And you thought the IRS wasn’t helpful

When I think of the IRS, helpful isn't always the first word that comes to mind.  However, this email recently came to me and I thought I'd pass it on because it has some excellent tips if you are thinking of starting a business.  Business owners typically aren't sure how to set up their business structure, pay taxes, or keep records so there is a lot of homework to do before you get going.  Disclaimer - this is from the IRS, so keep in mind that these are not the only things you need to do to start a business.

"Anyone starting or thinking of starting a new business should be aware of their federal tax responsibilities. Here are the top seven things the IRS wants you to know if you plan on opening a new business this year or thinking of starting a new business.

1.    First, you must decide what type of business entity you are going to establish. The type your business takes will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.

2.    The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

3.    An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.

4.    Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

5.    Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used. 

6.    Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

7.    Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.

 To get the latest IRS news and products and services, subscribe to e-News for Small Businesses on IRS.gov at http://www.irs.gov/businesses/small/article/0,,id=154825,00.html, click “Subscribe Now” at the bottom of the page and enter your e-mail address.

 The IRS Small Business and Self-employed Tax Center at http://www.irs.gov/businesses/small/index.html has more information about starting and operating a new business."

 

If it’s free, it’s me

Did you know that there are a lot of free resources available for entrepreneurs and small business owners?  Small business counseling, business mentoring, business plan assistance, marketing and financing options, government contracting, just to name a few.  Perhaps you want to run your business idea past someone, learn how to do financial projections or find out about microloans – there is someone locally that you can talk to.   Not sure where to start or who to call?  Click here to see local service providers or give me a call and we can determine which provider(s) best meets your needs.

Once you get a business license or sign up for certain services (like a DUNS number)  where the information is public, you may suddenly have many offers to ‘help’, for a small fee, of course.  There are businesses that offer a variety of fee-based services to the small business owners.  Keep in mind that many times you can get for free what they are selling.  For example, I ham working with a client on getting government contracts.  He was contacted by a firm that said they would prepare all of his paperwork and search for bids for him, for a $3,000 fee.  It is still a business decision whether or not to hire a firm, rather than take advantage of free assistance, but for the start-up entrepreneur,   

In addition to free business services, there are some excellent free reference materials online.  E-newsletters, magazines, blogs – there are so many that you could spend all day reading – I think the trick is to narrow down to a few good ones that have applicable information for you or your venture, such as Inc. (The Daily Resource for Entrepreneurs) or Alltop (All the top Start-up news).  I enjoy the daily ‘Smart Brief for Entrepreneurs’ which surfs the internet for top entrepreneur stories and then sends me an email brief with links to those articles.

Buyer beware with things you find free on the internet – sometimes you get what you pay for and if it sounds too good to be true, it probably is!