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Are All Your T's Crossed?

Author: Keith Huggett

If you are starting a business, you know that you have a lot to do. You have to develop a product, create a marketing plan, build a staff and handle all of the administrative issues of setting up a business. While you are doing all of this, you need to figure out how to pay for everything. The federal government's Small Business Administration can help you find money and bonding, letting you focus on the rest of your business.

The SBA's Guaranteed Loan Program gives your start-up access to money. While the SBA does not directly lend money to people starting a business, it provides guarantees to help protect lenders against the risk that you will not pay back your business loan. If you take out a loan that qualifies for an SBA guarantee, it will usually offer better rates and terms than non-guaranteed business debt.

The SBA can also help you get venture capital through its Small Business Investment Company program. The SBA provides money at favorable rates to SBICs in various communities. Those investment funds then provide debt and equity financing to small businesses like yours. As you know, venture capital involves diluting your ownership in your company, but it usually does not carry the payments that debt financing requires.

Finally, the SBA can help you with one more challenge that you will likely face: getting a surety bond. Surety bonds are a form of insurance that protects your clients against the risk that you will not meet your obligations to them. If you don't, for instance, finish a job for a client, the surety bonding company will compensate him or her. Many companies require their contractors to carry surety bonds. To make it less expensive and safer for companies to insure you, the SBA's Surety Bond Guarantee program provides partial guarantees under which the SBA bears some of the cost that your bonder incurs when they pay off.

The professionals at The Tax Office Inc. have experience dealing with SBA programs. Contact us to learn how they and the SBA can help you with starting a business.

Before You Hand Over That Check...

Author: Keith Huggett

Investing in a startup venture is one of the most exciting things that you can do with your money. Many people feel good being an "angel investor" and helping someone else realize their dream. While you are doing something nice, you also have the potential to earn a return of hundreds or thousands of percent. However, you also have a very good chance to lose all of your money.

Most startup businesses eventually fail. Fifty percent of startups fail to make their fifth anniversary, and only 16 percent of startups stay open for a full 10 years. With this in mind, it is very likely that you will lose all of your money. Then again, if the business does succeed, you should make a very generous return.

One of the reasons that many startups fail is that they lack adequate financial controls. To protect your investment, ask for a copy of the startup's financial statements and have professional bookkeepers and CPAs review them for you. Confirm that they have good cost controls in place and other sources of capital. If other entities are willing to invest in a start-up venture, it could indicate that you are in good company.

If the startup venture that you invest in does succeed, you may need to figure out an exit strategy. While startup investors had historically gotten taken out by IPOs, they have become much rarer. Between the cost of actually doing an IPO costs and the cost of complying with the Sarbanes-Oxley Act once the company is public, more and more companies are opting to stay private or to be acquired. Furthermore, if the company completes an IPO, you may not be allowed to sell your shares.

Within these risks lies great opportunity, though. Even in the face of these risks, open-eyed investors who fully understand the risks that they are taking can find diamonds in the rough. While investing in new venture carries great risk, the potential to fund the next Genentech, Apple Computer or Google makes startup investing potentially one of the most rewarding things that you can do with your money.

For any questions about startup ventures or investments, contact us here. We're here to help you resolve all your planning questions.

New Business Owners Have Several Choices for Accounting Services

Author: Keith Huggett

Starting a new business is a tremendous challenge. You have to design and create products and/or services, establish a brand, find customers, fill orders, etc. You also need to figure out what you spend and what you take in, maintain a positive cash flow, perhaps deal with payroll and certainly manage your tax obligations.

If you don't have the accounting expertise necessary to do this, there are a number of ways to handle your financial books. Here are four common options:

1. Do it yourself. Some entrepreneurs who have no accounting or tax experience manage their own financials. Dedicated software can help, but you still need to understand the basics of accounting. If you take this on, you risk classifying income and expenses improperly, which will make it harder to analyze your company's performance and meet your tax obligations accurately. This is risky for anyone but the smallest of businesses.
2. Hire a bookkeeper. Bookkeepers can do a satisfactory job of entering information into a pre-configured system. Most are not experienced enough to set up an accounting system, though, and they're not qualified to give you tax and planning advice.
3. Hire a CPA. The right CPA can do things well. But CPAs practicing solo have the same challenge that you do: keeping their own businesses running. And you're limited to the expertise of one individual.
4. Hire an accounting firm. Accounting firms typically have a mixture of CPAs along with other accounting and business professionals, and support staff. These days, they're also well-versed in technology. They can set up your bookkeeping system and help you in myriad ways, while basic data entry is done by non-chartered accountants and bookkeepers. This model can provide the expertise that you need, when you need it, and save you money.

Accounting is a time-consuming, unfamiliar process for most new business owners. It's very familiar to us at The Tax Office. We can handle every aspect of your financials, from online bookkeeping to payroll to tax planning and preparation to general business management and complete accounting. Contact us to get started, so you can focus on what you do best -- building your business.

Small Business Owners Need to Be Aware of Financial Situation

Author: Keith Huggett

Launching a startup business is exciting, but you can't ignore the practical realities of your personal finances. If you're one of the many people who created a startup business while being employed by another company, you will likely experience a point when you need to decide whether to stay with your day job, or quit and pour all of your energies into your own business. This is a difficult decision. You can't effectively run your startup with the limited time that you have, but you're not sure if it will be successful quickly enough to sustain your financial requirements.

So how do you know when it's time to take the plunge? First, get the following ducks in a row to protect your own financial health:

• Save up for a long haul: Pay down as much debt as you can and save enough money to sustain your lifestyle for at least six months. Separate your personal money and the funds you plan to dedicate to your startup business so you don't face any unpleasant financial surprises down the road.
• Have a solid plan: While you may have fully thought through your business idea, if you don't have a plan to follow it's easy to get distracted along the way. You may be able to afford these distractions now, but this won't be the case if you give up your primary income source.
• Consider factors other than money: What will you do for health coverage? Do your kids currently participate in a daycare program through your current employer? Are there other perks that you currently take for granted that will impact your lifestyle or finances?

Remember, starting a business often requires more money than you may expect. Be sure that you have enough startup capital to cover unexpected situations.

To make sure you have the full financial picture of your startup business, consider working with a qualified tax professional like those at The Tax Office Inc. We can help you evaluate your current financial situation and the various consequences of striking out on your own. Contact us today to learn more, or schedule a meeting online. For quick answers to your questions, find us on Twitter at #Plan4Tax.

Keeping Finances Separate Ensures Less of a Money Mess

Author: Keith Huggett

If you’re starting a business, it’s your money. So who cares if your personal and business finances are intermingled?

It’s simple: separating your finances is the business-like thing to do, and it helps protect your personal assets. It also shows you’re mature and savvy enough to turn starting a business into success.

Why?

• Mixing personal and business finances can create confusion at tax time. You’ll risk missed tax savings, and it will cost more to prepare your taxes.
• If your business grows and you want to bring in partners or investors, you cannot have “fuzzy” finances.
• If you and your business are indistinguishable, you could be liable if the business is sued or you can’t repay a loan.

What should you do?

• Keep everything separate, including bank accounts.
• It’s tempting to leverage your home or investments when starting a business. Don’t do it. Positive thinking is good, but if things don’t work out you could easily lose those personal assets.
• Don’t use your personal credit cards, either, for starting a business or ongoing expenses. Get a separate business card and use it only for related expenses.
• Don’t pay personal bills with business funds. Pay yourself instead – not a whopping salary, but enough to support you and still leave as much money as possible in the business to keep it going and growing.
• It can also be tempting to reward yourself after a few strong months by taking a chunk of cash from your business to make a large personal purchase, such as a car. Don’t do that either. Revenue could drop, and your young business needs all the capital it can get.

Establishing a solid foundation when starting a business will pay huge dividends down the road. Since finances are the “bottom line” of every enterprise, consulting one of our professional experts at The Tax Office Inc. could be your smartest startup move. We’re experienced in working with new businesses, and when you contact us, we can give you the advice and support you need to get your new business off to a great start.

What to Consider About Filing Changes

Author: Keith Huggett

Launching a new business can be exciting, rewarding -- and scary. Taking charge of your own future is a wonderful adventure and can bring many positive changes to your life. In order to increase your chances for success, though, you should understand the financial obligations associated with your new company, including taxes.

When you move from W-2 employee status to small business owner, you become responsible for much more than personal income taxes. Here are five types of taxes you need to know about before you start:

Employment tax

If you plan on hiring staff, you will need to pay Social Security, Medicare, unemployment, federal withholding and state and local employment taxes. In addition to withholding from employee checks, your new business will have to match Social Security and Medicare funds. It is essential that you budget for these expenses and make employment tax payments on a regular basis. The schedule is usually defined by the size of your staff and payroll.

Excise tax

If your new business will manufacture or sell certain types of goods, you may be liable for excise taxes. This includes environmental and clean air taxes, fuel taxes and taxes on the sale of industrial vehicles.

Sales tax

In most areas, businesses charge sales tax to be paid to local and state governments. You will need a way to track sales and related taxes so you can complete necessary forms and remit these funds regularly.

Property tax

If you plan to purchase buildings, vehicles or machinery, you will have to pay property taxes. Depending on the area where you base the business, you may have to make payments quarterly, biannually or annually.

Business income tax

You will also have to complete a business income tax return. To avoid massive tax liability, you can often reduce income tax burdens through expense deductions.

Overwhelmed before you even open your doors? By beginning this journey with accurate, comprehensive records, you can keep tax-related work from overrunning your daily operations. For professional, cost-effective help putting the pieces of your tax puzzle together, contact us at The Tax Office today. We'll manage your tax obligations and let you concentrate on building your new business.