expects to profit from the activity, this indicates it is for profit.
5. The success of the taxpayer in carrying on other similar or dissimilar activities: "The fact that the taxpayer has engaged in similar activities in the past and converted them from unprofitable to profitable enterprises may indicate that he is engaged in the present activity for profit, even though the activity is presently unprofitable." 
6. The taxpayer's history of income or losses with respect to the activity: "Where losses continue to be sustained beyond the period which customarily is necessary to bring the operation to profitable status, such losses, if not explainable, as due to customary business risks or reverses, may be indicative" that the activity is not for profit. "A series of years in which net income was realized would of course be strong evidence that the activity is engaged in for profit." 
7. The amount of occasional profits, if any, which are earned: "Substantial profit, though only occasional, would generally be indicative that an activity is engaged in for profit, where the investment or losses are comparatively small." Also, "an opportunity to earn a substantial profit in a highly speculative venture is ordinarily sufficient to indicate that the activity is engaged in for profit." 
8. The financial status of the taxpayer: "The fact that the taxpayer does not have substantial income or capital from sources other than the activity may indicate that an activity is engaged in for profit." 
9. Elements of personal pleasure or recreation: "The presence of personal motives in carrying on of an activity may indicate that the activity is not engaged in for profit... It is not, however, necessary that an activity be engaged in with the exclusive intention of deriving a profit." 

The majority of all court decisions indicate that you are required to have an honest profit objective when you undertake this venture.  Thus, if you have a sincere purpose of eventually reaping an overall profit, you will be deemed to have a business motive.[c]   

The Courts have looked at the following factors in deciding if your endeavor is a business or a hobby:   
    1.  Business plan:  Most court decisions have looked favorably on taxpayers who prepare business plans showing projected estimated income and expenses of their endeavor.[d]  The key is to project an overall business profit.  In addition, the projected numbers should have some reasonable basis in reality.  You should; therefore, document how you estimated each of your figures.  If your business contains inventories, you should certainly have enough inventory on-hand to meet your goals.

    2.  Your own statements:  IRS will use your own statements against you.  Thus, don't ever say, "I'm in this only to save taxes or costs, or to get a discount."  In addition, don't have your business plan showing only estimated losses.[e]  

    3.  Manner in which you conduct your activity:  This is probably the single most important factor that IRS uses in judging a business intent from one where there is no expectation of profit.You must conduct your activity in a business-like manner.  Thus, you need to keep a diary and maintain complete and accurate books and records.[f]  Keep separate books and records and bank accounts for your business.[g]

    4.  Run your activity like a similar profitable business:  You should also try to show that your activity is being carried on in a similar manner to other profitable activities.[h] Here is where the principle of duplication is critical.  If you conduct your activity like other successful people in the same business, you have a stronger argument that you have conducted your activity like a business with the expectation of making a profit.  In addition, if you follow the path of successful people, your chances of becoming successful are also enhanced.  Adopt similar marketing efforts to those who are successful.[i]  Thus, you

• Advertise your business
• Have business cards with your business address on it
• Maintain a business telephone listing
• Purchase and use promotional literature
• Use a variety of marketing strategies[j]

    5.  Your prior business experiences can help or hurt:  Your prior business experience in this industry can make a big difference to the IRS.  If you have no prior experience in this endeavor, it is more questionable as to whether you ever had a profit motive.[k]  The courts have held that this lack of prior business experience can be overcome by:

• Extensive study
• Listening to training tapes
• Taking seminars
• Attending training meetings, etc.[k]

You can never get enough training.  Document all training and lectures attended.  Document all help from other successful persons in your business.  The documentation should be in your diary.

    6.  Thoroughly investigate your venture before starting it:  Few good business people start a business without a good prior investigation of the business and any related companies.  It is, therefore, very vital that you conduct a thorough prior investigation of your respective business and company prior to entering the business.[l]

    7.  Get expert advice:  You should consistently consult with experts and other successful people or distributors in your business in order to constantly improve profits.[m]  It goes without saying that you should document their advice and ordinarily follow the advice.

    8.  Devote some time in a regular manner to your activity:  Although you certainly do not need to conduct your activity full-time; the more time and effort, the better.  Cases have shown that as little as on (1) hour per day on the average was substantial enough to support a profit motive.[n]

Businesses are conducted in a regular manner, hobbies are not.  One hour a day for four days a week is better than eight hours once every two weeks.[o]

    9.  Your history of losses/income and steps taken to improve profits: Without question, your expenses can certainly exceed your income in a business.  Absent unforeseen circumstances[p] you should do everything to turn those losses into profits.[q]  However, you should watch out for expenses that are unreasonably excessive when compared to your endeavor's income.  Thus, in one case, an Amway distributor's accounting fees alone exceeded his entire gross income.  There were other items of expenses that also grossly exceeded the income.[k]  The court held that the distributor's activities constituted a hobby and limited all deductions to that income.

Excessive personal unreasonable expenses could be used against you by the IRS as "lack of business profit motive." (e.g. too much Travel & Entertainment expense).  Recent cases note that although you do not have to make a profit, you should have some gross income yearly.  If there is no income provided at all, this is indicative of a hobby.

It is essential that you document:

• All training
• Consultations with experts and other successful people in your business,
• All marketing activities,
• The reasons for all trips noting the business intent and the necessity for this trip in order to "combine personal pleasure with business travel."

Again, the important point is that your activity must be conducted in a business-like manner.

    10.  Amount of income from other sources:  Although it may not seem fair, the greater your income from other sources, the less likely your loss from your activity may be deemed a business loss.[r]  Although this is certainly not a determinative factor, if you have substantial other income from other activities, you need to more closely dot your i's and cross your t's.

    11.  Watch out for certain "inherently suspicious activities":[s]  Certain activities are inherently more suspect by the IRS because of significant personal pleasure involved.  These include:

• Antique collecting
• Stamp collecting
• Traveling
• Writing
• Ministerial duties
• Record recording
• Raising show horses
• Training and showing dogs
• Automobile racing
• Thoroughbred racing

If you find yourself in one of the above-mentioned activities, you must pay careful attention to the "business vs. hobby" factors mentions since your endeavor is inherently suspect.

Business vs. Hobby Loss Checklist

1. Try to have a profit in at least 3 out of 5 consecutive years.  This is not mandatory, but nice to have.
2. Document business intent by sending a letter to your manager or sponsor/company as to why you have entered the business emphasizing your desire to make a long term profit career.
3. Make a business plan showing projected income/expense.
4. If your business contains inventory, always have enough on hand to justify your goals and business plan.
5. Don't make any "improper" statements such as "I'm in this only to save taxes."
6. Keep a good diary and maintain accurate books and records.
7. Utilize advertising, telephone business listings and a variety of marketing strategies.
8. Before entering your business, conduct an investigation of the industry and of any companies that you are thinking of associating with.  Document your steps in this investigation.
9. Keep getting trained and getting tips on operating your business.  This shows that you are constantly trying to make a profit.
10. Document any consulting with successful people or "experts" in your business.
11. Work your business regularly at least one hour a day, four to five times a week.  This should be documented in your diary.
12. Clearly document the reason for making business trips.
13. Be especially careful if you are in one of the "inherently suspicious activities."

Footnotes:

[a]  Rev. Reg. §1.183-2(a)
[b]  Rev. Reg. §1.183-2; Floyd Fisher, TC Memo 1980-183 (1980)
[c]  Maurice Dreicer, 28 TC 642, Aff'd. 702 F.2d 1205 (CA Dist Col. 1983). 
[d]  Rev. Reg. §1.183-2(a); Jonas R. Bryant vs. Comm'r, 928 F.2d 745 (6th Cir. 1991)
[e]  Harry Van Scoyoc, TC Memo 1988-520 (1988)
[f]   Rev. Reg. §1.183-2(b)(i)    
[g]  Frank Suiter, TC Memo 1990-447 (1990); Charles J. Givens, TC Memo 1989-529 (1989); Joseph Ransom, TC Memo 1990-381 (1990) (Amway Distributor); Frank Harris, TC Memo 1992-638 (Mary Kay)
[h]  Rev. Reg. §1.183-2(b)(i)     
[i]  C. Fink Fisher, 50 TC 164 (1968), Acq.
[j]  Sheldon Barr, TC Memo 1989-69 (1989)
[k]   Rev. Reg. §1.183-2(b), Joseph Ransom, TC Memo 1990-381 (1990); Abdolvahab Pirnia TC Memo 1992-137 (1992)
[l]  Wenzel Tirbelmen, TC Memo 1992-137 (1992)
[m]  Rev. Reg §1.183-1(b)(2) 
[n]  Sherman Sampson, TC Memo 1982-276 (1982)
[o]  Percy Winfield, TC Memo 1966-53 (1966)
[p]  Rev. Reg §1.183-2(b)(6)  
[q]  Rev. Reg §§1.183-2(b)(6)&(7)  

[r]  Rev. Reg §1.183-2(b)(8)

[s]  Rev. Reg §1.183-2(b)(9)
References:   

• Botkin, Sanford, Tax Strategies for Business Professionals, The Tax Reduction Institute
• Rev. Reg. §1.183 

Advantages & Disadvantages of Business Forms

Advantages & Disadvantages of Business Forms
Choosing the Right Business Form
Overview:  There are three basic business forms available for most business owners:

• Proprietorship (Schedule C)
• Regular Corporation (C Corporation)
• S Corporation

The matrix on below provides an excellent overview of the differences.  This section highlights important strategies for the different forms of business.

Description	Schedule C Proprietorship	Regular Corporation	S Corporation
Reasonable salary*	Not an issue	Deductible	Deductible
Unreasonable (excessive) salary	Not an issue	Not deductible by corporation;  dividend to shareholder/employee	Generally, not an  issue for shareholder/ employees
Social security taxes	Self-Employment tax based on bottom-line Schedule C income	Taxed 50% to  corporation and 50% to employee	Same as regular corporation
Net income	Taxed at individual tax rates	Taxed at corporate tax rates	Taxed at individual tax rates
Net loss	Deducted on individual return against other income; unabsorbed losses may be carried back 2 years and forward 20 years	Net loss on corporate return is carried back 2 years and forward 20 years	Deducted and carried back  and forward  on individual  return up to shareholder’s  basis in stock and loans  to corporation
Medical insurance premiums on owner	Deduct 100% on front of Form 1040	Deducted on corporate return	Same as proprietorship including ability to deduct 100% on front of Form 1040
Disability premiums on owner	Not deductible	Deductible to corporation; taxable to recipient of benefits	Not deductible by corporation or individual
Group term life insurance premiums on life of owner	Not deductible	Deductible as a tax-free fringe benefit on first $50,000 of coverage	Not deductible
Retirement benefits	Basically same as corporation	Basically same as individual	Basically same as individual
Supper money for owner	Not deductible	Deductible	Questionable
Election required	No	No	Yes – strict time limits
Ownership	Individual	Stock can be more than one class	Only individuals, estates, and trusts restricted to one class of stock (voting rights can differ)
Liquidation of ownership	Assets are sold and individual is taxed	Sale of stock or sale of assets and liquidation of corporation (double-tax problem)	Sale of stock or assets, no double tax problem, except for “built in gains”
Liability	Individual	Corporate, except for professional   corporations  wherein  professionals  remain liable under malpractice statutes	Same as regular corporation
Asset expensing IRC §179	Up to $500K if assets placed in service total less than $2MM	Claimed on  corporate return  with same  limits that apply  to an individual	Reflected on S Corporation  return and claimed  on individual return
Paperwork	Simplest form	Two separate entities for income tax purposes… payroll taxes… corporate minutes	Same as regular corporation;  however, may involve  more complex  state filing requirements
Hiring child	No social security tax if child under 18	Social security taxes apply	Social security taxes apply (may gift stock to children and eliminate social security on distribution, in addition, can still benefit from shifting income).

* Reasonable compensation:  Services performed by shareholder/owners must be reasonable compensated.  Reasonable compensation is subject to wide discretion. (Roob v. Commissioner, 50 TC 891, 898 (1968).  See Radtke vs. US; 712F. Supp. 143; Aff'd 895 F.2d 1196 (1990) in which no compensation was paid).   It must take into account: 

• Services performed
• Responsibilities involved
• Time spent
• Size and complexity of business
• Prevailing economic conditions
• Compensation paid by comparable firms for comparable services
• Salary paid to company officers in prior years

General Rules of Thumb

1. High medical expenses -- regular corporation
2. High disability premiums -- regular corporation
3. Income $20,000 to $70,000 -- S-Corporation to save social security taxes
4. High liability exposure -- corporation
5. Hiring children -- Sole proprietorship
6. Gift/Leaseback -- any form, but assets must be owned individually to create benefits
7. Appreciating assets -- S-Corporation or proprietorship

Reference:  Botkin, Sandy, Tax Strategies for Business Professionals, The Tax Reduction Institute

“Build a Business Plan” Online Tool

“Build a Business Plan” Online Tool
Having a business plan is a must for small business owners, but finding the time to put pen to paper often means putting them on hold until the very last minute, such as right before that big meeting with a loan officer or bank manager.

Every smart entrepreneur and business owner should already have a firm grasp of key information about their business and on what will influence the path they take and decisions they make over the course of 1-3 years.

Putting this information together into a concrete plan is essential if you want to secure a business loan or outside financing, of course. But the planning and mental exercise of writing it down is just as important to the success of your business. Writing a plan will not only help you succeed, but it will open your eyes to what it’s going to take to get there.

One of the big challenges for smaller businesses is actually building a business plan. What format should it take? What numbers should you pull together to demonstrate that you have a rock solid financial foundation? To simplify the process, SBA has just launched a new “Build a Business Plan” online tool that guides small business owners through the process of creating a basic, downloadable business plan. The great thing about this tool is you can build a plan in smaller bites, save your progress and return at your leisure.

To use the tool, you’ll need to be a member of the SBA Community (register here) and then log in. The tool offers a tab-based step-by-step guide that lets you enter information into a template for each section of the business plan, including market analysis, company description and financial projections. The tool is secure and confidential and will keep your plan on record for up to six months. You can also save, download or email the plan at any time.

Coutesy:  Building a Business Plan – New SBA Online Tool Can Help You Get Started
by Caron Beesley, Community Moderator 

Hobby Loss vs. Business Loss

Hobby Loss vs. Business Loss
TURNING HOBBY LOSS INTO BUSINESS LOSS
It happens on more than one occasion that a person turns a hobby into a business and makes money.  After all, if it is something you like doing, you tend to do it better, and spend time learning, improving, and mastering the activity.  These are all some of the basics tenets of success in business.

Your government loves this.  A hobby that starts producing profits means taxable income which translates into more taxes.  Why wouldn't this be well received?

However, the reverse is not always true.  Losses that emanate from a business which could be construed as a hobby-type activity are frequently subject to government challenge in an audit.  This is because these losses can be used to offset other taxable income you may have, resulting in your paying less taxes.  So, there is a form of polarization here.  The taxpayer may be happy with the losses which could save up to 40% in taxes for some.  Obviously, the government may not be as happy with these results.

The key here is to work within the system to be able to use hobby-type losses to save taxes.  The way to do it is to make sure the hobby-type activity qualifies as a business, not a hobby, under the current IRS guidelines.  In terms of IRS tax code, you want to qualify under Code Section 162 (Trade or Business Expenses), or Code Section 212 (Expenses for Production of Income) which refer to a trade or business and/or the production of income.

You don't want to get categorized under Code Section 183 which is an "activities not engaged in for profit," since this makes the net losses non-deductible.

To help your cause in being able to deduct these losses, there are a number of issues, or tests that are considered under current audit guidelines.  The successful qualification within these parameters goes a long way toward the allowance of these losses against other forms of income.  This isn't to say ALL of the guidelines must be met.  It is a matter of the relativity of these guidelines compared to the specific activity in question.  Let's look at the guidelines that are used to establish the activity as a business rather than a hobby.

The main parameters that are currently used as guides to the deductibility of hobby-type business losses are as follows:

1. Amount of profits earned, and occasion of such profits:  Obviously, if the activity produces consistent profits, there is no problem.  There are no losses of concern.  If the profits are only occasional and the losses are more frequent, the tests here are twofold.  First, a relatively large profit, even if only occasional, would tend to support the idea that it is a business more than a hobby.  Second, if the losses are relatively larger than the occasional small profits, and consistently so, then it tends to be viewed more as a hobby.

2. Reason for, or history of losses:  Losses in the early phases of a business are common, and aren't necessarily held against you.  Similarly, losses due to circumstances beyond your control (such as from disease, casualty, weather, market conditions, etc.) are taken into positive reference.  So continued losses without profits in this case would not necessarily be a detriment.

3. The degree of personal pleasure in the activity:  The more this factors in, the more suspect the activity with the IRS.  Model train collecting, horse breeding, art painting, etc., where the business owner or family members participate heavily in the recreational aspects, causes more problems than perhaps other activities.

4. Degree of benefit of losses:  The economic status of the taxpayer enters in here.  The more you have income from other sources besides the hobby-type activity, and the more you benefit from the losses tax-wise, the more it may be challenged.  If you are deriving the bulk of your income from the activity, or if the losses are not saving you much in taxes, it becomes more of a moot issue to challenge.

5. Experience, or expertise of the taxpayer:  Those with significant expertise in the related field, or those who can prove they are making continued efforts to become knowledgeable stand a better chance.  If you use advisers in the activity, if you go to school, trade shows, or buy books, to name a few possibilities, you reinforce that you are trying to make positive efforts to understand the market, and eventually overcome the current losses.

6. Time spent on the activity:  If you spend a significant amount of time in the running of this activity compared to other income-producing activities, it helps show you view this hobby-type activity as more of a business with income potential.  If you spend 3 hours a week on stamp collecting vs 37 hours a week earning money elsewhere, it could be difficult writing-off losses year-by-year from this activity.

7. The "business-like" nature of the activity:  This is perhaps the most frequently-used major test.  One difference between a business and a hobby is in how the activity is run.  If good financial records are maintained, a proper bookkeeping/ recordkeeping system is used, and possibly a separate checking account is kept, then a better case can be made that it is a business, not a hobby.  Similarly, if you can prove you made reasonable attempts to market or advertise this activity to generate revenues, it supports your case.

Is there a Loophole for all of this?
A possible general "loophole" exists where you can show that a reasonable profit occurred in two out five consecutive years of operations.  If this is the case the IRS tends to assume the activity was done for profit, hence the loophole since no challenge may be in order.  Note however, that the degree of profit is important compared to the degree of loss.  Very small profits for two years vs large losses for the other 3 years may not be enough to keep the IRS from trying to challenge.

Since the challenge is done "after-the-fact," the IRS has the benefit of hindsight.  It's too late for you to go back in time to shore up your position.  If you lose this challenge, these losses, both future and past (within the appropriate statute of limitations), can be disallowed resulting in a possible hefty tax bill for you to pay– plus interest and possible penalties.  So contemporaneous recordkeeping and marketing activities are the watchwords here.

However, if you do your homework and the loss-producing activity is handled correctly, this can be a wonderful tax-saving opportunity.  You or members of your family may have the chance to enjoy a fun activity, write-off its expenses, and reduce your taxes all at the same time.  So it is worth the consideration.

Reference: Practice Enhancers, Able & Co.

Checklist for Sole Proprietor - Start-up Issues for New Business

Checklist for Sole Proprietor
Start-up Issues for New Business

Below is a checklist of actions that should be considered for the organization and operations of your sole proprietorship.
♦  Do assumed (fictitious) business name registration
♦  Consider tradename registration
♦  Apply for required operating permits, licenses, bonds
♦  Register for Federal SS-4 Tax ID #
♦  State ID# registration
♦  Register for State Sales tax number
♦  Register for State Unemployment, Withholding, Tax ID #
♦  Set-up bookkeeping systems for income/expenses, auto use, home office, equip. purchase, etc.
♦  Set-up bank / checking accounts
♦  Contact insurance company re. coverages (business liability, workers' comp, errors & omissions, disability, medical)
♦  If employees will be hired, order payroll deposit coupons and consider a personnel manual
♦  If subcontractors will be used,  have W-9 forms and consider a subcontractor agreement
♦  Establish association with loan officer
♦  Establish association with attorney
♦ Set up tax filing calendar of due dates (yearly, quarterly) 
♦  Consider putting spouse and children on payroll 
♦  Arrange for estimated tax payment filings 
♦ Consider a business pension / Profit Sharing plan (IRA, SEP, KEOGH)

Notes:

Reference:  Practice Enhancers, Able & Co.

Starting a Business? 10 Steps Every Entrepreneur Needs to Know

Starting a Business? 10 Steps Every Entrepreneur Needs to Know
Courtesy:  Caron Beesley
Created: May 2, 2012, 7:04 am
Updated: May 21, 2012, 6:46 pm
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Starting a business? Confused about the planning, legal and regulatory steps you should follow?  Did you know that home-based businesses are required to hold permits to operate legally in most states? What about incorporation? Many new businesses assume they need to incorporate or become an LLC from the  get-go – but the truth is, more than 70 percent of small businesses are owned by un-incorporated sole proprietors (although even this group is required to register their businesses).  So, variables aside, there are still some fundamental steps that any business needs to follow to get started. SBA has compiled 10 steps that can help you plan, prepare, and manage your business – while taking care of the startup legalities. Not all these steps will apply to all businesses, but working through them will give you a sense of what needs your attention and what you can check off.

Step 1 – Write a Business Plan
Yeah, yeah, you know you should write a business plan whether you need to secure a business loan or not. The thing is, a business plan doesn’t have to be encyclopedic and it doesn’t have to have all the answers. A well-prepared plan – revisited often – will help you steer your business all along its growth curve. Try to think of your business plan as a living, breathing project, not a one-time document. Break it down into mini-plans – one for marketing, one for pricing, one for operations, and so on. Take a look at SBA’s Business Planning Guide for more ideas.

Step 2 – Get Help and Training
Starting a business can be a lonely endeavor, but there are lots of free in-person and online resources that can help advise you as you get started. Check out what‘s offered at your Small Business Development Centers; SCORE (which offers free mentoring services); Women’s Business Centers, or your local SBA office.

Step 3 – Choose Your Business Location
Where you locate your business may be the single most important decision you make. Many factors come into play such as proximity to suppliers, the competition, transportation access, demographics, and zoning regulations. Check out SBA’s Tips for Choosing a Business Location and this blog: How to Choose the Best Location for your Business.

Step 4 - Understand your Financing Options
You may choose to bootstrap, fall back on savings, or even keep a full-time job until your business is profitable, but if you are looking for an external source of financing, these resources explain your options.

Step 5 – Decide on a Business Structure
Going it alone or forming a partnership? Thinking of incorporating? What about an LLC? How you structure your business can reduce your personal liability for business losses and debts. Some choices can give you tax benefits. To help you determine the right structure for your business, here’s an overview of your options and some information on how to file the necessary paperwork in your stateand the tax implications of your decision. You might also want to read:
LLCs Explained: A 101 for Small Business Owners
Should You Incorporate Your Freelance or Consulting Business?
“Working Together” – How to Start and Formalize a Business Partnership

Step 6 – Register Your Business Name (“Doing Business As”)
Registering a “Doing Business As” name or “trade name” is only needed if you name your business something other than your personal name, the names of your partners, or the officially registered name of your LLC or corporation. Here’s how to register your “Doing Business As” name.

Step 7 – Get a Tax ID
Not every business needs a tax ID from the IRS (also known as an “Employer Identification Number” or EIN), but if you have employees, run a business partnership, a corporation or meet certain IRS criteria, you must obtain an EIN from the IRS. You’ll also need to start paying estimated taxes to the IRS; this blog explains more about this process.

Step 8 – Register with Tax Authorities
Employment taxes, sales taxes, and state income taxes are handled at the state-level. Learn more about your state’s tax requirements and how to comply.

Step 9 - Apply for Permits and Licenses
All businesses, even home-based businesses, need a license or permit to operate. This guide explains more and includes a handy “Permit Me” tool that lets you determine what your permit and licensing needs are, based on your zip code and business type.

Step 10 - Hiring Employees
If you’re hiring employees, follow these 10 steps. If you’re working with a contractor or 1099, read 5 Things to Know About Hiring Independent Contractors.

Related Resources
Check out SBA’s Starting and Managing a Business for more tips and guides. About the Author Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

The 5 Most Important Decisions to Make When Starting Your Business

The 5 Most Important Decisions to Make When Starting Your Business

1.  Have a Business Plan

a)      Business plans are used for financing.

b)      They provide a yardstick against which future performance will be measured.

c)      They provide a framework for decision making and coordination of business.

d)     They define the business culture that will be communicated to employees, customers, etc.

2.  Choose the Entity that is Right for You

a)      Sole Proprietorship

b)      Partnership

c)      Corporation

d)     Limited Liability Company (LLC)

3.  Set up a Good Recordkeeping System

a)      Set up a business bank account.

b)      Use a good accounting software program or recordkeeping system.

c)      Keep all receipts relative to the business.

d)     Stay away from cash transactions.

e)      Know the records retention requirements. (attached)

4.  Know Your Filing Requirements and Your Tax Responsibilities

a)      What forms are required and when are they due?

b)      Set up a calendar system to help monitor the due dates.

c)      Learn what taxes are due and how you calculate the amount to pay.

d)     Learn the rules for taking money from your business account.

5.  Engage a Good Banker, Accountant & Attorney

a)      A banker will help you with loans, financing, bank accounts and recordkeeping.

b)      An accountant will help you with your accounting, taxes and filing requirements.

c)      An attorney will help you with all your legal issues and help protect your assets.