It is absolutely imperative to ensure that a new business keeps on top of all the paperwork from the beginning. Putting away expense receipts and other documentation in a drawer and hoping it will make sense when IRS filing time comes around is only going to make life more difficult.
Accountants love Microsoft Office Excel and for good reason. It’s relatively easy to use and if the spreadsheets are filled in on a daily basis it’s a very useful tool for monitoring the financial health of the start-up business. Setting up a new company can prove costly, so make sure that all receipts for computers, telecom links, travel, gas and any other expenses that relate to the business are detailed, entered onto the spreadsheet and the physical/paper receipts are filed away neatly. Another method of dealing with the business accounts is to use the services of an umbrella company, and let these firms take over the running of accounts and other administrative functions, including payroll.
Efficient accounting will save time when filling in IRS forms once the year-end tax deadline comes around. In fact, getting in touch with the IRS when in the process of setting up the new business will be really helpful as they will be able to advise about all the necessary paperwork and exemptions, and if you have employees they will inform about all new employer responsibilities.
It is important to file tax returns on time, as penalties will be charged if the IRS hasn’t received the return by the due date. The IRS website is well worth a visit. Even if the business is classified as ‘tax exempt’, this applies to those companies that file a turnover of $50,000 and under, it will have to fill in form 990 or an ‘e-postcard.’
It’s very important to keep business costs and expenses separate from a personal checking account. Make an appointment with your chosen bank and set up a bank account for the new business. At some stage the business may be in need of a loan so it’s worthwhile looking at the different banks and see which best suit the needs of the new company. Not all banks offer financial advice, so this is another point to bear in mind when looking for the right bank for your start-up.
Importantly, never treat the business account in the same way as a personal account; this can only lead to problems. Carry out some research into the different bank charges; these do vary from one institution to another. Some companies choose banks that offer an online facility; others like to ensure that their bank has national ATMs. Alternatively there is a move in the US for small businesses to be encouraged to support their community banks under the ‘Local Self Reliance New Rules’ project and the ‘Move your Money’ initiative. Community banks are often more flexible compared with the large international institutions.