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  • Small Business needs accounting help.

    Small Business needs accounting help.

    Greetings TG community.

    Rick here again with questions and concerns about starting his small business.
    As some of you know, the response from the website questions were great and well appreciated. Here is the link to that thread if interested. http://www.tacticalgamer.com/sandbox...g-website.html
    Note, I will be posting some specific questions on that later in the month.

    The run down of the business. Will start first quarter of 2007.
    Personal Training. The service will be either rendered at a Physical Therapy or Doctors clinic or in the clients actual homes. Pluses and minus to each. Would like to set up in a clinic.
    Sole proprietorship. No employees (maybe later). Very little overhead (selling a service and zero goods). Will not need start up loan/s.

    Being a total new guy to financing and accounting and taxes, I want to get a strong handle on this before the business goes on line.

    First and for most, I plan on paying my fair share of taxes. I know that not doing so is extremely dangerous. Just ask BF2 player IRS Agent how lethal those goes are when it comes to getting their money. Furthermore, I do not want to screw over my fellow small business owners and community by not paying my fair share.
    With that said, I want to be as frugal as possible. As I have said since I was 16 and had my first job (Food Lion): ďIt is not how much you make, it is how much you spend that counts.Ē In this case it should be: ďIt is not how much money you earn, it is how much money you keep that counts.Ē
    For these reason I ask help from the TG community on such issues.

    Note: I do not plan on performing the accounting and tax responsibilities myself, I will pay for others to do so. However, I will record transactions in order to make sure things go well and to one day perhaps do this myself. I will never do the end of the year stuff.

    1. Should I go with a Payroll Company rather than an actual accountant, or both?
    The payroll company will be used for ensuring: the payroll taxes for each pay period, each quarter, and each year are deducted properly. At the end of the fiscal year, I can present this payroll information to an accountant to prepare the year-end statements.
    I believe this strategy is sound and cost effective. To recap: Use the cheaper Payroll company all year, expect go with the more expensive accountant at the end of the year to seal the deal.

    2. What is a good software program to use for accounting?

    3. My business will accept money before services are rendered. The plus side to this is that I do not have to worry about someone owing me money. The minus to this will be that Iíll need to make sure I document when the service has been rendered when putting this as revenue. I do not want to spend money that I have not earned.
    So the question is: What should be the best accounting method, cash or accrual?
    I am leaning towards Accrual.

    4. After reading a few small business books, I still do not know this.
    If I bought stuff in 2005 and 2006 can I document this as tax detectable?
    For example, I bought my first computer in 2005 for the purpose of the business. Can I deduct that as a business expense for 2007? I have the receipt for it and all. Granted the graphics card I put in it will not be included. There all a lot of other things I bought for the business in 2005 and 2006 that I have a receipt for, can this also be deducted when filing taxes at the end of 2007?

    5. With that said, the more stuff I claim as tax deductible and needed for the business, the more things I will need to put on my personnel property business tax. Iíll need to pay taxes on this every quarter right?

    6. When you put money into your business account after a deposit, how do you take money out of it and transfer money to your regular bank account?

    7. More on deductible expenses. From what I understand with the personal training indurstry, I will be paying about a third of my taxable income to the government. Meaning my gross income minus deductions will be the taxable income. A third of this will be paid to the government. Seems to me the variable I have control over in this equation is deductions. Any tips on maximizing deductions. (I have all of my receipts all together. Plus I have documented on an excel program all of the items, when they were bought, quantity and the business I bought them from so that the accountant will not have a problem with the deductions. Note, if I need to drive to clients homes, Iíll need to be on the stick with mileage documentation.

    So here is a sample equation for the end of the year taxes:
    $100.00 gross income for 2007. (will take a while to establish cliental.)
    $80.00 deductions for business expenses. Note, this is all the stuff I bought to start the business. (Computer, computer desk and printer/faxer, along with monthly expenses and other stuff.
    100-80= $20.00(.3333) = $6.66 in taxes I must pay.

    Lets say for 2008 it looks like this.

    $400.00 gross income.
    $20.00 deductions for business expenses. Note, because it is a service business, I will not have to buy much at all (except: internet service, phone, license, liability insuranceÖ)
    400-20= $380.00(.333)= $126.66 in taxes I must pay.
    So may main point is. The first year will be a little rocky, but Iíll have a lot of deductions to help me out. The second year will be better than the first, but Iíll have less deductions to help me out. Is this sound logic?

    8. Quarterly taxes. Does anyone have tips here?

    9. Yearly taxes. Does anyone have tips here?
    10. What are some tips and lessons learned that can help out?

    Please state problems with my logic and planning.

    Any tips are appreciated.

    Thanks Champs.
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  • #2
    Re: Small Business needs accounting help.

    Originally posted by Rick_the_new_guy View Post
    3. My business will accept money before services are rendered. The plus side to this is that I do not have to worry about someone owing me money. The minus to this will be that Iíll need to make sure I document when the service has been rendered when putting this as revenue. I do not want to spend money that I have not earned.
    So the question is: What should be the best accounting method, cash or accrual?
    I am leaning towards Accrual.

    4. After reading a few small business books, I still do not know this.
    If I bought stuff in 2005 and 2006 can I document this as tax detectable?
    For example, I bought my first computer in 2005 for the purpose of the business. Can I deduct that as a business expense for 2007? I have the receipt for it and all. Granted the graphics card I put in it will not be included. There all a lot of other things I bought for the business in 2005 and 2006 that I have a receipt for, can this also be deducted when filing taxes at the end of 2007?

    Any tips are appreciated.

    Thanks Champs.
    I'm sort of an Accountant, and I can offer a few tips.

    If you're taking money before offering services, Accrual is much more accurate. The only catch is, I believe the IRS always works on a Cash
    basis, regardless of which method you use for your own books. So if you go Accrual, your records become more complicated since your Tax Statement won't line up. If you were running a large company, especially one with Investors and Stockholders, the extra accuracy would still be worth it. If its just you (and maybe 1 employee), its probably going to be easier to work on a cash basis. You just have to keep good client records, so you know for each client whether they've received services already or not.

    Same problem on number 4: The IRS always works on Cash. So your purchases would make fine deductions for 2005 and 2006, but not for 2007. Sadly, I don't think you can get a tax refund if you didn't actually earn any income, so they won't help you much.

    Feel free to doublecheck my answers with a real professional though. I'm just a College Student working parttime as a Bookkeeper. :)

    Comment


    • #3
      Re: Small Business needs accounting help.

      I've been a sole-proprietor for about 5 years now and have learned some very hard lessons. That being said I still feel like I don't know nearly enough, but here's my .02.

      1-I don't know why you need a payroll company. Unless you are incorporated, or an llc, where you have set yourself up as an employee of that organization. You may want a bookeeper to organize your receipts and expenses if you find it as tedious as I do. Find a good accountant that has clients in your field to help too.

      2-Quickbooks is what I have. Most accountants I have talked to prefer this over most others. Find a good CPA and go with their recommendation. They can set up the accounts for you and you can just e-mail them your info when they need it.

      3-Not sure about this one, because I don't get paid until the deal is done. Find a good accountant for that question.

      4-You may be able to deduct these, but capital equipment is depreciated over time and anything that will last more than 2 years is considered capital equipment. That point is arguable with PCs and there are one time deductions allowed. Again, check with your accountant.

      5-I'm not sure what you mean by "personal property business tax". Yes, you will need to pay quarterly estimated taxes on your income if that's what you mean. At least you should. I have avoided it for the last couple years, but I don't recommend doing it my way. It's not the right way, but it is possible. The IRS has a nice installment plan ;)

      6-No great shakes there, you're a sole proprietor so just keep records of it all. You're free to use your money as you like in this situation. If you were a corp or llc it's not much different, just what you call it and how it's reported.

      7-Here is where a good CPA will earn every penny of what you pay him/her. I collect all my receipts; every meal where business was discussed at all, every pencil, home improvement or repair ( I have a home office), utilities, even my internet connection, anything at all. I put it all in the journal and I let my CPA tell me what I can or can't do. Anything remotely related to business (i.e. car mileage) you should keep track of. That 30% number you used is more like 33%for me. Every penny counts.

      8-See #5 If at all possible you should try very hard to make the quarterly payments. Even though they will let you slide, you will pay penalties and interest if you don't pay quarterly.

      9-I inevitably have to extend every year all the way through Oct. I feel like every second I spend on this tax non-sense is another second I'm not trying to make another buck. I don't believe trying to do things yourself and avoiding a couple hundred dollars you might pay to a great CPA is worth the effort at all. If the Fair Tax ever makes it to my ballot box I will be voting for it.

      I think you're on the right track, but I can't emphasize enough finding a CPA that you trust, that has clients in your situation. A good one won't charge you anything to ask him these kinds of questions you have here. Call a few and ask them if they have any clients like you, and then interview some of them at their office. You're hiring them, so go with one you trust and have them counsel you on the best way to strategize your tax avoidance.
      New to TG?

      Comment


      • #4
        Re: Small Business needs accounting help.

        Thanks for the posts.

        This QuickBooks intrigues me.

        Perhaps I can do o.k. without this payroll company I speak of.
        From what I hear tell, these types of computer programs are basically feel in the blank and click away and its done.

        I’ll look into getting a good CPA in order to e-mail them the info for the quarterly/ yearly numbers they are looking for.

        The business is really tiny. I do not want to error in taxes and such, but I feel like I can handle crunching the numbers without any help on a weekly bases. However, I’ll leave it up to the CPA on the quarterly and yearly details. Once they take command of the issue they are responsible for any errors right?

        Thanks again

        Kerostasis
        &
        USN Squid
        (PO3) Marcinko_R. (BF2 PR .509) Squad Member
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        • #5
          Re: Small Business needs accounting help.

          Most of the companies I know that have less then 10 employees use QuickBooks. I would also second the importance of a CPA. Also consider getting incorporated, or an llc a little bit down the line, because you are working with people and there are crazies that make a living suing people. It costs a few hundred bucks.

          Your best resource may be http://www.score.org/ The website has a wealth of information. They offer free face to face small business mentoring. They also host small business seminars. They have an office in your area.

          250 Franklin Road, Federal Building, Room 716
          Roanoke, VA 24011
          PHONE: (540) 857-2834 FAX: (540) 857-2043
          EMAIL: [email protected]

          Comment


          • #6
            Re: Small Business needs accounting help.

            Good intel Hambergler. I am getting a strong endorsement for a CPA and the QuickBooks.

            Thanks for the link and the address also.

            Remember the time you thought you could change objects to cheeseburgers. Click here for details: http://www.youtube.com/watch?v=nv3y4ceOn1Q&NR
            (PO3) Marcinko_R. (BF2 PR .509) Squad Member
            (CPO) Marcinko_R. (BF2 PR .509) Squad Leader
            (LCDR) Marcinko_R. (BF2 PR .509) Commander

            Squad Member pledge to their SL:
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            • #7
              Re: Small Business needs accounting help.

              Definitely find a good CPA that doesn't mind you picking his/her brain about issues as they come up. Quickbooks is great and most firms can just take a copy of it and do the quarterly and yearly returns for you without you having to generate a bunch of reports.

              The only other recommendation I would have is to get a credit card and use it for anything you purchase that you can't get terms for (paying it off each month of course if you can). The statemtents are clean and it can really help you track your spending. Any kind of points/dividends/airline miles are a bonus that can really add up.
              Gigan - Shaman (Resto)
              Pistos - Semi-retired Shadowpriest
              ...and other distractions of various levels.

              Comment


              • #8
                Re: Small Business needs accounting help.

                /Rick jumps behind a piece of furnature to dodge the rounds coming from the infinite clip of Pistos' assault rifle after walking into the forum.

                Thanks for the intel.

                I discovered the QuickBooks Basic is no longer for sale.

                I'll purchase the QB Pro withen the next few days. I am interested to check this thing out.

                Good call on the business credit card, I'll need to get that when I start the bank account.


                I have already programed my T100 to search and find Roanoke's best and avordable C.P.A. in the valley.

                I told you guys that I am not a computer person, but a Cyborg person.
                I befriend the borgs in order to get more out of my machine.

                Thanks again Pistos.
                (PO3) Marcinko_R. (BF2 PR .509) Squad Member
                (CPO) Marcinko_R. (BF2 PR .509) Squad Leader
                (LCDR) Marcinko_R. (BF2 PR .509) Commander

                Squad Member pledge to their SL:
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