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Tax Compliance For Small Businesses: A Complete Guide

StrategyDriven Managing Your Finances Article | Tax Compliance For Small Businesses: A Complete GuideAs a small business owner, filing taxes for the business can be stressful. One of the things you might notice is that the types of taxes you’ll be filing for the business are different from personal taxes and a little bit more complex. The taxes you’re required to file for your business will depend on the tax laws in your country or region. For instance, you’ll be expected to file income tax, estimated quarterly taxes, and self-employment taxes in some countries.

Additionally, you should hire a professional to guide and help you file taxes for your small business. A professional will also help you understand the kind of taxes you’ll be filing and their implications on your business. Furthermore, failure to file and pay taxes on time can be severely detrimental to your business because you’ll be fined and subject to interest on the amount due. If you have no idea where to start with filing taxes for your small business, here is a complete guide:

1. Understand Your Tax Obligations

As mentioned earlier, there are several types of taxes, and you must understand the ones your business needs to comply with. If you know the tax system well, evaluate and organize all your tax obligations to ascertain you’ll get dividends, if there are any. You’ll also have to ensure you’re up-to-date with changes in tax regulations to ensure compliance.

However, suppose you find the tax system complicated, you can hire a reputable accountant or a tax filing company such as Swyft filings registered agent service to handle the entire process.

Subsequently, you can start by looking into the basic tax forms, which differ depending on the business bracket. When filling out the tax forms, you can decide to consolidate both the business and personal obligations, especially in income tax returns. Another item you might want to consider is creating estimated tax returns where you can specify the amount and the deadline for payments.

In addition, you can check and inquire whether your business has extensions that should be handled within the prescribed time. You can request an extension for the business when there’s a need for extra time to meet legal obligations. Despite being granted an extension, you’ll have to calculate the amount owed in taxes and ascertain it’s paid before the due date.

2. Create A Personalized Tax Calendar

Keeping track of all your business tax obligations can take a toll on you, and an electronic calendar would be helpful. Start by creating a digital calendar detailing the taxes that must be filed, the amount, and deadlines. Another benefit of creating a digital calendar is that it’ll also serve as a reminder. You can also include notes on tax reports and hardcopy documents on the calendar.

Besides, you should ensure you’re using a secure application or software for the calendar. Since you’ll note important business information on the digital calendar, you must ensure it’s safe. Any form of illegal access or breach into the digital calendar can expose crucial business details. Nonetheless, a tax calendar will help you stay organized and have a one-stop shop for all business information.

StrategyDriven Managing Your Finances Article | Tax Compliance For Small Businesses: A Complete Guide3. Consider Tax Deductions

As a business owner, it’s essential to constantly look for ways to save money and boost profits. While it might sound odd, you can save money on tax deductions offered to small businesses. Some of the deductions that might be available to you are business expenses such as payment of salaries, insurance, and start-up expenses. Another area you might consider when claiming a business deduction is a home office deduction if you’re running the business from home.

In addition, you must learn what the laws on tax deductions provide and how they’ll benefit your business. For illustration, regulations such as the Qualified Business Income Tax Deduction give room for up to 20% deductions on the total income of a business. Though you’re entitled to tax deductions for your business, you must be qualified. You can check the tax regulatory bodies for qualifications for tax deductions in small businesses.

Moreover, if you’re wondering what deductions you can claim for your business, start by checking tax regulations. However, if you’ve sought the services of an accountant or a tax agent, they can advise on the tax deductions you can claim.

4. Ensure Accurate Calculation Of Taxes

Your small business must always file accurate taxes. Once you’ve collected all the information on the types of taxes, you’ll be filing and the possible deductions, you can start calculating taxes. When calculating taxes, ensure you comply with the legal structure to avoid issues with the tax regulatory body. In addition, use receipts and invoices to correctly identify income and expenditure in the business.

Once you’ve tallied the total revenue and expenses, you can determine the deductions your business qualifies for. The calculations will help determine how much tax your small business should pay. When done, file the tax forms with the tax regulatory body accompanied by payments of the amounts due. Nevertheless, if the math becomes overwhelming, seek the help of a professional.

5. Make All The Tax Documentation Accessible

Once you’ve gathered all your documents, including receipts, ensure they’re accessible to authorized personnel. The papers are proof of tax compliance and should be accessible to your business partners or anyone else that might need them. While it’s easy to keep a digital record of all documents, hardcopy documents can be saved as a backup. You can keep the documents in a lockable drawer for safety.

Besides, if there’s an issue with the tax process, the documents can be used to countercheck accounting details. Further, you can label the documents using tags to differentiate documents and the consequent return periods.


6. Create A System

Filing business taxes can be tedious, but creating a functional system can make it easy. You can start creating a system by organizing your documentation and taking the time to comprehend your tax obligations. While it might take a lot of time and energy to establish a sustainable approach, the benefits to your business would be tremendous.

Nevertheless, you must ensure your system gets updated whenever your business has new tax obligations. You’ll have to regularly revisit the process to ascertain it’s still meeting the business needs. Eventually, you’ll spend less time and resources on tax compliance for your business.

Conclusion

Ensuring your small business is tax compliant can be complex and stressful. Despite the difficult and tedious process, you must ensure your business files the appropriate tax documents on time to avoid being penalized. You can make the taxation process for your business easy by creating a system that works for you. Feel free to consult a professional if you’re not confident about the taxes you’re supposed to file for your business.

Choosing the Right Bank

StrategyDriven Managing Your Finances Article | Choosing the Right BankChoosing the right bank to help manage your finances can be difficult. With so many local and national bank chains, the options from which to choose can be seemingly endless. However, with just a few simple steps, you can be much closer to choosing the right bank for you.

Step 1: Decide What Account Type(s) You Need

The first thing you should decide is what type of accounts you need. Perhaps you simply need a checking account for depositing your paychecks or a savings account to start building your emergency fund. If this is the case, then you can be sure almost any bank you choose will meet your needs.

However, if you are looking for more advanced options such as credit card lines, personal loans and wealth management, you will find your pool of options begins to get smaller.

Step 2: Find Banks Local to You 

While online banking largely eliminates the need to regularly visit the bank in person, it may still be important to visit the bank directly on certain occasions, and depending on where you are located, certain chains may be more or less available. For example, if located in Massachusetts, Kevin Cohee OneUnited Bank could be a great option, but if you are in North Carolina, Well’s Fargo may be more readily accessible.

It is important to note that it is possible to maintain accounts without a local branch, so if you do not care to have a face-to-face option, then finding local banks may not be a priority for you.


Step 3: Consider the Benefits

Depending on the accounts you choose to open, you may enjoy any number of complimentary benefits. Two of the most popular benefits to look for in choosing a bank are access to a mobile app and not having to pay an annual fee.

Large chains such as PNC or Kevin Cohee OneUnited Bank will offer instant access to all your banking needs, but smaller, local banks may not. In addition, many banks may charge an annual fee to bank with them or may charge a fee for low balances or over-drafting your account. Look for banks that take measures to help you avoid these fees with features such as offering free, customizable account alerts.

At the end of the day, there is no perfect bank, and there is not just one bank that will work for you. So consider these steps to help you make an informed decision, but know that you can always change banks if you find the bank you initially choose ends up not being right for you.

4 Important Factors in Choosing a Revenue-Based Financing Lender

StrategyDriven Managing Your Finances Article | 4 Important Factors in Choosing a Revenue-Based Financing LenderWhen it comes to revenue-based financing, it’s important to do your research. Not all lenders are created equal, and you need to make sure you partner with a reputable company that has your best interests at heart.

Partner mentality, competitive terms, history of investing, and dependable and timely funding are the things you should consider when choosing a lender. Read on to learn more.

Partner Mentality

Once you start a company, you’re going to run into a number of people offering you money — but not all of these people will be able to offer you the support and guidance needed to truly grow. When you’re choosing investors, you don’t want someone who just hands you money and then leaves — you want someone who will act as an active partner in your business.

There are revenue based financing firms that would be more than glad to partner with you to help grow your business. They’re committed to helping you throughout the entire duration of your loan, even after the term sheet has been signed and the transaction has been completed.

Competitive Terms

First-time business owners can run into lenders who want to hand them a term sheet that was drawn up without the borrower’s consultation. While this may seem like an easy and quick way to get money, these deals usually end up having less-than-ideal results for you.

You should only work with an RBF lender who will work with you to come up with the best terms possible for every party involved. Your needs and the lender’s needs should be accounted for, and a good lender will draft a term sheet that reflects this.

History of Investing

As more SaaS companies are established, RBF increasingly becomes more popular. This means you have more lenders to choose from — both good and bad.

Low-quality lenders can quickly ruin your company, so it’s important to do research on a lender before accepting a deal. Check a lender’s portfolio and contact their previous clients to see what their experience was like. If no red flags appear, you can move forward more confidently.

Dependable and Timely Funding

Managing a business is hard enough without factoring in an unreliable vendor. When you mix in chasing down an investor for the capital they promised, it gets even harder.

While it may sound absurd, this is a situation some founders deal with — which is why it’s important to partner with a reliable lender. Choose a firm that has a strong and positive reputation as well as a track record of providing funding without any complex approval processes and delays.

Choosing the Right Partner for Lasting Growth

As an organization that’s heavily dependent on funding, it’s crucial to have the right lender supporting you — not just financially, but holistically. By doing your due diligence and avoiding accepting deals prematurely, you can ensure you partner with a lender who can act as an investor and a mentor during an important phase in your company’s growth.

Should You Apply for an Equipment Financing Loan?

StrategyDriven Managing Your Finances Article | Should You Apply for an Equipment Financing Loan?Can your business benefit from new equipment? Maybe it’s time to apply for an equipment financing loan. Here are some things you should consider first.

What is An Equipment Loan?

An equipment loan is a type of financing in which businesses can purchase new or used equipment. The purchased equipment secures the loan, and the term is typically for 3-5 years. Equipment loans are popular among small businesses because they provide a way to finance needed equipment purchases without having to dip into their working capital or risk their personal finances.

Benefits of Applying for an Equipment Loan

There are several reasons your business might benefit from applying for an equipment loan.  Take a look at some of the most common.

Finance New or Used Equipment

With an equipment loan, your business can finance the purchase of new or used equipment. This can be a great way to upgrade your operations without using your working capital.

Tax-Deductible

The interest on an equipment loan is tax-deductible, which can help reduce your business’s tax burden. In addition, you can write the entire principal amount off as a business expense.

Fixed Interest Rate

Another benefit of an equipment loan is that it typically has a fixed interest rate. This allows you to budget your payments since you’ll know exactly how much to pay each month

Down Payment May Not Be Required

Some equipment loans don’t require a down payment, which can be helpful if you don’t have the cash on hand to make a large purchase.

No Prepayment Penalty

Most equipment financing solutions come with no prepayment penalty, which means if your business can pay off its equipment loan early, you won’t be charged extra. This can save you money in the long run.

Fixed Monthly Payments

Equipment loans have fixed monthly payments, which allow you to budget for your expenses.

Things to Consider Before Applying for an Equipment Loan

Before you apply for an equipment loan, make sure to consider the following.

Purpose of the Loan

The first question you should ask yourself is about the purpose of a loan. Will the equipment purchased with the loan help your business grow? Will it improve your bottom line? If you can’t come up with a legitimate reason fow how your business will benefit from an equipment loan, it may not be the right choice for you.

Can You Afford the Loan?

The next question you need to answer is whether you can afford the loan. An equipment loan is a form of debt, and you need to be sure you can make the payments each month.

Equipment Collateral

You can use the equipment your business purchases as collateral for the loan. If you default on the loan, your lender can seize the equipment. Make sure you’re comfortable with this before applying for a loan.

Length of the Loan

The loan term for an equipment loan is typically 3-5 years. This is the time you have to repay the loan. Be sure you are comfortable with this timeframe before committing to a loan.

Interest Rate

The interest rate on an equipment loan is typically fixed. This means that the interest rate will not change over the life of the loan.

The Bottom Line

Once you have considered the benefits and drawbacks of an equipment loan, it’s time to decide. If your business could benefit from the new or used equipment, an equipment loan might be the right financing option. Be sure to look into various lenders, or work with a fintech marketplace like National, to find solutions suitable to your needs.