Small Business Owners: Keep Track of Financials All Year Long

November 06, 2012

Owners of small businesses typically have numerous issues and responsibilities monopolizing their time. As a result, particularly for those without a background or expertise in accounting or tax law, it can be difficult to ensure the financial structure of the business is organized in the most advantageous fashion. In addition to the tips set forth below, in many cases, it may be wise to consult with an attorney with proficiency in financial legal issues to protect the financial security of the small business.

Small business owners often forget to reconsider the business structure as the business matures. The business structure is one of the first choices a future business owner must make when establishing the business. The entity appropriate for the business may change over the years, though, depending on the financial success of the organization. For instance, as the business becomes more profitable, it may be wise to change the structure to protect the owner from financial risks and improve the tax implications.

Additionally, while it can be easy to get caught up in the day-to-day financial health of the business, this focus is often to the detriment of the business owner's personal financial future security. It is prudent for all small business owners to establish a plan for retirement. There are many options when it comes to retirement plans, including:
- Simplified employee pension (SEP)
- Individual retirement account (IRA)
- Keogh pension plan

Another wise step for any small business owner is to keep track of the business' financials, including expenses and revenue, consistently throughout the year. Small business owners are entitled to a variety of tax deductions based on the business expenses during the year. By keeping records of these expenses throughout the year, it will not only ensure the information is accurate, but will also allow for a less stressful process once tax season rolls around.

Plan Ahead for Tax Payments

To ensure the business is paying the appropriate amount in taxes, small business owners should periodically evaluate the estimated tax payments for the year. By doing so, they can ensure the business is not charged a penalty for underpaying. Conversely, if the business is overpaying, the money being overpaid could be better spent by the business.

As noted previously, small business owners should keep accurate records of expenses, to ensure proper deductions are taken on their taxes. One common deduction for businesses is write-offs for equipment purchases. Currently, certain purchases qualify for a 50 percent depreciation deduction during the year in which the product was purchased and used.

Protect the Financial Future of Your Small Business

By taking advantage of all the tax benefits available to small businesses and keeping accurate records of financial activity throughout the year, your small business will be able to thrive financially. If you are uncertain about the best course for your business or how to maximize the business' financial success, discuss your options with an experienced business law attorney.

Article provided by Schifanelli & Associates, LLC
Visit us at www.marcschifanelli.com