Monday, April 19, 2010

Improved Oversight Needed for New Businesses

Calling all you bankers, lawyers, accountants and other service providers who help people start their new businesses, please help us out.

We are finding far too many small businesses that have really created a mess in their first year or two of business because they didn’t understand some of the requirements of the particular business entity that they chose and other aspects of running a business. I am talking about payroll issues and accounting problems primarily.

A Sub-S corporation has different tax and payroll issues than a single member LLC and if an entrepreneur operates all year on their own and only meets with an accountant or tax preparer during tax season, there may be numerous problems with serious consequences including large penalties, fines, and interest which simply don’t need to occur. Many owners don’t understand all the rules surrounding employees and payroll and run into problems with withholdings and taxes and paperwork. Sure, it is ultimately their responsibility to know the rules, but I think we sometimes assume that the new business owner is more tuned in to the financial part of their business than many actually are. So much money and heartache could be saved if we perhaps worked a little harder to make sure that a new business owner has a plan for meeting the required tasks and that we follow up diligently during their first year in business to make sure that they are doing things correctly.

We would love to see some way of catching a business owner as the company is being established and providing a checklist to make sure they are starting strong and correct. It would be great if a personal banker helping a new business open a checking account asked the owner if they had all their employee and accounting issues properly handled. The same holds for attorneys helping set up LLCs and other business entities. So how can we all work together to give these small businesses a fighting chance to succeed?

Your thoughts? Comments?

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