The "ABCs" for New Businesses | Tax Tip of the Week | No. 51

Starting a new business can be an unbelievably exciting time!  Unfortunately, due to various governmental agency compliance issues, it can be an overwhelming undertaking.The statistics don’t lie. Most new businesses will not make it past their first year. The big question is why?In most cases, it is due to a lack of accounting systems. A new business can be losing money and not even know it.We've also seen situations where the new entity was not compliant with a tax or government agency.  Getting behind with payroll taxes, sales tax, or income taxes can be a hole that is seemingly impossible to climb out of.  The penalties and interest associated with back taxes or failure to file can be a huge hit to any business, but especially a new business.Practicing your ABCsThe above is a lot of doom and gloom. But if you practice the ABCs of business you can build the foundation needed to succeed in the market place.  What are the ABCs you ask? The ABCs are having an active relationship with an Attorney, a Banker, and a CPA who can give you the extra leg up your business needs to get past the first year hump—and on its way to future success.  Below are just a few of the foundational building blocks a great financial team can help with:

• Entity Choice: An Attorney can help your business choose the right legal entity for asset protection and for tax saving strategies. (For more information see Tax Tip #45: Considerations for choosing an entity.)
• Accounting Software: A seasoned accounting team should be able to get you up and running on accounting software that us right for your new business.  You need to know if you are selling your products for the right prices and if your overhead is in a good place. Good accounting software and systems will answer these questions and more. (For more information see Tax Tip: Getting Organized part II).
• Banking Relationship:  A good relationship with a local banking team can help your business set up separate checking, savings, & credit accounts that are necessary for running a business.  Having these accounts separate from your personal accounts can help you with asset protection issues as well make your accounting for income & expenses easier. You will also need their assistance if you plan on taking credit card payments for your goods and services.

It is a big step when you start your own business—it is best not taken alone. Don't forget your ABCs!What's your story?Do you have a story about when you started your business? What did you learn?As always, you can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our web site.Rick Prewitt - the guy behind TTW...until next week.