Issues You Should Consider
Starting your own small business is an iconic American dream, but one that has not seen a lot of activity in the last several years. That may be changing, as the results of a recent Kauffman Index report show that start-up activity is on the rise.
If you are among those who are getting ready to jump in to the mix, it is essential that you are familiar with the specific rules and regulations that will apply to your business. In order to avoid being one of the fifty percent of small businesses that fail in their first five years, you must have educated yourself on the pitfalls and have a plan.
Understanding the different types of business entity
There are several different business structure options available for small businesses, and those who are setting up shop need to take their time and educate themselves on the various advantages that each offers. Whether you opt for a sole proprietorship, partnership, corporation or Limited Liability Company will determine how your taxes are managed and reported.
When making your decision you need to be aware that certain types of business structures are inexpensive to set up and maintain, while others have higher costs as a result of their required financial documentation and recordkeeping. Sole proprietorships and partnerships have straightforward, inexpensive tax reporting requirements that allow them to avoid filing a business return and include their business income on their personal income tax filing.
Understanding how to leverage a home-based business
Working from home and running a business from home is becoming increasingly popular, and those who do so are able to take specific deductions for their expenses for the part of their residence that they use for the business. In order to qualify for the deductions, you need to allocate a specific room or area of the home as being used exclusively for the business on a regular basis.
Additionally, small businesses have the ability to deduct expenses from revenues, no matter where they operate their business. In order to maximize profits and leverage tax advantages, it is essential that small businesses understand all of the deductions available to them, regardless of whether they can be taken all at once or amortized over time.
Small budgets, big dreams
One of the biggest challenges that face businesses with fewer than 100 employees is being able to grow their revenue, and much of this difficulty lies in the fact that it is hard for them to get approval for loans or seed money from private investors.
Analysis of the problems these businesses have faced have caused experts to suggest that small businesses focus on what they do best and not try to be all things to all people. The thinner that businesses spread themselves, the less they are able to prove their talent and the quality of their product. Those businesses operating their businesses on small budgets are advised to show where they shine in order to encourage customers to seek their products or service.
Retirement plans designed for small businesses
Whether you are a young entrepreneur or a person who has spent years in the corporate world and has decided to use their experience to strike out on their own, saving retirement is something that everybody should be thinking about. The tax laws provide a number of different tax-advantaged retirement plan options for small business owners.
These various plans offer low start-up costs, little documentation, and low maintenance costs as well. Not only do these plans offer tax benefits, but the contribution limits on some of them are more generous than those found in corporate 401Ks or IRA plans.
The plans that are available include the Simplified Employee Pension IRA, which allows a contribution of up to 25 percent of the owner or employees’ compensation, with a maximum of $53,000.
The Savings Incentive Match Plan for Employees – or SIMPLE IRAs – work well for companies that have up to 100 employees and who want to provide a retirement plan that does not carry high administrative costs. These are just a few of the plans that are available to small businesses that offer both employees and owners significant tax advantages.
Get help from an accounting professional
If you’re considering opening a new business, the amount of information that you need to master and manage can be mind boggling. When it comes to issues of establishing a business entity, taxation, and setting up a retirement plan, it simply makes sense to rely upon the knowledge and experience of professionals who have dedicated themselves to understanding these issues.
For help with these issues and many more, call our office to set up an appointment. We’ll help you establish business processes, help set up ways to monitor your growth, and guide you at every step along the way.
Thinking of starting a new business in the Tampa area? Call us today at (813) 600 3199 to discuss your situation.