Entrepreneurship can be exciting. Unfortunately, when starting a maintaining a business, there are a lot of technical financial questions that need to be answered right of the bat. Although not the most exciting part of getting your business up and running, the answers to these questions are critical in getting past initial challenges and setting your business up for long-term success. Here are 4 key accounting and financial questions when establishing and maintaining the financial success of your business.
1. What Type of Business Structure Should You Establish?
Determining the legal structure of your business is the first crucial step in setting your business up. Should you be a sole proprietorship, partnership, Limited Liability Company (LLC), corporation, S corporation, nonprofit or cooperative? The right structure depends on things such as your investment needs, the risks and liabilities of your business and how the structure will be maintained when it comes to expenses and taxes. You’ll also want to ensure the right operating agreements and contracts are in place to protect you and your assets. Getting incorporated with the right structure from the get-go can help eliminate unnecessary taxes and business expenses.
2. How Do You Best Comply With Tax Laws?
Once you have your name and business structure in place, you need to register your business and obtain a tax ID number from the IRS and your state revenue agency. With one of the most complex tax codes in the world, it’s important to understand the forms, dates, and intricacies of filing taxes as a business owner. While the IRS website contains the basics, complying with tax codes to avoid errors and tax audits should be run by a professional accountant who knows the territory and can ensure your business is running as compliant and efficient as possible. Don’t wait until tax season, keep your business in order with regular, professional bookkeeping to ensure all numbers and forms are in order.
3. What Are Your Financial Priorities?
As entrepreneurs and small business owners, it’s important to have clear ways to measure progress. It can be difficult to succeed if you have not defined what success is and how to optimize operations to get there. Many businesses define financial success as the growth of market size and revenue. While these are important, they are not the full story. Strategic tax planning and asset protection should also be considered in your financial priorities. Shield minimize taxes, shield assets and protect you, your business and your family from the start. You work too hard to then watch money fly out the door during tax season. Plan ahead to minimize taxes and grow your bottom line for the future.
4. How Should You Track Expenses & Receivables?
As mentioned above, professional bookkeeping is important in keeping payroll, bill pay, taxes, and more organized and accurate at all times. Having a trusted software such as Quickbooks is a great start, however, the numbers are information coming out are only as good as the numbers and information going in. A lot of times, outsourcing is key in ensuring that all expenses and receivables are accounted for and categorized correctly to maximize deductions come tax season.
Avoid The Financial Mistakes of Many Startups
With all the allure of starting and running a business and watching it grow, financial planning is the most important thing you can do from the start. With the right business structure, tax planning, asset protection, and bookkeeping practices in place, you can be sure to give your business the best chance at financial success and watch it grow. Don’t leave money on the table or risk paying too much in taxes.
With the proper accounting and financial planning, an entrepreneur and small business can not only succeed but thrive. Whether you are just getting started or have an established business, talk to our expert CPAs to get advice on how you can protect and grow your wealth.