Money matters: how to manage your business finances and taxes
When it comes to running your small business, how you manage your finances is very important. Well-managed finances means better control over your money as well as less hassle when it comes to taxes.
If you are unsure of where to start, these are a few ways you can manage your business finance and taxes:
Hire an accountant.
A good accountant can help you wade through confusing tax and financial matters. By doing research, asking for referrals, and conducting interviews, you can find a good accountant who will become invaluable to your business. Find an accountant familiar with the circumstances of your business; for example, if you have a business conducted primarily online, your accountant should be internet-savvy.
You can find a good accountant for managing your taxes and accounting in a number of ways. One is to ask for referrals. Business associates, friends, and referral services that can be found on the internet can be very helpful in finding a good accountant.
Incorporating a business is something any business can do, regardless of its size or number of employees. Incorporating allows business owners to separate their personal identity and financial assets from that of their business. One of the biggest advantages of incorporating involves tax breaks, which is a main reason many business owners decide to incorporate. Such tax breaks include income shifting, small business tax deduction, and fringe benefits. Discuss your options with your accountant or tax specialist.
Use a budgeting software for businesses
One of the most effective ways to track and manage your finances is through software. With charts, spreadsheets, bill pay reminders, and other handy features, money management software helps take the hassle out of budgeting and finances for many people and can help alleviate some of the apprehension that comes along with running a small or home-based business.
There are a number of different types of budgeting software available today. Some of the most popular include Quicken and Microsoft Money. `
Know tax laws and requirements
In order to properly manage your taxes for your small business, you will need to obtain from the IRS a federal Tax Identification Number, which you can apply for on the IRS' website. As far as taxes go, to give you a general idea, most likely you can expect the following:
- Federal, state and local income taxes on your earnings from your business
- Self-employment taxes (roughly 15.3 percent) on everything you've earned from over $400. These are paid quarterly.
- You will also need to file Schedule C form (income or loss from a trade or business) with your Form 1040 each year you have your business
Home and small business taxes can be complicated, so it's best to ask for advice from your accountant in order to properly file your taxes.
Keep track of your records
One of the most important things you will need to do for your home business is keep very detailed financial records. You should save all receipts for anything business-related, invoices, order forms, and anything else that may have to do with expenses for your business. Not only will this help you to keep track of your ingoing and outgoing expenses, but if you are audited, you will need all this information as well.
These are a few ways you can manage your business finances.