Checklist for Starting a Business – per IRS website changed a little

1. What is your plan – have one

Business plan/model

How do you want to take money from this business

Funding 2. When ready…apply for an EIN (Employer Identification Number) and state registrations

Once you have the business plan in place and ready to execute – apply online with Form SS-4

This filing can set off filing requirements so don’t file until you are ready 3. Select a business structure – use a lawyer and a CPA to pick the correct one

Sole Proprietorship (Schedule C on your personal Form 1040) – SE taxes OUCH!

Partnership – for 2 or more people (Form 1065) – partners receive guaranteed payments, not W-2 wages, SE taxes OUCH!

Corporations – double taxation (Form 1120)

S Corporation – favored, restrictions include one class of stock, only 100 shareholders, corporations, partnerships and nonresident aliens cannot be shareholders – tax free distributions when there is basis (no double taxation), (Form 1120S) individual shareholders pay the tax via passthrough

LLC – very common, needs to elect classification on Form 8332 (sole proprietor, S or C corp, or partnership)

4. Choose either a calendar year or fiscal tax year

Short tax year

Individuals are calendar years 5. Determine your accounting method

Cash method – report income/deduct expense when received or actually paid

Accrual method – report income/deduct expense when earned or incurred – regardless of when it is received or actually paid

6. Know your tax deadlines and don’t miss them

3/15 tax return due for corporations

4/15 tax return due for partnerships and personal returns

Extensions give you 6 more months to FILE – never an extension to pay what was due

Estimated taxes are: i. 4/15, 6/15, 9/15 and 12/15 for businesses

ii. 4/15, 6/15, 9/15 and 1/15/XX for individuals

File returns TIMELY to “start the clock” – statute of limitations is 3 years and forever for fraud

7. Employees or independent contractors

Understand the cost of employees – it costs more than their hourly rate or salary i. ER has to match the SS and Medicare portion of their wages and is only the

fiduciary to submit the payroll taxes TIMELY to the IRS and State ii. Quarterly/Yearly the ER has to pay unemployment taxes on their employee’s –

high turnover increases this cost iii. Will you be required to maintain some health insurance for your employees? iv. Independent contractors are more favorable, but they can’t solely work for you

– read Publication 1779 from the IRS 1. Behavioral Control – who tells you how to do it and trains you?

2. Financial Control – are all costs reimbursed? Do you incur a profit or loss?

3. Relationship to the Parties – employee benefits (insurance, PTO) v. Have a written contract

vi. The IRS wants you to be an employee because it means more revenue for them 8. GOOD RECORD KEEPING – it is ALL right here…success or hardship

Pick an accounting solution/software (Quickbooks/Peachtree…you get what you pay for) i. It needs to be reliable

ii. It needs to be available if other people need to access it iii. It needs to do all the basic accounting functions (debits=credits, Balance Sheet is

perpetual) iv. It needs to be backed up in case of electronic failure or malfunction so it can be

restored v. It needs to be safeguarded

vi. NOT doing this is risky and costs more money and headache in the long run

RECONCILE!!

28 -30% of businesses declaring bankruptcy cite problems with their financials as their main reason/cause for filing – don’t let that happen to you

Keep copies of your expenses – the burden of proof falls on the taxpayer to substantiate their claims on their tax returns. KEEP YOUR RECORDS

9. FRAUD – things to look out for:

Desperate times call for desperate measures – even close friends and people you have known

People with opportunity and they justify their reason – PREVENT IT! i. HOW – never give one person all of the power

ii. If you have a bookkeeper, look over their shoulder or have someone else do it iii. The best thing you can do is have someone else reconcile the books/bank

statements if you don’t do it yourself. This one simple action let’s that person know you will see everything. Look deeper into things that look out of place.

iv. Fraudulent vendors – almost the same name, common address as person committing the fraud

v. Sign all checks yourself – a hassle but very effective vi. Have a relationship at your bank so someone else is looking out for you

10. VIRTUAL ASSISTANCE

Logmein.com, gotomypc.com – both are great tools to get the assistance you need