There’s nothing worse than having a small business owner arrive at my office too late.

They haven’t set up their payroll properly, haven’t kept their books up-to-date and haven’t calculated their tax liability. Sometimes I can help save their businesses and get them back on track. But other times, they’ve gotten so deep in debt or so far behind that that just isn’t possible.

Before you put your own time and money into a business venture, or go into debt financing it, make sure you research, research and then do more research. The good news is that the Internet makes it easier than ever to find out all about the practical aspects of running a small business. But you must keep one foot grounded in business reality while you dream of flying high on business success.

Check with your nearest community college or university about taking a class on entrepreneurship. (Many institutions offer extension courses online or on Saturdays, so don’t think you have to earn an MBA before you can open your business!)

Connect with nonprofit entrepreneurial training organizations such as EntreWorld.org, and MyOwnBusiness.org. If possible, take a job at a business similar to the one you’d like to open, and learn everything you can from the inside out about how it works. Figure out what is not working at that company, and how you can do things differently – and better!

Look for professional business associations you can join and then read their trade publications, talk to other business owners and attend networking meetings of your local chamber of commerce.

Avoid jumping into a poorly thought-out business whole-heartedly. Unfortunately, failure rates for startup businesses are high: You’ll need a solid business plan, good advice from professionals and plenty of capital before you get started in order to be successful.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

Business owners who have employees must withhold payroll taxes from their employees’ wages through the use of a W-4 form for each employee.

Payroll taxes amount to 15.3% of income, which represents the employee’s 7.65% Social Security and Medicare tax, plus the employer’s 7.65% Social Security and Medicare tax. You may also need to withhold state employee taxes and state and federal employer taxes, such as unemployment.

Withheld taxes must be deposited with the IRS on a monthly or semi-weekly basis, depending on which schedule applies to your company.

If you do not deposit your payroll taxes in a timely fashion, or miscalculate the amount of withholding, it’s likely that you may be charged penalties and interest.

Work closely with an accountant who is knowledgeable about small business finances and tax matters and can advise you on crucial issues like payroll and withholding. Another idea is to hire a payroll service that will process your employees’ salary checks, calculate withholding and remit your payments to the government. Many payroll services today offer extras for your employees, such as direct deposit.

More information on payroll taxes can be found online at the website of the IRS, www.irs.gov, in Publication 15, and at aggregate websites such as TaxSites.com.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

I often consult with would-be business owners looking for advice on taxes, funding and setting up their accounting processes.

What many of them don’t know is that they should start out with a business plan, particularly if they will be seeking outside funding in the form of loans or investments.

The business plan does not have to be extensive or lengthy. It can start with a two- or three-page executive summary and run no more than 10 or 12 pages total.

It should set out the company’s objectives and what kind of business it is up front. It should also state explicitly how much money the company will need, over what period of time and how the funds will be used. Don’t pull a number out of thin air: Do some research to figure out what kind of startup capital you’ll need – and then double it to cover all the unforeseen circumstances that inevitably occur during startup.

Keep your writing simple and avoid vague or unsubstantiated statements in your business plan. You can’t assert, for example, that “revenues will double” during your first year of operations without backing up that assertion with reasonable projections.

Include a section on your competition, market research into your industry and product or service and solid financial documents proving your company has a good shot at achieving return on investment within the period of time you’ve specified.

An accountant who specializes in small business – like me – can help you prepare the financial statements and review your business plan before you take it to investors or lenders.

You can also take a business plan workshop at your local Small Business Development Center, http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html, SCORE office, http://www.score.org/ or university entrepreneurship seminar.

Find additional resources at the library, bookstore or online, including step-by-step books on how to plan a business and sample business plans for various industries.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

Many potential business clients have asked me about entity selection. I hope the following is helpful:

The first major decision facing entrepreneurs is what kind of legal entity to establish for their businesses. That decision is complicated matter with profound tax consequences, so make sure you talk to a professional (hopefully our firm) about your choices.

There are multiple business structures, each with their own pros and cons. For instance, entrepreneurs who incorporate get the prestige factor of having an “Inc.” after their business name, and they enjoy limited protection from personal liability for their companies.

However, but the annual expenses and paperwork required for a corporation makes it too expensive and time-consuming for some small companies. Here are some common business entities:

Sole Proprietorships and General Partnerships: These are the simplest and least-costly business entities. Many home-based and micro-business owners operate as sole proprietorships. Income generated by these entities is “passed through” to the owners and reported as income on their personal tax returns, so the business itself pays no federal income tax. The downside to these forms of doing business is that the owners do not get any personal protection from liability if their business is sued.

Limited Liability Companies: This is a relatively new legal entity that offers some liability protection for the business owner but also operates on a pass-through basis, saving the owner from paying both business and personal income taxes.

S-Corporations: These corporations operate for tax purposes identically to pass-through entities such as general partnerships. S-Corporations are not subject to federal corporate income tax, though there may be state tax on their income. S-corporations are limited in their number of shareholders and are allowed to have only a single class of stock. If formed and operating correctly, they do offer liability protection for owners.

C-corporations: Companies with large numbers of shareholders and different classes of stock typically incorporate as C-Corporations. Unlike S-Corporations, the C-Corp is subject to tax on its income when earned, plus its shareholders are taxed on the corporate income when it is distributed to them.

Talk to an me about your business before you decide which business entity to operate under. There’s no “right answer” for everyone when it comes to forming a business entity.

Jonathan Medows, CPA

MEDOWS CPA, PLLC

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com

Jonathan has been featured/quoted in the following articles:

Businessweek:
http://www.businessweek.com/smallbiz/content/may2009/sb2009057_907024.htm

The Freestyle Entrepreneur:
http://www.thefreestyleentrepreneur.com/feature/avoiding-the-taxman/

Web CPA:
http://www.webcpa.com/news/Jonathan-Medows-50433-1.html

Asbury Park Press:
http://blogs.app.com/inthemoney/2009/05/27/time-short-for-taxpayers-seeking-amnesty/

Jonathan Medows, CPA

MEDOWS CPA, PLLC

About MEDOWS CPA, PLLC: We are a boutique CPA firm located in New York City  (Manhattan), dedicated to helping small business owners and individuals.  In addition, we also provide CPA services to people outside of the state and country.

http://www.medowscpa.com

http://taxblog.medowscpa.com

info@medowscpa.com