We began working with smaller companies almost 40 years ago. But, back then, our efforts were exclusively aimed at developing new products these companies could manufacture, market, and sell. (We also worked with much larger firms, developing new products, processes and manufacturing schema.) But, many of our smaller clients ran into problems. Not with the technical matters, but with their management and financial affairs. So, we decided to begin working with these firms to help shore up their capabilities in these areas so their great products wouldn’t wither and die because the other parts of the company were sick.
Obviously, if you are just starting out, you need to determine the legal form under which you want to operate. Should you remain a sole proprietor or partnership? Or become incorporated/form an LLC? Each has their own tax situation- some pay corporate taxes (and then you must pay taxes on the money you take out of the company), others pass along profits to you directly, and still others let you allocate profits and losses among partners. Choosing the right entity is a critical consideration.
It also means that you need to worry about income taxes, payroll taxes, sales taxes, license/registration fees, issuance of 1099’s… and that’s just for starters. Some require monthly filing, others quarterly, still others only annual submissions. Failing to file can shut your company down- and/or subject you to tremendous fines and penalties (which are not deductible, by the way).
You can’t meld your personal and corporate finances, either. That is a short-cut to tax hell. Your corporation can be dissolved, you can be sued by customers/clients (since you are not separating you from your company), among other issues.
And, while you can deduct a variety of expenses, you need to keep “good” corporate records. Your monthly credit card bill does not constitute “good” corporate records- even if you have a credit card just for your business. You need to have expense reports and an accounting system. Don’t assume that because everyone uses QuickBooks that it will work for you. It might- but if you don’t have inventory, you may find other programs easier— much easier— to use. And, if you bill by the hour, you need an outstanding system to track what you do and when you do it- so that you can recover all your billable hours.
So, that’s the kinds of things we help you decide and do. We can advise you, we can do the bookkeeping for you, we can do the tax filings and tracking for you, we can even do the billing for you. We do as much- or as little- as you want. And, we also are available to teach you how to do it, to be there via eMail or phone call to answer questions, and to serve as mentors to you and your people. You do what you do best- leave the rest to us, so you can focus on your bottom line.
All good points for starting up a business, Roy. I like the fact that you did not berate QuickBooks in your piece. The fastest way my business will not become the business of other entities is demeaning another’s business. Thank you for that. Maybe one day my business will be in the hands of your business. 😉
QuickBooks really makes sense for those who have inventory needs. Or, if they have employees with bookkeeping knowledge (or a bookkeeper or accountant doing the work for them). Otherwise, PeggyLee, it makes those less adept at bookkeeping more likely to throw up their hands and say- “I won’t do it”….and, then, the IRS has a field day.
It’s important to meld the accounting system to the needs of the user.
Thanks for your comment.
Outsource the accounting work, that’s what I say too!
Eleni Poulakou recently posted..Writer’s Blog: Help Me Choose My Logo
We love hearing that, Eleni…
But, seriously, we each need to do what we do best to grow our business’ bottom line!
Thanks for your comment.
There are a lot – a myriad – of startups gurus in the web today, I check on what they say once in a while and none of them even mention these things. You have to warn every one – or they might end up taking that road to hell you mention (Also, it makes you wonder what do these gurus really do, if they are not aware of the basics),
Gustavo recently posted..What do the People in your dreams mean? (Part II)
I always worry when folks call someone a “guru”. We hope we are the experts needed, the ones who can explain things in plain English (or French or German or Hebrew), who can help augment the bottom lines, keep folks on the path THEY chose, guide them to find the path they want… but, then we see these “gurus” and panic. We don’t want to be like them…
Roy
Good tips Roy. I’m with Eleni, outsource the bookkeeping/accounting. I’m terrible at it.
Julia Neiman recently posted..Build Your Business Around Pain Relief: Solutions Sell
It’s fantastic that you know what you do well, delegate what you don’t (or don’t like) so your business will thrive, Julia.
Good information for starting a business with emphasis on financial planning and records. Many people do not give financial planning enough time when they start a business. They are thinking about making alot of money but they do not know what to do when the money starts coming in…too bad it is so complicated.
Janette Fuller recently posted..Children’s Book Review: Dream Something Big; The Story of the Watts Towers
Forearmed is forewarned is the rule when it comes to starting a company, Janette.
Thanks for the visit AND the comment.
Roy
Wow! So *this* is part of what you do! =) I admire you all the more, Roy. In fact, I was just doing research on accounting for a website and I couldn’t believe all that’s involved with finances for both freelancers and business of all sizes. And I especially identify with the need to better log my hours. Sheesh! Gotta get organized. =P
Samantha Bangayan recently posted..Making the Best of a Bad Situation
Thanks for the approbation, Samantha!
Yes, this is among the services we provide. And, like we would tell our other contacts, find the simplest system that provides you with the data you need!
Roy