Frequently Asked Questions
What are the different types of business ownership & which is best for my individual situation?
There are three types of business ownership, Sole Proprietorship, LLC or Partnership, and Corporation.
Sole Proprietorship is best if you want to get into business right away, and you are not worried about being sued, or your business continuing on after you die.
LLC is best if you plan to invest in real estate, if you have partners, or if you want to protect yourself from being sued but don't want the hassle of having yearly corporate meetings and other paperwork.
A corporation is best if you are worried about being sued, you want your business to last forever, and you want to make your own money by selling shares of stock.
What is the best method for business record keeping?
The best method is one you can stick to. Because any method is good when you are not busy, But problems can occur when you actually start making money.
Then the stakes are higher due to the fact that you are busier, which means you may not have time to review things and write stuff down every night.
You may be also dealing with larger amounts of money. Which means the risk and consequences of being audited by the IRS are greater.
In other words, your record keeping system will be tested because you probably won't be able to remember everything you are doing.
This is an area where you will probably be better off talking to us or another expert about it.
We can customize a system just for you for FREE with AAIME membership.
How can I get Uncle Sam to help pay for my business start-up expenses (for wage earners)?
There are two ways. One is for
• Employed people who don't get a tax refund, or their tax refund is smaller than the Federal tax withheld (Box #2 on your yearly W-2 form).
• People who are self-employed.
If you are one of these, you should start your small business immediately (which means start claiming your business income and expenses on your personal taxes- US Form 1040.) Because business owners get to claim many more deductions on their taxes than nonbusiness owners.
Deductions such as car expenses; and in some cases home expenses like rent, lights, gas, water, Internet, or property taxes and depreciation if you own your home.
The second way is for people who are unemployed. If you are not working you need to start a C corporation and run your business with the corporation. Because then whenever you take a loss it can stay in the corporation for up to 20 years and then go against a future profit. Offsetting profits with losses means you don't have to pay taxes. Thanks Uncle Sam!
How to let your business bank statement help do your bookkeeping
Start a business bank account and put all of your income especially the cash in it. Then get checks and a debit card and pay yourself with cash, debit card, or ATM withdrawals.
Pay bills with checks. Buy stuff for your business with the debit card or checks. If you must pay cash for a purchase, get a notebook and write all cash purchases in it. The date, amount, what the cash bought and who the cash went to. Why? Because you won't remember!
Keep all business related receipts! If your business needs money from you, write a check from your personal bank account and write "Loan" on the check memo. Make sure to download all your personal and business bank statements to your personal computer and back them up.
Bring or email your bank statements to us or your other accountant at tax time and we will have most everything we need. We can ask for your receipts, or your cash journal to make sure you get all the deductions you are entitled to.
What ways are there for me to invest in my new start up in order to qualify for tax advantages?