By Sharol Lehnertz
The first thing you should know about taxes, especially as a business owner, is that it is best done as a process, not a once-a-year chore. That means you pick a tax professional not based on price or convenient location, but on trust and an ongoing relationship that extends beyond tax day.
Here is What Every Small Business Should Know about taxes:
1) Seek a trusting business relationships. If your accountant knows you well, they know your business and your unique circumstances. They will help you stay on track for planning and meeting all the deadlines that are easy to overlook. For example, we always remind our clients to renew each year with the Minnesota Secretary of State’s office to maintain the liability protection of their LLC. No LLC, no protection.
In the case of TLC Financial, we often host clients’ annual meetings at our offices and make that part of our annual review of their financials so we can begin planning for the upcoming tax season.
Because we are relationship focused, we get to know our clients’ businesses and industries. If they are in plumbing, we not only understand their business, we use their services. If a client owns a restaurant, we eat there. Because we’re also a small business, I know the challenges they face. I’ve been there.
2) Understand your financial reports. No matter the size of your business, you have to know your bottom line and where it is going. For our clients who don’t have financial backgrounds, we sit down and teach them how to run the financial reports – Profit and Loss, Balance Sheet – and understand what they mean.
3) You must file a tax return. It’s surprising how many owners don’t file for their business. They have no problem filing an individual return, but they mistakenly think that they are exempt if they didn’t make a profit. All business must file a return.
4) Beware of DIY. Entrepreneurs are notorious for trying to do everything themselves. Many just make a mess and have to go to an accountant to clean it up, which will cost much more than if they had just started with a professional. Do-it-yourselfers often make their “best” guess in response to a Turbo Tax questions and miss out on opportunities for additional write offs. I help my DIYs along the ways so they do it right.
5) Don’t be afraid. Some business owners are embarrassed at how disorganized they are and hesitate to go to an accountant. They fear being judged. We teach them how to keep their books in whatever way they are most comfortable with. Excel, ledger book on paper or QuickBooks.