Be sure you are up for the task
Are you disciplined enough to write down and file details describing money that goes out and comes in? Can you force yourself to keep receipts and mileage records even though it seems like an unnecessary hassle? Can you pay for a freelance assistant or staffer to take care of the filing and computer inputting for you -- so you can focus on the ‘big picture’ view of your business finances? Or are you willing to deal with the recordkeeping yourself?
If all this sounds like just too much trouble, maybe you’d better stick with a job where taxes are already taken out of your paycheck and tax filing is a comparative no-brainer. Because if you want to own a small business, you have to produce detailed financial records. The summaries from these details will be written into your tax returns. Corresponding paper trails will be stored for years in your attic or garage. And, of course, your financial numbers are your constant guide for making the decisions that propel your business forward.
OK, so you’re serious about starting in business... now for what you need to do to be ready for business taxes
Don’t make the mistake of naively jumping into business without laying the preparation for your tax responsibilities. The IRS and other government agencies don’t take ignorance of their rules and deadlines as an excuse. So head off potential problems from the start.
Line up a tax professional you feel comfortable working with
I know many of you are the “I’ll just do everything myself” breed of entrepreneur. Or, you’d like to use a tax professional, but you’re afraid you can’t afford one yet.
That’s exactly how I was. During the first years of my first business, I must have heard “every business owner needs an accountant” at least a hundred times. I always turned a deaf ear. I figured if I wasn’t making much money yet, I certainly couldn’t afford professional help. Plus I thought only big companies and wealthy individuals needed accountants.
After several years, I finally went to an accountant to have him do my tax returns, and discovered what I’d heard was really true -- “every business owner does need an accountant!”
Once I had an accountant, I no longer had to spend frustrating hours struggling to figure out IRS publications and forms. Plus, my tax pro saved me thousands of dollars in taxes from deductions I’d never heard about. -- Francie
So from the very start, plan that an accountant is one of your most necessary business expenses. Find a way to come up with the few hundred dollars your initial accountant meeting will cost you. Use this meeting to get your business started on all the right feet.
What to ask your accountant’s office before your first meeting
Get the sticker shock out of the way before the meter starts running. Ask what’s likely to be their office’s annual fee for preparing your tax returns and meeting with you a couple of times a year.
If your company might be an LLC or corporation, be sure to get a clear understanding of the extra accounting costs that will be involved, including (for corporations) the processing cost of paying yourself as an employee of the corporation.
Don’t have an accountant? We share ways to find one:
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