4 Financial Tips for Small Business Owners

4 Financial Tips for Small Business Owners

 As a small business owner, managing your finances can be overwhelming and intimidating. There are so many things to consider, from taxes to cash flow to budgeting. Luckily, there are some simple tips you can follow to help make the process easier. Let’s look at four financial tips every small business owner should know.

1.  Create A Budget and Track Your Expenses:

Creating a budget is essential for any successful business. With a budget, you can easily manage your finances and plan for the future. Plus, tracking your expenses will help you identify areas where you can save money. Make sure to track all of your income and expenses (including taxes!) on a regular basis. This will ensure that everything is accounted for and that you have an accurate picture of your overall financial health.

 2.   Secure Financing Early On

 If you don’t have access to capital or don’t want to use your own funds, securing financing early on is key. Whether it’s taking out a loan, talking to an accountant, applying for grants or even crowdfunding, having the right funding can make all the difference in getting your business off the ground. Make sure that you research all of your options before making any decisions – this will help ensure that you get the best deal possible!

 3.    Keep An Eye on Cash Flow 

Cash flow is one of the most important aspects of running a successful business. Keeping an eye on cash flow means staying on top of invoices and payments from customers as well as keeping track of bills and other expenses that need to be paid in order to keep operations running smoothly. Setting up automated reminders or using an accounting software solution can help make this process easier – but ultimately it’s up to you as the business owner to monitor cash flow closely and stay ahead of any potential issues with payments or collections from customers.

  4.    Hire Professional Help When Needed

 When it comes to managing finances, sometimes it pays (literally!) to hire professional help when needed. Hiring an accountant or bookkeeper can save time and money by ensuring that all paperwork is filed correctly, and all necessary tax documents are in order each year. Additionally, hiring professionals may also provide valuable advice related to cash flow management or other financial matters that can help keep your business on track financially over time!

With these four simple tips in mind, managing your finances as a small business owner doesn’t have to be so daunting! By creating a budget and tracking expenses regularly, securing financing early on if needed, monitoring cash flow closely, and hiring professional help when necessary- you’ll be well on your way towards a successful small business with healthy financials. 

LLC or S Corp. What’s Better for My Business?

LLC or S Corp. What’s Better for My Business?

Many business owners are usually faced with deciding whether to incorporate as a Limited Liability Company (LLC) or S Corporation (S Corp) due to the nature of their business, ownership, employees etc. It’s advisable to contact an accountant to help you with making the right choice depending on your organization’s situation. We however have a few pointers here to help you understand how they both work to help you make an informed decision.

Protections

LLC and S Corporations both have limited liability protections for their owners. Owning a business as a sole proprietor gives an opportunity for business creditors to reach your personal assets that do not have anything to do with your business. As an LLC or S Corporation, your business is a separate entity, responsible for its debts, liabilities and obligations.  

Pass-Through Taxation

S Corps and LLC’s both offer their owners pass-through taxation with federal income taxes. This means the income and losses of the business are not taxed at the company level, but passed through to the owners to be reported on their individual tax returns. This avoids “double taxation” which is typical for C Corporations, since the corporations and shareholders are taxed at the company level.

LLC Advantages

There’s some additional flexibility when it comes to managing an LLC. S Corps and C Corps have corporation laws that have more guidelines regarding the management of the company compared to LLC’s. LLC’s have more flexibility to split and allocate financial interests among its members, S Corp’s profits however must usually be allocated based on ownership percentage. S Corporations can only have certain types of shareholders and are usually restricted to having less than 100 shareholders. Violating these rules can lead to many unwanted issues.

LLC’s can however achieve pass-through taxation status without those restrictions and offer more income tax choices in how your company is taxed. There’s an option to have your LLC taxed as a C Corp or S Corp, but we’d recommend discussing with your accountant. 

S Corp Advantages

S Corporations offer the options to receive both salary and dividend, which could keep your taxes lower. LLC owners however pay self employment taxes, which can result in higher taxes. S Corps are also easy to convert into C Corps, with the process simply involving the filling of a form with the IRS. LLC’s on the other hand have a more complex process to convert into C Corp. S Corps typically also get outside funding more than LLC’s, as some investors and banks prefer to invest in corporations over LLC’s.

Summary

LLC’s and S Corporations both have their advantages, you may prefer to have more flexibility in running the company and allocating profits as you wish, which would lead to you to incorporate as a LLC. Contrarily, you might want earnings distributed proportionately to members, prefer to earn a salary instead of self-employment income and plan to seek funding later on. This would lead you to incorporate as an S Corporation. 

The best way to determine what best suits you is to talk to an accountant like one of our professionals at Motl Accounting

Changes in the Tax Code: New Tax Laws for 2015-2016

Changes in the Tax Code: New Tax Laws for 2015-2016

With each New Year comes an inevitable change to the federal tax code, prompting individuals, businesses, and accounting firms alike to reassess how their returns will be filled and filed. 2015-2016 brings us a host of changes, even an adjustment to the traditional tax deadline of April 15th.

Filing Deadline

Due to Emancipation Day, the official tax-filing deadline has been moved from Friday, April 15th to Monday, April 18th. Emancipation Day is a holiday celebrated by the city of Washington D.C. to commemorate the day in 1862 on which President Abraham Lincoln signed the Compensated Emancipation Act, freeing approximately 3,100 slaves in the District. This holiday is typically celebrated on April 16th, which falls on a Saturday, and therefore will be observed on the Friday prior. And because the IRS treats D.C. holidays as federal holidays, Americans have three more days to file their taxes, according to the Washington Post.

For those living in both Maine and Massachusetts, Patriot’s Day, which commemorates the battles of Lexington and Concord, pushes the deadline back yet another day to April 19th. (more…)

Should I File My Taxes Online or Visit an Accountant?

Should I File My Taxes Online or Visit an Accountant?

While the past decade has seen the advent of several tax preparation programs that allow users to file their taxes online, these programs raise several questions: Will filing your taxes online find you all of the deductions you qualify for? Are these programs secure? What if you encounter an issue? Here, we will examine the pros and cons of using tax software versus the advantages and disadvantages of filing with a CPA.

Time

Depending on how complex your returns are, filing your taxes can take a fair amount of time. But, with that said, when you compare filing online with visiting an accountant, the time difference is clear. When you file online, you are still responsible for inputting all of the necessary information into the program. When you file with an accountant, they are responsible for wading through your information to complete the worksheets and calculations that result in your final return. This gives you the opportunity to spend your time doing what you want to do, rather than dealing with your taxes – which few people find enjoyable. (more…)

How to Choose a Payroll Service That Best Suits Your Business

How to Choose a Payroll Service That Best Suits Your Business

Regardless of the size of your business, whether you’re a three-person operation, a thirty-employee small business, a company of 200 strong, or even larger, there are certain things you must consider about how you pay your employees.

For small businesses especially, the conundrum may lie between paying your employees yourself and utilizing an outsourced payroll service. If you happen to be well versed in payroll tax laws, and have an in-depth understanding of accounting, dealing with your business’s payroll may not be such a big deal – but for those of us who are not up-to-speed on the ever-changing myriad of tax policies, a payroll service might be the better option.

Now that you’ve determined that you should outsource your payroll services, it’s time to delve into choosing the right payroll service for your specific business. (more…)

Bookkeeping Basics: What You Need to Know About Being Audited

Bookkeeping Basics: What You Need to Know About Being Audited

From movie portrayals of IRS auditors as fear-mongering bullies to dozens of unnerving myths and urban legends, it’s fair to say that there is no shortage of negative perceptions about tax auditing. When it comes down to separating fact from fiction, tax filers want to know: Is the process really as bad as it seems in pop culture? In a word—No! In this month’s blog we’ll explain the auditing process and dispel some common misconceptions about tax auditing.

What is tax auditing?

You can think of tax auditing as a fact-checking process by the Internal Revenue Service (IRS) on someone’s personal or organizational taxes. An audit occurs when the IRS, which is overseen by the U.S. government, selects and investigates a tax return to ensure that all reported information is correct. Most often, the IRS is simply seeking clarification through something called a correspondence audit. This type of audit occurs when a return doesn’t match typical trends based on the IRS’ data. In this case, the IRS requests documentation from the filer, and the audit can be resolved quickly if everything checks out. An examination audit can be a little bit more involved and occurs when something looks truly irregular in a return. (more…)