Thursday, July 29, 2010

Dealing with Taxes as a business owner

We have seen far too many people losing money and suffering sleepless nights over tax issues lately. I don’t prepare income taxes myself, but we do help our clients with sales and payroll taxes and we make sure their financial information is complete and accurate for their income tax preparers. Here are a few thoughts about taxes in general.

The right to collect taxes, whether sales & use, payroll or income, is dictated by law so if you don’t pay the amount of taxes you owe, you are breaking the law.

Every business owner needs to understand what taxes they owe and when. Find a professional you like and trust and have them teach you about your taxes. You don’t have to prepare all the paperwork if you don’t want to, but you do need to know what is due and when. You have to work with your service professionals to stay within the law.

If you run into cash flow problems and you can’t meet a tax deadline, don’t bury your head in the sand! File the proper forms or returns and then contact the tax authorities and arrange a payment schedule. The IRS and state authorities want to collect their money and they will work with you. Communication will go a long way to avoid levies and garnishments and fear. Avoidance leads to penalties and interest which grow at staggering rates. We have seen cases where the interest and penalties far exceed the actual taxes owed by the time the business owner sat down with the tax agency.

Owners also need to understand that money withheld from employees’ paycheck is still technically the employees’ money and not sending it to the proper agency is considered stealing. The IRS can come after a business owner personally to collect employee portion of payroll taxes even if the business is incorporated or an LLC.

Learn about your tax responsibilities and work with your service professional to see that you file and pay on time. It can save you and your business.

Monday, July 19, 2010

Learning how to be a business owner

I was reading the UW-Madison Business Alumni Magazine Update for Spring/Summer and I was excited to see the educational opportunities available for entrepreneurs. The fourth annual Wisconsin Entrepreneurial Boot camp was held at the School of Business. This event brings together graduate students from engineering, law and sciences to learn more about running a business by attending interactive sessions led by Wisconsin School of business faculty and real-world professionals. The university also offers two formal certificates in entrepreneurship-one for undergraduates and one for graduate students. The School of Business hopes to assist students in engineering, liberal arts, sciences, law and other majors learn the fundamentals necessary to run a successful business.

This all shows that having a great product or service isn’t enough to have a successful business. Business owners need to be able to read their financial statements and understand cash flow. They need to know what the trends are in their industry and in their market. They need to focus less on minimizing income taxes and more on building adequate equity and capital for their company. The economic downturn showed that businesses which had a plan and had proactive management and had adequate capitalization were able to weather the storm with much less pain than those companies without these essentials.

For those of you starting out or those who survive the latest recession, now is the time to get your business in good shape. Write a business plan, figure out what business knowledge or skills you lack and do something about it. There are classes available at local universities and plenty of books available, such as the E-Myth series. There are software programs available to help you write a business plan, or you can work with the many consultants out there who provide this service.

Entrepreneurs aren’t afraid of hard work so now is the time to take charge.

Friday, July 9, 2010

Is There A Wrong Time In Your Life To Start A Business?

So you have an idea and you have the entrepreneurial bug.The question arises: is this a good time in your life to start a business? In fact, is there a right time and a wrong time to start a business? This is a question we mull over ourselves as we work with various clients. Ours is not the business to deflate people's dreams. However, inherent in planning for success is pointing out potential weaknesses in the plan and developing a contingency plan.

So what is our opinion, you ask?

Whether you are male or female, I wouldn't plan to start a new business if you are in the process of getting married. The same holds true if you are thinking about having a baby within the next 5 years. Both of these events are life changing events. Until you are in the middle of them, you cannot imagine how they will affect your attitude, your energy, your ambitions, your time, and your resources. They are some of the most joyful, yet stressful moments in life. Businesses that start up in the middle of these phases of life often fail.

Go ahead and work on your plan, and do some contingency planning regarding your time and resources, for example, but if at all possible, give yourself time to get through these phases and adjust to your new life before throwing the stress of starting a business into the mix. You will likely have better success in all areas of your life by following this advice.

What is your opinion?