What do you mean by flying under the radar? If you were a pilot, you would fly under the radar so you don’t get spotted. As an entrepreneur, you’re operating your business just enough that you don’t get noticed by the governmental agencies.
In my 28+ years of practice as a CPA, the increase in more entrepreneurs to open up their own businesses had grown 60% since 2011 or total around 29 million. In addition, there are more do-it-yourself software programs that attempt to help people save money. In reality, it will end up costing you more; not only in time and money but in being able to reach your highest potential for success in business.
How can it end up costing me? The lack of understanding will cost you in the end by paying higher taxes and wasting time because it takes more of your efforts away from you operating your business; and can eventually cause loss of your customers due to lack of professionalism.
Let me paint a scenario that may apply to you or a friend that you know. One day, you decide “I’d really love to have my own business”. Based upon what friends tell you, you decide to start a side business while you still have your day job. Not knowing what your local regulations are or investigating what all is required for you to be in compliance with all Federal, State and Local government agencies, you decide to start soliciting for business. You start to tell your friends and family and they recommend that you start an LLC (Limited Liability Company) to protect yourself. You decide that an attorney is going to cost way too much, so you use an online company to help you get your LLC. You learn how to build your own website, and get inexpensive business cards printed. After that, you’re ready to go and start operating and at the end of the year you try and save money by preparing your own tax return. Sound familiar? Let’s take an in-depth look at what was just created.
Some of the biggest mistakes that entrepreneurs fail to check out are the following:
If I’m operating out of my home, do I need a permit?
What required tax filings am I responsible for at the end of the year?
Did I file for a FBN (Fictitious Business Name)
Did I file for a City Business License?
What’s the purpose of a FEIN (Federal Tax ID Number)
Understanding when you must put a person on payroll versus a 1099 contractor
The next scenario is :
You don’t have enough funds to hire a professional to help you set up your bookkeeping properly so you take a poll and ask your friends what they suggest that you use. You buy the software and get frustrated because it takes you too long to learn so you sporadically try to enter the data or you just give up and begin to accumulate receipts in a box.
Setting up Your Business for Success
Have you carefully thought out a plan for the business; a business or success plan?
What’s my available resources; money, time, and people?
Do you mix your personal funds with your business funds?
Do you properly account for you income and expenses and how often do your review it?
The last scenario is:
It’s the end of the year and now it’s time to do your taxes. You attempt to put all of your receipts together and decide that preparing your taxes on your own shouldn’t be a problem. You begin to fill out the schedule C but don’t know all of the tax laws so rather than get caught on something you don’t understand about, you don’t want to get audited and claim less expenses than you are entitled.
Maximizing Your Profits and Paying Taxes
What kinds of deductions am I entitled?
How come I have to pay so much in taxes?
Why am I being penalized?
Why does it show that I made so much money but don’t have the money in my bank account?
Do these things sound familiar? Some of the items listed above are actually things that subconsciously hold you back from reaching your highest potential in business.
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