There is a fundamental difference between business and personal finances when it comes to taxes. While the “average Joe” may not have to worry about taxes again until next year, “Joe the small-business owner” needs to start thinking about his next quarterly tax filing now. And for the rest, to start you off on the right track for next year I’ve flagged 7 financial faux pas that are commonly overlooked by small businesses.
1. Not keeping financial records up-to-date.
This is the number-one mistake small-business owners make, BUT it’s also the easiest to remedy. Cloud computing and smartphones make what was once a tedious process, effortless to keep in sync.
2. Skipping the annual budgeting and financial forecasting.
If you don’t have something to measure against, how will you know if you are on track? Data is knowledge, so create a simple plan based on your business insights and knowledge of market trends to forecast ahead and plan accordingly.
3. Not meeting with an accounting professional regularly.
A second set of eyes is always best—especially when it comes to the numbers in your business! You can remove some of the burden by working regularly with an accounting professional and use their expertise to your benefit.
4. Misclassification of employees.
This issue is becoming increasingly important as more businesses outsource jobs to contractors. It is also something the IRS has been paying close attention to, so be cautious! Misclassification can result in big fines and government scrutiny. Play it safe and classify accordingly.
5. Not incorporating your business.
Not incorporating is not an option. Most SMBs choose an S.Corp or LLC filing because of tax purposes — meaning that you file your business taxes at the same time as your personal income taxes, but the entities are kept separate. This provides a little extra security in that, if something goes wrong with your business, you won’t lose your personal assets with it.
6. Incorrectly filing your business.
Choosing the right business structure (i.e. LLC, S Corp. or Corp.) can be confusing, but it’s worth putting some thought into. Most small businesses opt for an S.Corp or LLC. But most importantly, make sure to file.
7. Mixing personal with business expenses.
Small businesses are afforded tax breaks and write offs that are typically unavailable to the general population. These include home office deductions, mileage, some business meals, utilities and travel expenses. Make sure you are taking advantage of these and not leaving money on the table, but be careful not to over indulge, as excessive deductions are one of the biggest triggers of an audit.
To read more on this article, go to http://www.entrepreneur.com/article/233664
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