Tax pitfalls you could face as a small business owner
Starting your own small business can be an exciting venture. However, there are several things that many do not think about in advance that could put them out of business before they have barely begun. And attempting to handle some of these problems on your own may ultimately lead to negative results.
Michael Rozbruch, CEO of Tax Resolution Services will assist you in steering clear of these costly pitfalls.
Here’s a sampling of some of the most common tax pitfalls:What entity do you choose? Sole proprietor, LLC, or corporation? Pitfalls of each exist. A sole proprietor entity offers no protection between creditors and yourself. One member LLC’s are not recognized by the IRS and are treated as sole proprietors. Corporations must file separate returns for the business and yourself and must maintain separate bank accounts for each. No co-mingling of funds.
A bookkeeper is a must. Small businesses should have a bookkeeper from day one tracking expenses and income. Be proactive - not reactive. Keeping track of your business expenses and income on a monthly basis vs. reconciling at the end of the year can relieve you of many headaches. It can also keep your business on track.
Under capitalized. Unexpected expenses will come up. A business must have a “cushion” such as a personal line of credit or a bank account that holds at least two months worth of operating expenses.
Payroll taxes. Retain an outside payroll company with automatic tax depositing. A 34% fee is charge on the unpaid principle after 16 days. Once past due - it’s the “kiss of death” for businesses.
Stay tuned: In addition to the above points, please stay tuned at the end of the program for a special segment featuring a discussion with Ramon Ray and Marian Banker, Co-Producers of the Small Business Summit. The summit took place in New York City on February 13, 2007. Ramon and Marian discuss the planning and preparation that went into developing the event. An event which “crackled” with energy due to the large number of small business owners thirsty for information and eager to exchange energy with the wonderful sponsors that supported the event.
This broadcast has been made possible by Small Business Trends Radio and Anita Campbell.