Checklist for starting a business
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Checklist for starting a business

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Checklist for starting a business Checklist for starting a business Document Transcript

  • Checklist for Starting a Business – per IRS website changed a little<br />
    • What is your plan – have one
    • Business plan/model
    • How do you want to take money from this business
    • Funding
    • When ready…apply for an EIN (Employer Identification Number) and state registrations
    • Once you have the business plan in place and ready to execute – apply online with Form SS-4
    • This filing can set off filing requirements so don’t file until you are ready
    • Select a business structure – use a lawyer and a CPA to pick the correct one
    • Sole Proprietorship (Schedule C on your personal Form 1040) – SE taxes OUCH!
    • Partnership – for 2 or more people (Form 1065) – partners receive guaranteed payments, not W-2 wages, SE taxes OUCH!
    • Corporations – double taxation (Form 1120)
    • S Corporation – favored, restrictions include one class of stock, only 100 shareholders, corporations, partnerships and nonresident aliens cannot be shareholders – tax free distributions when there is basis (no double taxation), (Form 1120S) individual shareholders pay the tax via passthrough
    • LLC – very common, needs to elect classification on Form 8332 (sole proprietor, S or C corp, or partnership)
    • Choose either a calendar year or fiscal tax year
    • Short tax year
    • Individuals are calendar years
    • Determine your accounting method
    • Cash method – report income/deduct expense when received or actually paid
    • Accrual method – report income/deduct expense when earned or incurred – regardless of when it is received or actually paid
    • Know your tax deadlines and don’t miss them
    • 3/15 tax return due for corporations
    • 4/15 tax return due for partnerships and personal returns
    • Extensions give you 6 more months to FILE – never an extension to pay what was due
    • Estimated taxes are:
    • 4/15, 6/15, 9/15 and 12/15 for businesses
    • 4/15, 6/15, 9/15 and 1/15/XX for individuals
    • File returns TIMELY to “start the clock” – statute of limitations is 3 years and forever for fraud
    • Employees or independent contractors
    • Understand the cost of employees – it costs more than their hourly rate or salary
    • ER has to match the SS and Medicare portion of their wages and is only the fiduciary to submit the payroll taxes TIMELY to the IRS and State
    • Quarterly/Yearly the ER has to pay unemployment taxes on their employee’s – high turnover increases this cost
    • Will you be required to maintain some health insurance for your employees?
    • Independent contractors are more favorable, but they can’t solely work for you – read Publication 1779 from the IRS
    • Behavioral Control – who tells you how to do it and trains you?
    • Financial Control – are all costs reimbursed? Do you incur a profit or loss?
    • Relationship to the Parties – employee benefits (insurance, PTO)
    • Have a written contract
    • The IRS wants you to be an employee because it means more revenue for them
    • GOOD RECORD KEEPING – it is ALL right here…success or hardship
    • Pick an accounting solution/software (Quickbooks/Peachtree…you get what you pay for)
    • It needs to be reliable
    • It needs to be available if other people need to access it
    • It needs to do all the basic accounting functions (debits=credits, Balance Sheet is perpetual)
    • It needs to be backed up in case of electronic failure or malfunction so it can be restored
    • It needs to be safeguarded
    • NOT doing this is risky and costs more money and headache in the long run
    • RECONCILE!!
    • 28 -30% of businesses declaring bankruptcy cite problems with their financials as their main reason/cause for filing – don’t let that happen to you
    • Keep copies of your expenses – the burden of proof falls on the taxpayer to substantiate their claims on their tax returns. KEEP YOUR RECORDS
    • FRAUD – things to look out for:
    • Desperate times call for desperate measures – even close friends and people you have known
    • People with opportunity and they justify their reason – PREVENT IT!
    • HOW – never give one person all of the power
    • If you have a bookkeeper, look over their shoulder or have someone else do it
    • The best thing you can do is have someone else reconcile the books/bank statements if you don’t do it yourself. This one simple action let’s that person know you will see everything. Look deeper into things that look out of place.
    • Fraudulent vendors – almost the same name, common address as person committing the fraud
    • Sign all checks yourself – a hassle but very effective
    • Have a relationship at your bank so someone else is looking out for you
    • VIRTUAL ASSISTANCE
    • Logmein.com, gotomypc.com – both are great tools to get the assistance you need