Business Type – Overview 101
There is no one legal structure that’s best for all small businesses. Whether you are better off beginning as a sole proprietor or choosing one of the more complicated organizational structures such as partnership, corporation or limited liability company depends on the business size, profitability of your business, how many people will own it...
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Sole Proprietorship, #102
Summary of Tax Brief
If you are starting and running a business by yourself, you will be a sole proprietor unless you form a corporation or an LLC. A majority of the small businesses in the United States are operated as sole proprietorships. This form of business is usually chosen by the one-person business in which the owner and worker are the same person, although sole proprietorships can have employees. The primary advantage is the…
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Business – Partnerships #103
Small business owners, start-ups and entrepreneurs often have trouble getting a great idea off the ground, or taking their initial success to the next level. So, in an effort to gain a boost, a competitive...
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Corporation #104
One of the main advantages of incorporating is that the owner’s personal assets are protected from creditors of the corporation because the corporation is considered a separate legal entity. Although a corporation usually has more than one owner, it is possible for only one individual to create and own 100 percent of a corporation...
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S Corporation, #105
Summary
An S Corporation is an ordinary business corporation that has elected to be taxed under Subchapter C of the Internal Revenue Code. It is not taxed on its earnings as a corporation. Instead, its earnings are passed through to its shareholders for tax purposes. Why S Corporations Exist
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Keeping Records, #106
Summary
While it’s important to understand the tax implications of business expenses, as an effective tax strategist and a new business owner (or not so new), you also need to know that it is as important to keep record of your business activities. The organization of tax records is very important. It may mean either the success or failure of your business. A well-structured accounting system and a systematic way of recording receipts and…
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Employees vs. Independent Contractors, #107
Summary of Tax Brief
It is critical that you correctly determine whether the individuals providing services to your business are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. If you incorrectly classify an employee as an independent contractor, you…
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Business Profitability Formula, #108
Summary
Financial formulas or ratios are a valuable and easy way to interpret the numbers found in business profitability statements. Such analysis can help to answer critical questions such as whether the business is carrying excess debt or inventory, whether customers are paying according to terms, whether the operating expenses are too high and whether the company assets are being used properly to generate income. Generally, financial ratios are categorized into five types: liquidity,…
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Closing a Business, #109
While nothing in life is certain “but death and taxes,” the same holds true for a business. There are still tax implications to consider when a business ceases operations. And the requirements differ depending whether a businesses closes, is sold or goes bankrupt. In addition to taxes, the company’s retirement plans must be dealt with.
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Business Type – Online Auctions #110
If you are an online auction seller, you may face certain tax responsibilities, including being subject to liabilities for income tax, self-employment tax, employment tax, or excise tax. The sales you generate may result in capital gains, nondeductible personal losses, or you...
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Business Type – Business Valuations #111
The most basic rule of thumb when it comes to establishing the value of your business, should you choose to sell it, is the concept of fair market value: in essence, your business is worth whatever a buyer is willing to pay for it...
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Business Type – Personal Holding Company #112
A personal holding company is a corporation with a limited number of shareholders that derives a large portion of its income passively, from such sources as interest, dividends, rent, royalties and capital gains. Personal holding companies are taxed at a higher...
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Business – Tax Dispute Options #113
The IRS offers a number of options to taxpayers that do not agree with its tax judgments. The conflict resolution methods are often impartial and do not necessarily require an appearance in court. In fact, the IRS offers a number dispute resolution options for small...
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Business – Cash vs. Accrual Accounting #114
Each taxpayer must figure taxable income based on an annual accounting period called a tax year. The calendar year is the most commonly used tax year. Other possible tax years are a fiscal year and a short tax year. Each taxpayer must also use a consistent...
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Business – Goodwill and Covenants #115
“Goodwill” is a way to account for intangible assets, such as in the sale or purchase of a business. Such costs are written-off over a period of time through amortization. Goodwill is one of many Section 197 Intangibles...
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Business – Foreign Worker Classification # 116
The IRS classifies non-U.S. citizens as “aliens.” This tax brief helps employers how to determine foreign worker classification and details what the IRS requires of those that employ aliens...
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Business – Audit Triggers #118
It’s no big secret that the IRS is ratcheting up its enforcement efforts these days. This is particularly the case in light of a recent report by the Government Accountability Office that claims more...
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Business – Alternative Financing #119
In times of economic trouble, small businesses often find capital harder to come by as lending is scarce, borrowing rates are high and financing is all-around less available. But business owners in...
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2009 Stimulus Primer for Small Businesses #121
The American Recovery and Reinvestment Act (ARRA), enacted in February of 2009, created, extended or expanded a variety of business tax deductions and credits. Because some of these changes (such as the bonus depreciation and increased Section 179 deduction) are only available this year, eligible businesses only have a few months to take action and save on their taxes...
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