popular business misconceptions would you believe?
Popular Business Misconception 1 :
"We Only Need Our Books Done One per year For Tax Purposes. "
Are Your Accounting Records Adequate To operate Your Business?
Although it is important to maintain records for tax purposes,
it is not the only real reason (or even the primary reason) great
accounting records should be kept. Another frequent cause
clients request financial statement preparation is to acquire
bank financing. Although important, this also is not really the
primary purpose of keeping good records for the business.
Good recordkeeping will enable you to draw out meaningful
financial information for your business that can help you
to manage it properly. If you can`t access these details,
you will not be able to manage your company properly. Bad
management leads to business failure.
Indeed, the primary reason good accounting records should end up being
kept is to produce periodic (at least from month to month)
financial statements for management information purposes.
Only with this particular current financial information can you properly
manage your company. This information can alert you to
declining product sales, excessive expenses, tax opportunities,
cashflow problems, and a number of other vital concerns for your
business.
To be associated with value, this accounting system should be set upward
with meaningful account categories and departments. It might
be cost-effective to have an outside accounting support do
the monthly bookkeeping. However, with accounting software program
that is readily available, you don`t have to become an expert
bookkeeper to do your own publications and extract meaningful
financial information.
If you perform your monthly statements yourself, it would still
be prudent to possess your accountant or business advisor help
you setup your system and, as well review such info
with you to discuss problems and opportunities.
Popular Business Misconception 2 :
"Writing My Hobby Off As A company Loss
Saves Me A Lot Of Income Taxes! "
Is Your Hobby A Tax Write-Off?
In case your business has no reasonable expectation of profit, if it's a
hobby and not really a business, you'll ultimately fail in your tax
objective. Since your losses are now being incurred for a hobby and not a
accurate profit generating business, the tax authorities will consider the
position that you aren`t entitled to any kind of deductions. This is a double
blow. First, you`re taking a loss. Second, you`re denied tax deductions.
It is accurate, however, that if you enjoy what you`re performing, you`ll do
better at it. You`ll be prepared to work longer hours and you`ll be
willing to put up with more hardships to make your business a
success.
Rather than attempting to achieve the tax system subsidize your hobby,
why not turn that favorite pasttime right into a real, profit generating
business? This is a two times as rewarding. First, you make money at
something you like doing. Secondly, the tax authorities legally have in order to
allow your reasonable expenses to earn your right now substantial business
income.
Prove that you`re running a business by in operation. Prepare and
follow a proper business plan. Maintain good accounting records with at
least monthly financial statements to provide you with the information you need
to manage your company. Above all, make money from what you perform.
Popular Business Misconception 3 :
"I Don`t Make Enough Money to add! "
Will Incorporating Really Benefit You?
Some persons resist the thought of incorporating themselves because
the tax savings may not really justify the added costs of incorporation,
annual min's, and extra tax returns. However, incorporation gives
benefits that go far beyond tax savings.
Insurance can provide you some protection against loss. However, you
may suffer business losses and lawsuits that might not be covered. For
extra protection, consider incorporating yourself. The actual limited
liability of your own corporation alone may justify the extra cost
and complexity.
Corporations may also be employed for income-splitting with your family,
as well as property planning and retirement planning objectives.
Additionally, corporations give some credibility to smaller businesses
and may enhance your image and prestige within the eyes of clients or
suppliers.
Lower corporate tax rates will generally apply on small company income.
Even in loss years, wages can be paid through the corporation to you so that
you may make use of personal tax credits available. If unincorporated, these
credits may be lost forever. The now larger corporate losses could be
carried forward to future (hopefully more lucrative) years.
A full analysis of the pros and cons of incorporation is
beyond the scope of this particular report. However, being incorporated may give
you much more flexibility and advantages than you originally anticipated.
Definitely, it is not prudent to reject it being an option simply because it
is more complicated as well as costly. In fact, it may be one of the greatest
investments you ever made.
Popular Business Misconception 4 :
"I actually need an office out.
Being home-based makes me appear amateur! "
Is A Home Office REALLY Expert?
Many times small business persons make the error of generating
unnecessary overhead in order to make an impression on clients and prospects. Often
this attitude leads in order to escalating debt and business failure. One such
example gets an impressive, but expensive, commercial office
space.
Clients aren`t stupid. They can see when such outdoors space is
necessary or advantageous for them. They can also see when it's a
waste of money and designed to energy your ego. What matters most to
clients is whether or not they are getting cost-effective results or not. If
your service or product delivers such excellent value, your customers
will be impressed and return. In contrast, if one allows his ego in order to
get in the way of satisfying the customers` requirements, they will go
elsewhere.
With the move in order to telecommuting, downsizing, networked communications,
and home-based businesses, operating out of your home office is actually
smart and trendy. Can you believe of a more appropriate location for a
consulting firm focusing on home-based businesses? They of all
businesses should arranged the example in cutting unnecessary expenses and
working efficiently.
This is not to say that presently there aren`t any disadvantages to being
home-based. One certainly should be well organized, disciplined, and
willing to follow great time management principles. This alone could
mark a person as more professional than other businesses, home-based or even not.
Expensive office space is not the response to reflecting a professional
image. If you are truly worried about your image, offer quality
service. Make sure that your corporate communications (telephone,
websites, printed supplies, et cetera) reflect the professional nature
of the business.
Popular Business Misconception 5 :
"Since we`re not looking for financing,
we don`t need a business plan. inch
Do You REALLY Need a Business Plan?
To acquire financing, many persons will prepare a business strategy.
Although entrepreneurs will go to great lengths to obtain their loan or
capital, these same business persons won't bother to plan ahead very
far or evaluate their business. Even if you required no extra
money, preparing a business plan can help you to achieve your
business.
Running a business without a plan is like a weight trip without a
map, sufficient gas, money, or perhaps a destination. Just as you wouldn`t
go on a holiday without some planning, no business can be prosperous
without it. Putting that plan in writing allows you to think out a
strategy for successfully operating and growing your company.
Where is your business today? Where will this be tomorrow? What is your
mission statement? What products are profitable? Which ones
aren`t? What business do you consider you are in? What business do your
clients think you're in? Should you be in a different company? Is
your product or service less attractive for your clients? How are
competition, global commerce, technological as well as social changes affecting
your company? What is your own competitive strength? What are your
weaknesses? Who tend to be your biggest competitors? What are their
weaknesses as well as strengths? What is your marketing strategy?
What are your projected income and expenses and cashflow for that next
year? How about the next five many years? Do you have a capital budget?
What determines whether you purchase an asset or not? Do you have a good exit
strategy? How will you manage growth? Have you got a financial plan? Do
you have an procedures plan? What definite sales and net profit focuses on
have you set for this year and the following five years? What factors could
interfere with the attaining of those goals? What contingency plans have
you made to cope with such problems?
The purpose of these questions would be to get you thinking and planning.
If you neglect to plan, you plan to fail. Although your accountant or even
business advisor can help you prepare your company plan, only you can
set the appropriate goals and follow-through on them. Yes, you
definitely need a company plan, not just for obtaining capital, but because
a roadmap for your business.
Popular Business Misconception 6 :
"I such as bartering with clients
because it saves paperwork as well as taxes. "
Are You Reporting Barter Transactions?
Bartering is a superb way of doing business. However, contrary to
well-liked belief, some barter transactions are taxable, both with regard to income
and sales tax purposes.
Legally, you must maintain adequate financial records for the business.
Barter transactions made by your business should be reported to the
appropriate taxation authorities and taxation's paid. However, transactions
between friends not engaging in business with one another may not be
taxable.
If you are a car mechanic and I am an accountant and We swap accounting
services for your car repair providers, the transaction in this case is
most most likely taxable, even if we are friends. However, your own accounting
fees should be deductible as a business expense and thus should the
business portion of my car costs. Note also that sales and similar
taxes may apply about this transaction.
On the other hand, if I trade accounting services for any vacation for my
family, I should really declare the worthiness of such services as income.
The firm supplying the vacation could deduct that value as
accounting fees. Any sales or similar taxes would need to be paid on
such transaction.
Many persons don`t report such transactions. For some, it may be the
matter of wanting to believe that you don`t have to be bothered with the
extra paperwork or taxes. Keep in mind, though, that ignorance of the law
is absolutely no excuse. Legally, you must keep proper records as well as pay all taxes
due.
Popular Business Misconception 7 :
"All My personal Workers Are Self-Employed, So I Don`t Need
To Make use of Payroll Or Workers` Compensation. "
Do You Have to Pay Payroll Taxes?
To save on payroll taxation's and workers` compensation premiums, many
employers arrange their affairs so that those working for
them are self-employed, impartial contractors. This is good tax
planning.
On another hand, some employers take the position that those
working for them are self-employed, whether they tend to be or not. Although
it is tempting to get rid of payroll taxes and workers` compensation
premiums, care should be taken to do this legally.
Whether those working for you are employed or self-employed is really a
question of fact (which can be based on the Courts). Do you supply
the resources and vehicles? Do you determine the working several hours? Do you
have the right to control the way the job will be done? Do you pay the
flat-rate or by-the-hour or a salary? Does your own worker have other
clients?
By asking several this kind of questions, a pattern will emerge as to regardless of whether
your worker is employed or self-employed. If as it happens that your
worker fits all the criteria of the employee, don`t say he`s
self-employed. On audit, you would still result in the payroll
taxes (and penalties and interest too).
Even if your workers are considered independent contractors through the
Income Tax Department, it is still possible that they'll be considered
to be "workers" for purposes associated with Workers` Compensation legislation.
Thus, it is the responsibility from the employer to determine whether such
coverage is required or not. Failure to obtain proper coverage might
subject you to substantial (and unnecessary) expenses.
In review, calling someone self-employed, doesn`t necessarily make sure they are
self-employed. If you have a dog, call it your dog. Your position that
your dog is really a cat won't be successful. Likewise, make sure
that your position relating to your workers is legally correct.
Popular Business Misconception 8 :
"My Accountant Charges An excessive amount of.
I Can`t Afford It Anymore. "
Is Your own Accountant Worth His Fee?
Many business persons look at bookkeeping, accounting, and tax preparation
as necessary evils. Within their view, accounting fees are an expense to end up being
reduced, deferred or even completely eliminated.
A great accountant, however, can give you benefits far more than the
fees charged. Well-designed accounting systems will allow you to
extract meaningful financial information for your business which will
help you to manage it properly, avoid company failure, and alert you to
declining sales, extreme expenses, tax opportunities, cashflow
problems, and many other vital concerns for the business.
Your accountant can save you lots of money using the advice you receive
on tax and other company matters. As well, a competent accountant can
be considered a valuable resource in discussing business problems and possibilities
with you.
Popular Business Misconception 9 :
"Nobody Makes Money On the web. "
Can You REALLY Profit From The Web?
Many people feel that the Internet is just about all hype. Many others feel that
it is overrated. Still others are of the opinion that it might be good
for some types of business, but not really theirs.
Typical comments heard include: "I`ve lost money on the web... Major
corporations have lost millions... Do you personally know those who have
made money from the Internet? "
However, if you read the list of recent billionaires, a high
proportion of those are Internet-related, and many of them under
forty years old. As well as the very rich, you will find many cases
of more modest financial prosperity caused by Internet commerce.
It is true that many are losing money on the web. It is also true
that many don`t understand what they`re doing. However, with the proper
assistance, a person, too, could profit from the net.