What's Your Dream?

Have you ever dreamed about owning a business? Many people have. Maybe you have dreamed about starting a catering business or owning a quilt shop or a coaching/ consultant business. According to the Small Business Administration, there are more than 27 million small businesses in the US. It is no wonder small businesses are often thought of as the backbone of America and why many financial analysts say they are the vehicle which is driving us out of an economic downturn.

Well before you hang your shingle above the door of your new shop….here are six tips that will help you get started on the right foot.

1. Create a business plan. While it may seem daunting at first, a business plan will help you gain a better understanding of your industry structure, competitive landscape, capital requirements and more.
2. Decide what business entity is right for you. The most common types of business are the sole proprietorship, partnership, LLC, corporation and S corporation. Each of these entities has different tax requirements, so determining the right entity for you is of key importance.
3. Obtain an Employer Identification Number (EIN) which is used to identify a business entity. Most businesses need an EIN, although some do not.  Visit www.IRS.gov for more information. If needed, you can apply for an EIN online. Also be sure to register with the state you are doing business in.
4. Determine what taxes you must pay and how you will pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and sales tax.
5. Keep good records. This will help ensure a successful operation of your new business.  You may choose any record-keeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need for federal tax purposes.
6. Adopt a consistent accounting method. Each taxpayer should use a consistent accounting method which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and accrual method.

Owning your business can bring you countless rewards and help you live your dream. For more information on how to get your business started, it is best to consult with your CPA. She will be able to help you avoid many of the mistakes first time business owners make, and help you achieve success with your new business.


Kathi Koenig, CPA
Partner - McGowen, Hurst, Clark & Smith, P.C.