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5 Topics Every Business Owner Should Discuss with An Accountant

September 8, 2022 by admin

Coworkers team at work. Group of young business people in trendy casual wear working together in creative office.Your accountant or CPA is a business asset that you should put to good use year-round, not just at tax time. There are several topics beyond taxes that business owners should discuss with their trusted financial professionals. In this article, we cover five of them for you. While the new year is traditionally when business owners think of making financial, strategic, and other business-related plans, any time is the right time to speak to your accountant to discuss the following aspects of your business. You can’t begin the conversation too early, but it could be too late in some cases, so don’t put aside these five essential talking points.

1. Financial Planning

Budget is front of mind for business owners, but other financial issues impact your business, too. Consider a full portfolio review with your accountant to plan your financial future. Some critical topics to cover include strategies to improve cash flow, existing business loans, capital investment, charitable contributions, employee-related expenses like bonuses and health care, retirement planning, and asset management.

2. Company Growth

The goal of all businesses is growth. With growth comes change. As your business objectives shift, your valuation and tax liability often shift, too. Any changes you experience in your business should be conveyed to your accountant or CPA so that they can apprise you of liabilities or status changes. For example, suppose you plan to expand, add additional locations, make significant staffing changes, merge companies, acquire new businesses, or plan to sell your business. In that case, you should set up an appointment with your accountant to develop a logical strategy to address the change.

3. Inventory

If your business sells or resells tangible goods, inventory is vital. Sales tax laws and regulations can be challenging. Many states have rules about nexus (i.e., how much presence a business has in a city or state) related to where businesses warehouse inventory and fulfill orders. Your accountant can assess your order process to verify your restocking and ordering processes to maximize cash flow, ensure unsold inventory is accounted for, and ensure that sales tax is collected everywhere your company has nexus.

4. Risk Management

Do you have a plan in place to protect your business from disruption? Many do not. If that applies to your business, contact your accountant to discuss continuity planning to protect your business. They can provide professional insight regarding how to mitigate risks should a disruption occur. Some topics to address are whether your insurance policies are up to date, if all compliance, security, and privacy standards are met, whether your business has fraud protection in place, and if the existing internal controls protect your business. Given the time and capital small business owners invest in their passion, they must take time to manage any potential risk that could destroy what they worked so hard to create and build.

5. Tax Compliance

Lastly, as a business owner, you always want to be tax compliant. And this doesn’t apply only to federal taxes. It is just as essential to make sure state-imposed taxes are addressed on time. Regulations and tax laws change frequently, so it is vital to have a firm grasp on these. The best way to ensure you do this is to have your accountant guide you. They can inform you of any changes that affect your business and advise you on addressing them. Discuss collecting and filing W2s and 1099s for any contract employees; ensure exemption and resale certifications are collected and stored correctly; comply with online sales and nexus rules; and have an internal review to find any issues that might trigger a sale tax audit.


It helps to think of your business accountant as an extension of your team, an impartial adviser who will assess the risks and rewards associated with your business. They will answer your questions and illuminate unclear topics for you. They may bring up important points you’ve yet to consider, so make that call today and get a meeting on the calendar to discuss these critical points with your accountant. And remember, you can do your part by making sure you keep business and personal finances separate and maintaining complete, organized records.

Filed Under: Best Business Practices

Business Owners: Keep That Shield Intact

August 18, 2022 by admin

LLC (Limited Liability Company) - acronym on wooden cubes on the background of a cactus and banknotes. Business conceptYou face plenty of challenges as a small business owner. Finding ways to protect yourself against lawsuits is a major one. You may be able to add protection by structuring your business as a corporation or limited liability company (LLC). Both these entities may shield the owners’ or members’ personal assets from the company’s debts and liabilities.

The protection isn’t bulletproof, however. Requirements must be met, and the separation between the owners or LLC members and the business must be clearly established. Evidence to the contrary could spell trouble.

The Corporate Veil

In the face of a legal challenge, if you’re not following proper protocol, a court may decide your business isn’t being operated as a separate entity from the owner(s) — despite the existence of a corporation or LLC. That could lead to a legal decision to “pierce the corporate veil,” a term that means the owners’/members’ personal assets can be used to satisfy business debts and liabilities.

Follow Formalities

Corporations must meet strict state requirements regarding bylaws, director and shareholder meetings, issuing stock and recording transfers, fulfilling annual state filing requirements, and paying corporate taxes. There are fewer requirements for LLCs, but members would be wise to follow the guidelines for corporations.

Document Diligently

The best way to show that your business is operating properly is to document everything. Keep minutes of all major management meetings and record all business activities and decisions. Keep these records with your other formal business documents (including contracts your company is party to) for a minimum of seven years.

Capitalize but Don’t Commingle

It takes money to run a business. There are several ways to capitalize your business: You and the other owners or members might fund it, you might take out a loan, or you might find new partners who are willing to fund you. Regardless of what method you choose, be sure to document all important financial transactions.

Never commingle your personal assets with business assets. Establish separate bank accounts and credit cards for your business, keep property and equipment separate, and file separate income tax returns.

Filed Under: Best Business Practices

Mentoring the Next Generation to Take Over the Family Business

July 18, 2022 by admin

Giving mom the gift of a comfortable retirementMany owners of small businesses would love to see a family member take over their business. If you have children, grandchildren, nieces, or nephews that you think might be interested in running the business in the future, you can help lay the groundwork for that potential transfer of ownership in several ways. Use the following strategies and tips to encourage the next generation to become part of the family business.

See Who Is Interested

One or more of your children may already have shown some interest in the family business and asked about its operations. It’s important to encourage that interest. Talk about the company’s history and your vision for its future. Share the excitement you experience as a business owner.

Over time, you can teach an interested child more about the business’s operations. Consider putting the child to work doing various tasks around the business on weekends and over school holidays.

Education Is Key

Over the years, the child’s interest in the business may wane or it may become more intense. If the child (or children) continue to express an interest in working for the family business, you might want to bring up future education plans. You can suggest that the child should consider obtaining a degree that would be beneficial in running all or part of the family business. For example, a degree in engineering could be a huge asset if the family business is involved in property development, construction, or design/build. A degree in accounting or finance can be helpful for businesses of all types. In addition, a degree in a related field would give your family member credibility when it comes to interacting with clients, bankers, and employees.

Insist on Outside Experience

Promoting a family member to a leadership position within the family business when that person has little experience can be a recipe for trouble. It can cause discord among employees, especially those who have worked hard with the expectation that they could move up in the ranks. Additionally, it can undermine the family member’s credibility in the eyes of clients and other business owners.

It often makes more sense and can be hugely helpful to have the family member obtain a post-college job outside the family business. Working in a different company in a similar industry to yours can give your family member a level of experience, confidence, and credibility that would not be obtainable by simply transitioning to the family firm. The skill set established through working elsewhere may help propel your family business in a new, more growth-oriented direction. Family business experts suggest that a child expected to take the reins of a family business should spend at least five years working elsewhere before joining the family firm.

When Multiple Children Are Involved

What happens when more than one family member is interested in becoming part of the business? Encourage them to follow the areas of the business that interest them most. With the appropriate education and experience working for other firms, they may be ready to run their own areas of the business when they rejoin the family firm. This is when their talents can develop and shine.

Bring in Outside Experts

The input of outside professionals who are skilled in different business areas, such as operations, finance, manufacturing, logistics, or marketing can be invaluable to the upcoming generation of family members joining the business. Mentors can guide and serve as a sounding board for the ideas of the child or children working for the family business.

Consider Staying on as an Advisor

You could consider making yourself available as an advisor to the incoming new generation of family members. Whether the arrangement is formal or informal, it should not be open-ended. Determine how long you will offer your services. The goal is to ensure that the new generation of leaders in the family business will be able to run the business independently.

Successfully transitioning a family business to the next generation takes time and planning. For planning assistance, consult an experienced financial professional.

Filed Under: Best Business Practices

4 Tips on How Small Businesses Can Reduce Taxes

June 22, 2022 by admin

Asian caucasian colleagues sitting on couch discussing solve business issuesAs a small business owner, tax liability is the money you owe the government when your business generates income. With changing laws and gray areas regarding deductions, exemptions, and credits, it’s no wonder small business owners rank taxes at the top of the list of the most stress-inducing aspect of business ownership. To reduce that stress, taxes shouldn’t be something to focus on only at year’s end. Use these tips on reducing your business tax year-round and see your taxes and stress level decrease!

1. Business structure

Your company’s business structure is how it is organized – it answers questions like who is in charge, how are profits distributed, and who is responsible for business debt. The most common business structures are:

  • Sole proprietorships have one owner who takes all profits as personal income. The owner is personally liable for any business debts.
  • Partnerships are structured like sole proprietorships but can have an unlimited number of owners.
  • C corporations have unlimited shareholders who each own part of the company. Profits are distributed as dividends between them. Owners are not personally liable for business debts.
  • S corporations are structured like C corporations, but the number of shareholders is capped at 100.

In addition to affecting how a business operates, business structure impacts how much a company pays in taxes. The U.S. tax code is complex and includes four main tax categories:

  • Income tax – paid on profits
  • Employment tax – employee Social Security and Medicare contributions
  • Self-employment tax – Social Security and Medicare contributions for self-employed individuals
  • Excise tax – special taxes for specific goods and services like tobacco, alcohol, etc.

IA sole proprietorship or partnership is a good idea for businesses wanting tax simplicity. For those with less than 100 owners, an S corporation might be the right fit and best tax option. Again, business structure and tax laws are complex and are best determined by a qualified, experienced accountant.

2. Net Earnings

Net earnings (i.e., net income or profit) is the gross business income minus business expenses. Regardless of the business, it begins with gross income (the income received directly by an individual, before any withholding, deductions, or taxes), and allowable expenses are deducted to arrive at net income. How this figure is calculated is dependent upon business structure.

Net earnings are used to calculate business income taxes. Again, the calculation process differs slightly for different business structures. It is best to seek a professional to help with net earnings calculations for the proper calculation and maximum legal deductions.

3. Employ a Family Member

One of the best ways for small business owners to reduce taxes is hiring a family member. The (IRS allows a variety of options for tax sheltering. For example, suppose you hire your child, as a small business owner. In that case, you will pay a lower marginal rate or eliminate the tax on the income paid to your child. Sole proprietorships are not required to pay Social Security and Medicare taxes on a child’s wages. They can also avoid Federal Unemployment Tax Act (FUTA) tax. Consult a trusted accounting professional for details about the benefits of hiring your children or even your spouse.

4. Retirement contributions

Employee retirement plans benefit employees, but they can also be good for your small business. Employer contributions to an employee retirement plan are tax-deductible. They can also carry an employer tax credit for setting up an employee retirement plan. Again, this is a task an accountant can handle for you. They can guide you on retirement plan choices based on your business’s situation, employees, and other factors.

As a small business owner, you can deduct contributions to a tax-qualified retirement account from your income taxes (except for Roth IRAs and Roth 401(k)s). Sole proprietors, members of a partnership, or LLC members can deduct from their personal income contributions to their retirement account.

As with any tax situation, consulting your trusted accounting professional is always best. They are up to date on the latest tax laws, information, and allowable deductions. By being aware of ways your small business can reduce taxes, you can bring these topics up with your accountant, discuss the best options for you, and be prepared long before tax time rolls around.


Contact our tax professionals to learn more about how you can control tax exposure for your small business.

Filed Under: Business Tax

How to Overcome Accounting Challenges Most Small Businesses Face

May 24, 2022 by admin

Business colleagues in meetingPerhaps the number one action you can take to support the financial health of your small business is to stay on top of accounting. Make sure you’re aware of most small businesses’ accounting challenges and learn how to overcome them. We’ll tell you how here!

Banking

You’ve been banking for years, and you know how to manage the task. However, when you own a business, banking isn’t like managing personal checking and savings accounts. Unfortunately, many small business owners use their personal funds to pay for business expenses, especially when first starting out. Even small costs add up over time. This “cross contamination” of spending between personal and business accounts can lead to costly mistakes, not to mention headaches for your accounting team. Keep personal expenses, and business expenses separate all the time. Have dedicated bank accounts and credit cards only used for one or the other. If you need to track down an expenditure, you only need to look in one place.

Budget

When bank accounts are separated, budgeting becomes exponentially easier. You can even use an accounting software program to help you keep up with money coming and going to and from your business. However, recognize that simply entering information into a software program is not the end of the work when balancing a budget. Thinking that is true ends up being the downfall of many small businesses. Budgeting for a business means forecasting to ensure that unexpected expenses can be covered, managing inventory, taxes, and more. A shift in any direction can throw off any budget. That’s why many small businesses opt to outsource their accounting. The known upfront expense of doing so can far offset costly budgeting errors down the road.

Unexpected expenses

As mentioned above, you must consider the unexpected as part of your budget. Additional (new) taxes, payment delays from customers, rising costs of materials and supplies, new employee training, etc., are all possibilities. A qualified accountant is aware of these unexpected expenses and others that your business could face and knows how to prepare you for them. Awareness of what could financially happen in business is crucial to long-term profitability.

Payroll

While unexpected expenses are likely the most daunting for a small business, payroll is almost always the most significant. Payroll entails more than what you pay employees. New employee classification, if incorrect, could cost you a bundle in penalties. Other payroll-related accounting challenges are pay accuracy, proper tax filing, compliance, and paid time off tracking.

Unless you’re an HR professional, and chances are you’re not if you’re the business owner, consider recruiting a qualified accountant to help you manage payroll. It will save you headaches in the short term and money in the long term.

Taxes

A conversation about accounting and small business isn’t complete without discussing taxes. The tax struggle can be daunting, from filing to making sure you pay enough but that you don’t overpay. A significant challenge regarding taxes is merely keeping up with the ever-changing tax laws. A qualified accountant or CPA will be up-to-date on new regulations and guidelines so that you don’t have to be.

Overcoming accounting challenges like these is easy with a qualified accounting team on your side. Consider outsourcing your accounting needs so that your focus remains where it should – on running your business your way.


Contact our accounting professionals now for help managing your small business finances.

Filed Under: Best Business Practices

How QuickBooks Online Helps You Track Mileage

April 22, 2022 by admin

With gas prices so high, you need to track your travel costs as closely as possible. Consider getting a tax deduction for your business mileage.

If you drive even a little for business, it’s easy to let mileage costs slide. After all, it’s a pain to keep track of your tax-deductible mileage in a little notebook and do all the calculations required. If you do rack up a lot of business miles, you probably forget to track some trips and end up losing money.

QuickBooks Online offers a much better way. Its Mileage tools include simple fill-in-the-blank records that allow you to document individual trips. You can either enter the starting point and destination and let the site calculate your mileage and deduction or enter the number of miles yourself.

If you use QuickBooks Online’s mobile app, it can track your miles automatically as you drive (as long as you have the correct settings turned on). Here’s a look at how all of this works.

Setting Up

To get started, click the Mileage link in QuickBooks Online’s toolbar. The screen that opens will eventually display a table that contains information about your trips, but you need to do a little setup first. Click the down arrow next to Add Trip in the upper right corner and select Manage vehicles. A panel will slide out from the right. Click Add vehicle.

quickbooks online tips

You’ll need to supply information about your vehicles before you can start entering trips.

You’ll need to supply the vehicle’s year, make, and model. Do you own or lease it, and on what date was the vehicle purchased or leased and put into service? Do you want to have your annual mileage calculated by entering odometer readings or have QuickBooks Online track your business miles driven automatically? When you’re done making your selections and entering data, click Save.

Entering Trip Data

You can download trips as CSV files or import them from Mile IQ, but you’re probably more likely to enter them manually. Click Add Trip in the upper right corner. In the pane that opens, you’ll enter the date of the trip and either the total miles or start and end point. You’ll select the business purpose and vehicle and indicate whether it was a round trip. When you’re done, click Save. The trip will appear in the table on the opening screen, and your current possible total deduction will be in the upper left corner, along with your total business miles and total miles.

If you want to designate a trip as personal, click the box in front of the trip in that table. In the black horizontal box that appears, click the icon that looks like a little person, then click Apply. Now, the trip will appear in the Personal column and will not count toward your business tax-deductible mileage.

quickbooks online tips

When you select a trip in the Mileage table, you can mark it as personal so it’s not included in your business tax-deductible miles.

Personal Trips Can Count, Too

If you use your vehicle(s) for personal as well as business purposes, tracking some of those miles can also mean a tax deduction. For tax year 2022, you can deduct 18 cents per mile for your travel to and from medical appointments. Note: Medical mileage is only deductible if medical exceeds a certain percent of AGI. Be sure to check with the IRS yearly tax code, as they update the mileage amounts annually.

And if you do volunteer work for a qualified charitable organization, the miles you drive in service of it can be deducted at the rate of 14 cents per mile. You can also claim the cost of parking and tolls, as long as you weren’t reimbursed for any of these expenses. Obviously, the IRS wants you to keep careful records of your charitable mileage, and QuickBooks Online can provide them.

QuickBooks Online doesn’t track these deductions, but you’ll at least have a record of the miles driven.

Auto-Track Your Miles

The easiest way to track your mileage in QuickBooks Online is by using its mobile app. You can launch this and have it record your mileage automatically as you’re driving. Versions are available for both Android and iOS, and they’re different from each other. They also have more features than the browser-based version of QuickBooks Online, like maps, rules, and easier designation of trips as business or personal.

quickbooks online tips

The iOS version of Mileage in the QuickBooks Online app

In both versions, you’ll need to click the menu in the lower right corner after you’ve opened the QuickBooks Online app and select Mileage. Make sure Auto-Tracking is turned on. Your phone’s location services tool must be turned on, too. There are other settings that vary between the two operating systems. You can search the help system of either app to make sure you get your settings correct if the onscreen instructions aren’t clear enough.

Of course, you won’t see the fruits of your mileage deductions until you file your 2022 taxes. But you can factor these savings in as you’re doing your tax planning during the year. Please let us help if you’re having any trouble with QuickBooks Online’s Mileage tools, or if you have questions with other elements of the site.

Filed Under: QuickBooks Business Tips

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