Small Business Responsibilities
- Choosing a Business Structure
- Meet with an attorney and CPA to set up the structure that best suits your legal and financial needs
- Sole Proprietor
- State formed
- LLC (single member or multi-member)
- C Corporation
- Partnership (two or more partners)
- Taxation choices
- LLC = default taxed as a Sole Proprietor or Partnership unless election made to be taxed differently
- S Corp Election = F1120S pass through taxed on shareholder’s return
- Partnership = F1065 pass through taxed on partner’s return
- C Corporation = F1120 and pays tax
- Applying for an EIN and filing tax returns according to the business structure reported on the EIN application or IRS election forms. KEEP the IRS SS4 letter or S Corp Election approval letter in your business records!
- Setting up Books and Records
- Why?
- https://www.irs.gov/pub/irs-pdf/p583.pdf
- Monitor the progress of your business
- Use to file correct and accurate tax returns
- Substantiation for your income and deductions with supporting documents
- Prepare financials used to obtain financing to grow your business
- How?
- http://jkwcpa.com/images/JKWCPA-Accounting-101-for-Small-Businesses-eGuide.pdf
- Contribute assets (cash and/or tangible personal property) and record the owner’s equity with the capital investment
- Record all invoiced sales and receipts:
- IRS Form 1099s ~ only report amounts you received over $600 if filed for a sole proprietor, LLC not taxed as an S Corp, and partnership.
- Bank deposits
- Petty Cash
- Credit Card Receipts reports ~ Form 1099K is only received if charges are over a merchant vendor’s threshold.
- Billing company reports
- Record all Expenses:
- Invoiced Payment Receipts
- Canceled checks
- Credit Card Sales Slips
- Reconcile all transaction accounts for correct recording of assets, liability, income, and expenses:
- Reconciled Petty Cash
- Reconciled Bank Statements
- Reconciled Credit Card Statements
- Loan Statements
- Billing reports
- IRS form 1099s
- Payroll reports: Form 940, Form 941, Form W-2/W-3, TWC
- What happens?
- If I do not file proper formation documents?
- Business termination
- Penalties assessed
- Excess taxes
- If I do not keep proper books & records?
- Understated/Overstated Income/expenses
- Excess taxes
- Penalties & Interest assessed
- If excess understated income and/or overstated expenses could face Fraud charges and prosecution: Remember Al Capone!
- If I do not file and pay the proper tax forms?
- Penalties & Interest assessed
- Business termination
- If I do not file proper formation documents?
- Why?
- Meet with an attorney and CPA to set up the structure that best suits your legal and financial needs
Sales tax and payroll taxes are a fiduciary responsibility that if not remitted to the taxing authority could be ruled as theft.