Tips For Small Business Owners

For many sole traders or small businesses it can be difficult to find the time to maintain all paperwork on a regular basis, meaning a large amount of admin is left until it is absolutely necessary to sort out.

If this sounds like you, then you will need to make some changes to the way you work because the Inland Revenue  is set to investigate two million small businesses – slapping many with big fines if records have not been kept in order. Here are 5 tips to help your business in 2012…

Receipt
Receipt (Photo credit: BreakfastPirate)

1) Get organised, get in a routine and get sorted

Under the HM Revenue and Customs initiative ‘Business Records Checks’, small businesses and sole traders will be subject to inspection to ensure all paperwork and bookkeeping is up-to-date and correct. If they find that your business isn’t hitting their standards, you’ll be fined £3,000. And as the HMRC have been given a target of £600 million to hit over the next four years, you can be sure they won’t be taking a lenient approach when it comes to handing out fines.

Getting organised seems like an obvious first step, but if you’ve set your admin duties to one side for quite some time, you’ll have your work cut out! Admin is part of your business, so set some time aside either at the start or end of the week (or whenever your quiet period is) and focus on your paperwork and bookkeeping.

Consistency and routine are key to ensuring you stay on top of this task.

2) Keep all receipts

It is essential you keep all receipts so that you can back up business expenses. You could get 12 envelopes and write the name of each month on them and store your receipts according to when you purchased goods / paid bills. Alternatively, you could separate receipts according to source, for example ‘rent’, ‘tools and supplies’ ‘stationery’ ‘miscellaneous’.

This also applies to documentation for purchases you want to claim the VAT back on.

3) Bank and building society documentation

It’s easy to see a letter or statement from a bank or building society and think ‘I know what that is, I’ll open it later’ and before you know it, you have a stack of unopened letters to sort through. This is a habit you need to break – open the letter, check payment transactions are correct and file it away. It only takes a few minutes at the most and means you’ll save yourself a great deal of time and effort later on.

4) File your tax return on time

If you’ve kept paperwork up-to-date as outlined in the points above, you’ll find that filing your tax return will be much more straightforward to complete on time – helping you to avoid fines for being late.

5) Don’t throw anything away!

We’re not suggesting that you become a compulsive hoarder and never throw anything away; we simply mean that at the end of every tax year, you box away important financial documents like receipts, invoices and bank statements, and keep them safe in case you need them in the future. You should keep documentation of this sort for at least six years.

Using Your 401k to Start a Business

Starting your own business allows you flexibility and control of your financial future.  While the thought of writing yourself a check from 401k funds to start a business may sound easy, there are several steps to consider while thoroughly reviewing the process.  There are tax penalties to understand and if your business doesn’t pan out as well as you had hoped, you could lose more than your retirement funds.

The use of additional resources such as a financial planner or a retirement plan administrator will help you review options.  You may have the option to roll over 401k funds into a corporate retirement account that allows you to invest in your business.

 

Because so many start-up businesses fail, many say it is not a wise decision to use retirement monies to fund your venture.  Evaluating your risks will help you make an informed decision on using retirement funds.

Review the amount you have in your retirement account and determine whether or not to use all funds or just a portion.  For tax purposes of for your business, it may help to have a separate account to utilize your funds once you obtain them.  This also allows you to keep track of expenses. Upon requesting your 401k funds, a portion may be set aside for tax withholding before you obtain the amount you are requesting.

Your business opportunity should be something you enjoy and have plenty of knowledge about.  Starting a business may be the best opportunity to reinvent yourself and want to make sure things are executed in the best way possible to increase chances of your business being successful.  Additional tips to keep in mind when starting your business:

  • Certain aspects of starting a business may become complicated and if it does don’t be afraid to consult a lawyer or financial specialist. They can assist you throughout your business venture by making sure tax information is correct and provide additional business advice.
  • If you start a corporation using existing 401k funds, penalties fees may be waived.
  • Understand your market by conducting plenty of research, especially during a slow economy.
  • Look into courses and classes available for entrepreneurs.  The Small Business Administration has a wide range of business resources available.
  • If other people are involved in your business that is employees, make sure they are aware of changes during the process.  Make sure you have good communication before and after the business gets up and going.

Andrew writes frequently about personal finance as well as issues effecting both consumers and small businesses, covering everything from credit cards to mortgages to tax reduction.

Do I Need a Tax Consultant?

Do you need a tax consultant? Even if you’re educated enough to know about your state’s tax laws, they change quite frequently. It’s often in your best interest to learn how to find a tax consultant. Your best bet is to find someone qualified and up to date with the latest tax laws. The best way to find a tax consultant is when you need them the least. That means not waiting until tax season to find one. If you wait that long, chances are that all of the good ones will be taken by then. Instead, find one early on and book them in advance.

Did you know there are different kinds of tax consultants, all with their own specialties? That means that some work best with small businesses and some work best with contractors. To find the one that fits best with you, ask them who the majority of their clients are. They may not answer but if you’re polite enough, they just might. In addition, know what kind of assistance you will need in advance. If you own a business, a tax consultant can help you, but if you earn wages by being an employee, you may be able to do your taxes yourself. If you need to get help, a certified public accountant can prepare the necessary paperwork.

If possible, ask for references from friends, family, and other acquaintances. At first, you probably won’t know any certified tax consultants but if you know someone that has dealt with someone before, it may put you at ease knowing that they do good work. Only hire someone when you have interviewed several people, and if you have a gut feeling that you shouldn’t hire said person, it’s best to listen to what your gut tells you.

You may not necessary need a professional, but they have the possibility of helping you save time, effort, and money. If they are any good at their job, they will be able to help reduce your taxes or help with the finances of your business. However, be careful because it can be expensive and if you hire the wrong person, they can get you into trouble instead. Before making a decision, think about the long term advantages of hiring a professional.

Why Look for a 401k Investment Advice?

Almost all people want to be secured when they retire from work. The 401k is one vehicle that can help you to be financially secure when you retire. This retirement savings plan is part of the US government program for employees to have savings that is tax deferred and could invest earnings in saving. The money or contribution are sponsored by employers wherein the workers choose to have a portion of their salary paid into their individual 401k account where it can grow until retirement.

The 401k retirement plan has a lot of good things to offer you. If you plan to invest, here is a 401k investment advice for you. You will have a few significant reasons why you must have this kind of retirement account. One is that you are going to have a significant tax advantage because the dividend, interest, and capital gains are not taxed until you cash out 401k. Another is, this account is flexible for investment for the reason that employees can choose from a range of choices as to how their assets are invested. If you are young, a 401k investment advice for you is to start your account right away because time is in your side. The longer the years you have your account, the bigger the investment you can get if you had not cash out 401k.

If there are benefits, surely there will be drawbacks as well, and the 401k is not exempted here. There are few things that one will always put in mind in order to avoid the consequences of these disadvantages. One rule is that the investor must not cash out 401k early or before he is 59 ½ in order to avoid penalties. These fees and penalties are very severe because it will include tax money plus the interest, and the worst thing that might happen is the forfeiture of your 401k account if not paid back. So, if you break this rule, you will suffer from penalties and fees that can ruin your investment expectation.

Therefore, it is important to know some 401k investment advice to help you in managing your 401k account. If you have any problem regarding how to work with your account, you can ask help from experts like a financial adviser. Doing well with your account today would be a huge money tomorrow.