As a business owner, you know how much goes into running a successful business. Developing and maintaining a relevant product or service of quality, hiring the right team members, and growing your brand are a few of many considerations. However, nothing is more vital to the life of a business than sound financial management. Well-handled business finances can pave the way for long-term flourishing. At the same time, ongoing financial problems can severely hinder your growth potential or even lead to the demise of your operation.
Below, Red Beach Advisors presents some practical information and advice for staying on top of your small business expenses.
Form the Best Legal Structure
First and foremost, operating under the right business structure is critical because it will determine your business’s relationship to local, state, and federal laws and taxes. Most small businesses benefit the most from forming an LLC, as it provides tax advantages and helps protect you from personal liability regarding business debts (as long as you can prove that you have conducted business in a legal, ethical, and responsible manner).
Learning how to form an LLC isn’t difficult, but it does require you to understand state regulations. If you want to ensure the process is handled correctly, hire a formation service, which is more cost-effective than working with an attorney. This way, you can allow someone else to handle this paperwork while you get back to the task of managing your business.
Know What You Can Deduct
Next, understand what business expenses you can deduct from your taxes, as this is where many business owners get confused. Here are some examples of costs that the IRS typically deems tax-deductible:
- Rented space
- Office supplies
- Employee wages paid
- Employee benefits paid
- Necessary insurance expenses
- Interest paid on loans
- Legal fees
- Payroll taxes
- Tax preparation and other accounting expenses
- Marketing and advertising
There may be other costs in your business you can deduct, but these are some of the most common ones to be aware of. If you have questions about what you can and cannot deduct, it might be helpful to get in touch with an accountant or a tax professional. That way, you won’t make any mistakes that will get you in trouble with the IRS.
Understanding deductible expenses is one thing; keeping track of them is another. Since mixing personal and business money is a common mistake for entrepreneurs that can lead to poor financial management, ensure you have a separate bank account for your business expenses.
Keep your paper receipts and invoices in a file, and keep your online transactional records in a digital folder. Each month (or at least quarterly), set aside time to organize these systems, as it’s easy to miss or duplicate something. And if you have overlap between your business and personal expenses, such as mileage or Wi-Fi usage, record it each day on an app or notepad.
Keep Up with Your Taxes
Too many entrepreneurs and small business owners lose track of the taxes they owe. A lot of the time, it’s an honest mistake, but that won’t necessarily keep you out of trouble. Since you have plenty of other things to deal with as a business owner, make sure you have a qualified accountant on your team, preferably one who specializes in small business taxes. That way, you can rest assured knowing all your federal income, social security, Medicare, state payroll, and other taxes are covered. Of course, if you prefer to handle taxes yourself, there are quite a few software packages out there that can aid you in this task.
Don’t fall into the financial pitfalls that so many other businesses do. Make sure you’ve established the right kind of legal structure for your business. Learn about what expenses you can deduct, and keep track of those expenses. Stay on top of the taxes you owe each year, even if it means hiring a professional to handle them for you. Implementing these tips will help you keep your business in a position for healthy long-term growth.
Red Beach Advisors can help your business solve challenges, increase efficiency, and help pay the groundwork for global transformation. Get in touch today to see how we can assist you at www.redbeachadvisors.com or contact us at email@example.com.