When the time comes to invest back into your business, one the biggest steps you will take as a small business is hiring your first employee. Where many small business owners’ lose sight of this important consideration is the true value and long-term value this course of action can have on their business.
Yes, hiring your first employee will increase your weekly or monthly cost because now you have more responsibilities and commitments to your employee. You are now on the hook to pay another person a salary weekly, bi-weekly or monthly despite the success of the business. Hiring support opens doors and many new opportunities for growth.
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The day to day responsibilities of entrepreneurship can leave you guessing when it comes to what you need for tax season. Tax time is never that much fun so, this year, make sure you don’t leave out any crucial information.
You can start now with a simple checklist: 1. File the correct tax form Sole proprietors and single-member LLCs report business income and expenses on Schedule C that is attached to your Form 1040 Individual Tax Return. If your business is a partnership or multi-member LLC, you’ll be required to report business income and expenses on Form 1065. S corporations report business activity on Form 1120-S. Then the partnership, LLC or S corporation issues a Schedule K-1 to its shareholders, reporting their share of the entity’s income, deductions, and credits. 2. Provide business information When preparing to file your annual tax return, you will need to provide some basic information, including your business legal name, social security number, and address. If you have filed for an Employer Identification Number (EIN) with the IRS for your business, you will need it as well. If addition, make sure the name on your tax return matches the name on file with the Social Security Administration – otherwise, it can cause a delay with your refund. 3. Get your receipts out of the box Keeping your accounting records in order throughout the year can make it a lot easier to prepare your annual tax return. If you have a professional tax preparer or accountant, one of the first things they will ask you for is your bookkeeping records, such as your journal entries, list of revenue and expenses, bank and or credit card statement, profit and loss statement and balance sheet. 4. Understand the Home Office deduction One very common business deduction for small business owners involves the home office deduction. You may be eligible if you use your home regularly and exclusively for business. You can find the full instructions for Form 8829, Expenses for Business Use of Your Home, for more details on whether you qualify. 5. Be clear on deductions for your business vehicle Another common deduction associated with small business owners is car expenses. It is important that if you drive your own car, you need to keep an accurate log of your mileage for business use. The IRS will not allow a deduction for business use of a vehicle without a record of miles driven for business. Your log may be kept manually or electronically. The IRS Form W-9 is important for small business owners. You will need this whenever you hire an independent contractor for your business. It’s a good idea to have all independent contractors complete this form before you pay them.
As a company you will use the information provided by the independent contractor to prepare the Form 1099-MISC, reporting to the Internal Revenue Service the amount of income that was paid to the independent contractor by your company. The W-9 form also contains boxes to check showing how the contractor’s business is legally organized. This includes sole proprietor, C Corporation, S Corporation, Partnership, or Limited Liability Company. When contractors sign the W-9, they certify under penalty of perjury that they have completed the form correctly. They also certify they are not subject to backup withholding and are a U.S. citizen. The IRS states that anyone that receives payment of $600 or more over the course of a tax year needs to fill out the Form W-9. The best rule in practice is to collect the form anytime you pay someone for anything, even if it’s below the $600 threshold. The Form W-9 does not have to be filed with the IRS. It will be important to maintain the signed form in your files. Completing Form W-9 is pretty straightforward. The contractor should just indicate the business name and their employer identification number (EIN), also known as the tax ID number. When the form is completed, the contractor is certifying to the IRS that the tax ID number being provided is correct and accurate. When running your own business you may have to hire independent contractors and this process requires you to track and maintain files in order to run an effective and compliant business. Make no mistake, your business staff and management team should have a clear understanding of what the W-9 form is and when to use it. 3 Top Benefits to Outsourcing For Small BusinessesWhile you might think that only large and multinational corporations - can benefit from outsourcing, small businesses can potentially realize even bigger outsourcing benefits because of how many new jobs are actually being created within smaller companies. According to the Small Business Administration, companies with less than 500 employees account for almost 65 percent of new private sector employment.
Outsourcing refers to the way in which companies entrust the processes of their business functions to external vendors or small businesses. There are many benefits of outsourcing your business processes.
Building a business includes more than just picking a location, developing a business plan, building a website or picking your social media platform. Some of you may be asking what could be more important. Well, I'm here to tell you that opening a business bank account should be on your top 5 of "things to do" list. Having a business checking account can help you deal with tax, legal and practical issues. Many business owners choose to manage their business and personal finances within the same bank account for the purpose of convenience and but fail to realize the advantages that come with managing a separate business account. A major reason that companies use bank accounts is for internal control. Here are a couple of the control advantages of using bank accounts:
Keep in mind, the Internal Revenue Service (IRS) is really picky about business owners being able to show that their business is really a business and not a hobby. Basically, you have to show a profit on Federal Tax Form Schedule C three years out of every five. Having a separate business bank account established further proves you are a business and not a hobby business. As your business grows, it becomes critical to build a proper legal and financial foundation. Opening a separate bank account is one small step in that direction, and will help keep your accounting records organized.
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AuthorMy mission is to offer the best accounting and operations solutions and tips for entrepreneurs and small to mid-size companies worldwide seeking to close their process gaps with actual solutions. |