As a startup business owner, you work your plan and check off your mandatory tasks.
Market research – check. Business plan – check. Brick & mortar or online – check. Business name – check.
Great job! But there’s more to do so your business succeeds, maximizes profit, and minimizes expenses. There are four areas that the initial decision will make all the difference: Software, Entity Choice, Compliance, and Tax Deductions.
Software: Determine the best application to keep track of your finances accurately to limit distractions so you can focus on managing, planning, and forecasting. Excel spreadsheets or a bank ledger may do the trick now. The right software system will allow your team to access real-time reports and KPIs and streamline interdepartmental communication to help you make reliable business decisions.
Some of the most popular applications for freelancers and small to midsize businesses (SMBs) are:
• Intuit QuickBooks
Each of these applications has many applications and addons available. There are also options specific for freelancers, self-employed, online, and desktop versions. You will want to consider cost, integration, sharing, and ease of use as top considerations in your final decision.
Entity Choice: Establish the best entity choice or business structure will maximize your financial position. This choice will determine tax liability, personal responsibility, and paperwork submissions. The standard business structures are:
• Sole Proprietorship
• Limited Liability Company
• C Corporation
• S Corporation
An LLC tax structure can be as a C Corporation, S Corporation, or Nonprofit. Business structures vary state by state and have their own ownership rules, liability, taxes, and filing requirements. As your business evolves, you may need to convert to a different structure but may bring added complications that cause increased taxes or may cause the entity to dissolve and a new entity established.
Compliance: Once you choose your entity, you will want to register with federal and state agencies for an EIN (Employer Identification Number). Your business entity may be using your social security number, which will be your EIN. This number will be necessary to:
• Open a bank account
• Remit tax forms
• Submit tax payments
• Pay employees
• Establish retirement plans
• Work with other organizations
Acquire business insurance
Application for licenses or permits for both federal and state agencies have varied requirements, fees, and renewal schedules for different businesses.
Being compliant will minimize tax liability, additional fees, and penalties.
Tax Deductions: Tax deductions aligning with IRS guidelines are also known as “write-offs” to reduce your taxable income. Some deductions can be direct business expenditures, and some are personal that small business owners can utilize.
Some of the most common deductions are:
• Business meals
• Business interest, bank fees, legal fees, professional fees
• Education, Continuing Professional Education
• Home office
• Salary and benefits
• Travel expenses
Accompany IRS approved deductions with documentation. We encourage you to review expenses with your accountant to make sure you are taking all available deductions to reduce your tax liability.
Wilke & Associates, CPAs and Business Advisors has an excellent consultation package for a startup to help build a firm foundation for any new business. This $500 Startup Package will help you establish your Software, Entity Choice, Compliance, and Tax Deductions.
Please contact Rachel Kopec to schedule your appointment today by calling 412. 278.2200 or visit our contact page.
Amanda is a general ledger manager and business advisor at Wilke & Associates. She currently serves closely-held businesses using her prior experience as a corporate accounting manager in the manufacturing industry and prior audit experience in manufacturing & distribution, logistics, real estate, and pension plans.