The beauty of Entrepreneurship is that it provides freedom, wealth, financial stability, jobs and the opportunity for change, in your family, community, country or the world. Entrepreneurs and small business owners create social and economic value, opportunity and employment far beyond their organizations. Specifically affecting the U.S. economy by playing key roles as suppliers, customers, and service providers for other businesses. There is a path to success, you must be aware of what you’re doing in your business as well as how you’re doing it. Accounting will be your road map, there are few ways around it and shortcuts only cost more in the end.

1. Tax Tips for Entrepreneurs
and Small Business Owners

2. Hello I’m LaQuitta Jones, a tax accountant
with Terrell Tax & Planning, LLC, Atlanta’s
premier small business tax accounting firm,
where I specialized in maximizing profit and
minimizing tax.
Thank you for your time, I want to share
with you some tax tips for entrepreneurs
and small business owners.
Numbers are my passion, however, I do
understand that most entrepreneurs and
small business owners, do not share in this
passion, and did not become business
owners to rumble with numbers but to
share their gifts (services) and creations
(products).

3. In 2013, an estimated 25 million Americans were starting or
running new businesses, in addition, an estimated 14 million
Americans were running already established business,
according the Global Entrepreneurship Monitor (GEM).
The beauty of Entrepreneurship is that it provides freedom,
wealth, financial stability, jobs and the opportunity for
change, in your family, community, country or the world.
With a massive effect on economies, there does not seem to
be an end to entrepreneurship
no where in site, matter of fact,
if you pay close attention, more
and more politicians for building
their political campaigns on
growing and strengthening
entrepreneurship and small
businesses in the US.

4. Entrepreneurs and small business owners create social and
economic value, opportunity and employment far beyond their
organizations. Specifically affecting the U.S. economy by playing
key roles as suppliers, customers, and service providers for other
businesses.
This is to let you
know you are not alone,
your dreams of entrepreneur ship
and small business ownership
are valid and can be all you
desire them to be.
However, there is a path to that success, you must be
aware of what you’re doing in your business as well as how
you’re doing it. Accounting will be your road map, there are
few ways around it and shortcuts only cost more in the end.

5. The SBA describes a small business, either in terms of the
average number of employees over the past 12 months, or average
annual receipts over the past three years.
There are millions of successful entrepreneurs and small
business owners in the USA and millions more worldwide,
each and every one of them at some point hired an accountant
to assist them in the day to day operations of their business.
Being open to knowledge, getting comfortable with your
numbers, knowing how they benefit you and your business
and joining forces with a professional, that you are able to call
upon for guidance and assistance with strategic decision
making, will be that extra sauce, your business will need to
place you among the successful small businesses worldwide.
If you don’t know your numbers, you don’t know your
business.

6. Here’s Some Things To Consider…

7. With this presentation I want to be brutally honest, because truth,
honesty and respect are among the numerous characteristics of
successful entrepreneurs. So I will say, unless you're an accountant,
the word "accounting" probably strikes fear in your heart or make
you a little nervousness, at least. For young entrepreneurs, the
feeling is probably amplified. After all, starting out with poor
accounting or no bookkeeping, can really bite you over the long
haul.
In my experience, I notice most
entrepreneurs try to keep the financial
details of their business in their heads or
they have a genuine intention of maintaining
accurate and timely records, but the numerous other aspects of
running a business catch up with them.

8. Your Structure is your Business Foundation
Deciding what small business structure will be most advantageous to your
business is one of the most crucial decisions you'll have to make and this
decision must be made early in your business formation process.
The form you select
dictates such issues as,
legal liability, tax
treatment, record-keeping
obligation and
the type of shareholders
you are allowed. To help decide your business
structure, consider the nature of your business, future plans and how you
operate as an owner. One of the easiest things to do is to act fast and get
this wrong, it is strongly recommended that you consult a professional.

9. Your Business Structure Options:

10. SOLE PROPRIETORSHIP
The simplest structure is Sole Proprietorship, most individuals who work for
themselves with no partners, correctly choose this form. YOU are your own
business, simply report your income on Schedule C of your 1040 tax form.
TAX IMPLICATIONS- In addition to your normal income tax, you will also pay a
self-employment tax, which covers all portions of Social Security and Medicare
required by the government.
ADVANATAGE –Setup is easy, expenses are usually low, you save on overhead,
only one tax return is filed, opposed to two with corporations and you can
manage one bank account, your personal account.
DISADVANTAGE – You are responsible for self-employment tax, currently 15.3
percent, you don’t have legal liability, meaning if you are sued, your personal
property can be taken, you are personally liable for all the debts of your business.
POTENTIAL USERS: Freelancers, start-ups earning less then $50,000 annually

11. PARTNERSHIP
If you are in business with one or more person(s), the business structure could be
a partnership, all owners agree to share in the profits or losses of a business.
There are two varieties, general partnerships and limited partnerships. In a
general partnership, partners manage the company and assume responsibility for
debts and other obligations. A limited partnership has both general and limited
partners. The general partners own and operate the business and assume liability
for the partnership, while the limited partners serve as investors only; they have
no control over the company and are not subject to the same liabilities as the
general partners.
You should never operate a partnership without a partnership agreement.
TAX IMPLICATIONS: profits or losses are passed
through the business to the partners, who report it
on their personal income tax return.
ADVANTAGE: burdens of the operation are
shared among the owners, so you are not alone.
DISADVANTAGE: each partner is personally liable
for the financial obligations of the business.

12. CORPORATION
Most large companies will be a corporation, formally called regular or C–
Corporations. The most basic characteristic of the corporation is that it is legally
viewed as an individual entity, completely separate from its owners. This allows
owners, now called shareholders to not be liable for the actions of the company.
Therefore if the company is sued, the personal assets of the owner are not on
the line.
TAX IMPLICATIONS: The income from a corporation is double taxed, once for
the company tax return and again when the shareholder files a personal tax.
ADVANTAGE: Limited liability, flexible ownership structure, a completely
separate entity from owner(s), tax deduction for dividends, no self-employment
tax, well respected in business environment.
DISADVANTAGE: Expensive to establish and
maintain, double taxation.
POTENTIAL USER: Businesses that want to go
public ( offer stock shares ) or garner venture
capital investments.

13. LIMITED LIABILITY CORPORATION, LLC
With the LLC, structure your liability is limited, double taxation that comes with a C
corporation, is avoided. It gives you the feel of a small organization with the benefits
of a large one, you have more flexibility then other structures, however, with that
flexibility comes setup requirements, limitations and taxation.
TAX IMPLICATION: same as Sole Proprietor, if you’re a one owner, LLC and same as
partnership if there are multiple owners.
ADVANTAGE: Flexibility with such things as ownership and dividend (income)
allocation, liability (is limited, but allows you security), there is no double taxation.
DISADVANTAGE: Are you responsible for self-employment tax, no tax deduction for
dividends, and there are some uncertainty in the legal environment compared to a
corporation.
POTENTIAL USER: Any business that
does not desire to go public or attract
venture capitalist quickly.

14. S-CORPORATION
The S corporation is more attractive to small-business owners than a regular (or C)
corporation because it has favorable tax benefits and still provide business owners
with the liability protection of a corporation.
TAX IMPLICATION: income and losses are passed through to owners
(shareholders) to be included on their personal taxes. Therefore no double
taxation.
ADVANTAGE: owners without inventory can use a simpler accounting method,
cash method. 75 shareholders are allowed, which helps with capital investments
in company.
DISADVANTAGE: There is a cost associated with setup and tax
preparation, similar to a regular corporation. They also must file
articles of incorporation, hold directors and shareholders
meetings, keep corporate minutes, and allow shareholders to vote
on major corporate decisions. There are numerous stock and tax
related issues and a professional should be consulted
before choosing this structure.

15. An EXAMPLE to help choose, a startup that has
losses during its first two (2) years would do better
as an LLC, because LLC members will be able to
write off the losses on their personal taxes.
A regular corporation
with losses would not be
able to use them until
they make a profit. And
with a S corporation
you can only deduct the
money you invested or
directly loaned to the
company.”

16. 2. Don't mingle business and personal expenses.
Your first year of business, from idea to inception, can move
extremely fast. There will be many things that require your
immediate attention. Purchases made for the business should be
made from a business bank account or credit card, setup prior to
making business transactions. Things can get complicated fast,
separating business and personal transactions make it easy to keep
track of
deductible
expenses.

17. A transaction has to be recorded when funds are earned
or spent and if personal items are intermingled, the IRS
and others (investors, lenders) may consider you high risk,
unprofessional and not serious about being a business
owner.
With the IRS continuously trying to decide if taxpayers are
operating as a business or just a hobby, deductions are
often denied or not allowed for hobbies, co-mingling tells
them you are not operating a legitimate business.
Finally, if you want to claim this income or expenses you
must be able to prove they were for business purposes.

18. What’s the difference? A business transaction is an economic
activity or event that begins the accounting process for the
business, which is recorded in an accounting system, a personal
transaction does not have a connection to the business and was
made by or on behalf of the owner, for personal use.
First-time business owners are notorious for combining the two,
mostly because they are unaware of the ramifications or
simplicity of avoiding this. The effects are often unnoticeable
until tax time or when the IRS conducts an audit and require
explanation of transactions.
Best way to avoid combining business and personal is to
operate from a separate checking and credit card account for
your business.
Personal transactions are not tax deductible regardless of the
business structure you choose.

19. 3. Record-Keeping
After deciding, with a professional, the most advantageous
structure, the next decision to make is how you will maintain your
records. Accurate record keeping is important to a business's
success, not only for tax compliance but all company assessments.
There is no mandatory manner required by the IRS, as long
as the records produce accurate
accounting of income and expenses and
financial performance.
Think of your record-keeping as a
vehicle to monitor efficiency in
specific areas, the path to
complete and accurate income tax
data and a basis for sound
strategic future planning.

20. Good record keeping will begin with your source documents,
canceled checks, receipts, invoices, bills, loan documents, cash
register tapes, bank and credit card statements, purchase
orders or other documents that provide the details associated
with your business transactions.
Your number one question as a business owner should be, “Am
I making money?” And to get that answer, you’ll need to track
your business accounting information.
Most entrepreneurs and small businesses I work with, simply
just don’t know where to start, therefore they will forego the
process as long as possible.
There are two main ways in which business records can be
maintained: manual record keeping and computerized (or
automated) record keeping.

21. Manual Record-Keeping
Manual record-keeping will be most beneficial to smaller small
businesses, such as part-timers, freelancers, independent contractors and
startups. Yes, the pencil and paper method is still around and adequate,
one of the goals of those able to use this manual process is to grow to the
point, its no longer advantageous. Manual records satisfy the tax code as
long as they are accurate and can be understood or explained if
questioned. Of course, if you decide to use a manual system, you must
learn how to use it.
Your options are: Preformatted record books and Ledger sheets.
Both are inexpensive and available at most office supply stores.
Either will require a significant commitment of time, you must keep
accurate records of all income received and expenses paid, in a timely
manner. Be sure to jot down a brief description, date incurred, amount,
and to whom it was paid.
Pros:
• Easy to use
• Low cost
Cons:
• Manual, so you must total everything yourself
• No automatic checks and balance

22. Computerized Record-Keeping
Maintaining financial records on a computer, is similar to
maintaining records manually, except the process is
automated, which usually means quicker, no handwritten set of
books, and more accuracy. Also, there’s a system in place to
provide some level of assistance.
To be successful with a computerized system, you or your
accountant will input each transaction into the software, timely
and accurately to generate forms, reports and financial
statements.
Pros:
• Modern
• Eliminate math errors
• Information is instantaneous
• View Income and expenses by
category
• Steady system to safely maintain
records.
Cons:
• More expensive
• Require regular updates
• You must have a computer
and be comfortable using it
on a regular basis.

23. 4. Tax Planning
As an entrepreneur, small business owner you want to grow and
keep as much profit for your business as possible, one major way to
do this will be through tax planning.
Tax planning is a phrase often used, but not well understood. To
accomplish the goal of tax planning, which is to grow your business
financially in the most tax-efficient manner, you will increase
income, while reducing cost and making strategic, timely purchases.
Three Basic Ways to Tax Planning
1. Reduce your income
2. Increase deduction
3. Tax Credits
There are several effective variations
to the above, each basic method will
change from year to year and differ,
apply or not depending on your business structure.

24. KEY POINTS TO REMEMBER
Let’s be clear, tax planning is in no way tax
avoidance. The best tax planning, will
merely minimize tax liability. It's a mistake
to make business decisions based solely on
taxes.
Tax records in disarray can
cost you money saving
deductions and cause a
problem if audited. After all,
to avoid a huge tax liability
you want to get each, credit
and deduction you can and
be able to back them up.
Start off on the right foot. Make your
business record-keeping a priority, just In the
same way you go through your email every
morning, set a day and time that is
convenient for you and stick to it. I advise my
clients to set a recurring alarm
on your calendar: "Review
books" or “Enter Business
Transactions”, how often is
up to you, at least once a
month, if not more, is ideal.
We entrepreneurs are
do-it-yourselfers. We take
pride in our ability to
micromanage every aspect of our business.
But accounting, bookkeeping and taxes are a
few of those areas where you should
definitely seek professional help.
In the end, accounting isn't really that
scary. If you start off right, it can actually
be fun. After all, that's where you will see
your fortune grow.

25. The above is just the tip of the iceberg whether for
entrepreneurs, who are contractors or business
owners, however, they serve the purpose of providing
you direction on being successful.
Small business success, is
another passion of mine, your
success is my success; my
company goal is to be of value
while helping entrepreneurs and
small businesses do big
business.
Thank you again for being proactive with your business
and finances, good luck and best wishes with all your
future endeavors, now go grow that business…

26. Call To Action:
So if you agree accounting is and should be an important
aspect of your business, your next steps is:
1. Get a “Free Consultation” from an accountant
call (404) 720-4232 or email: laquitta@terrelltaxandplanning.com
2. Keep accurate, timely records of each transaction
you make in your business.
3. Select an efficient financial record keeping system
(software), that you understand and will keep updated
regularly.
“Numbers Don’t Lie, People Do”, You Should Know Where Your Business Stands Financially…
Terrell Tax & Planning, LLC
www.terrelltaxandplanning.com
(404) 720-4232