Owning a small business, being the boss, making all the decisions are dreams come true for any Phoenix entrepreneur. Many people day dream about opening a business. Others make those dreams come true by following the path to business ownership.
Most businesses are started because of the driving passion and ambition of the owner. Before letting the passion take over, there are three major components of business ownership that every potential entrepreneur needs to consider before hanging an open sign on the door.
Researching and developing a business plan, determining finances and taxes, and looking at the legal side of owning a business are vital to long-term success to any size or type of business.
1. Researching and Developing a Business Plan
The business plan is important to setting many of the procedures, techniques, and operations of a business. All business plans should include the following:
- Market research to determine the need for the product, pricing structures, and delivery methods
- Realizing the Strengths, Weaknesses, Opportunities, and Risks (called a SWOT analysis)
- A marketing plan for how are the products/services are going to be promoted
- A growth plan showing what the next 3, 5, or 10 years look like
- Personnel needs at startup and as growth occurs
- Specifics of an office or brick and mortar store front that includes size, location, rents and furnishing, etc.
- Projected first year sales, expenses, and profit margins?
- Financing, investments, taxes, and other money matters
- Legal factors such as naming, type of business (corporation, Limited Liability Corporation, Partnership), and licensing needed
2. Financing and Taxes
After researching and developing a business plan, the next step is to detail the financing and taxes section. The following list is a starting point for determining all the money details.
- Detail all financing matters such as investors, loans, and credit cards
- Projection of cash flow details such as how customers will be billed and what billing terms will be given to customers such as net due in 15 or 30 days
- Projected monthly profits
- Projected monthly expenses
- Tax payment schedules
- Payroll particulars such as how often to pay employees, benefits offered, and who processes payroll
- Accounting practices for the office including computer software to help manage and monitor cash in and cash out
- Weekly, Monthly and/or Yearly Tax preparation and filings
3. Legal, Business Forms and Insurance
There are many decisions business owners have to make from the moment he or she decides to go into business for themselves until the day the business is sold, closed, or as it grows. The list below contains the legal aspects of opening a business.
- Selecting a business name that is unique and legal
- Determining business structure such as sole proprietorship, Limited Liability Company, Cooperative, Corporation, Partnership, or S Corporation. Each type has its benefits and downfalls. It helps to consult an attorney to determine the best structure for a particular type of business.
- What types of insurance is needed for the business such as renter’s insurance, employee insurance, health or life insurance, consumer protection insurance, etc.
- How to file patents or copyrights
- Obtaining any all of the necessary licensing
Keep the Passion Alive
Many business owners tend to get put off by some of these details (especially the accounting and tax tasks) and would rather ignore them than to address them. Most of the details listed above are one time decisions while others have to be continually updated like the business plan.
Laying the ground work before starting the business is always the best way to approach these items. There will be time for the business owner to pursue their passions of making or providing the products and services that will always remain the foundation of any business.
We wish you much success, and if you are looking for tax advice or business accounting help from an experienced CPA in Arizona, please reach out to our Mesa office.
It’s August, so the last thing on your mind is probably taxes. But, there are things you can be doing now and throughout the year that will help you get the most out of available deductions. If your business involves real estate in Arizona, then read on for information on deductions you may not know about, and for helpful tips that can help you take full advantage of current real estate IRS tax laws.
Common Tax deductions for Arizona real estate professionals
- Vehicle expenses, including mileage, insurance, interest on loans, parking expenses, tolls, license plate fees and depreciation.
- Home office expenses (if you qualify – check with your CPA).
- Advertising and marketing expenses – basically, anything you pay for advertising materials.
- Bookkeeping, accounting, tax preparation and legal expenses.
- Business meals and entertainment (deduction is limited to 50%)
- Real estate franchise fees
- Office supplies
- Office rent, utilities and cleaning
- Business-related travel expenses
- MLS dues and dues paid to realtor associations and chamber of commerce memberships
- Real estate license renewal fees
- Continuing education expenses
- Computers and related software and equipment
- E&O, health, liability and equipment insurance
- Wages paid to employees
- Cell phone expenses
- Business gifts (deduction is limited)
Tips to help make tax time “less taxing”
1. Get organized. Use a separate bank account and credit/check card for your business-related expenses, and organize your receipts. Remember to save receipts even for the smallest purchases, as they can add up to big deductions. Keep track of mileage as you go, rather than trying to recreate it later.
2. Understand limitations. Most business expenses can be deducted if they are “ordinary and necessary.” A CPA can help you determine whether an expense satisfies both of these requirements.
3. Get help from professionals. We get it; you’re entrepreneurial. That’s great! However, unless your business is a tax business, it will be incredibly difficult, if not impossible, to stay on top of the tax rules and regulations on your own.
We would love to help out. Please complete the form to set up an appointment with our real estate tax specialist at Sean Core CPA PLLC conveniently located on Chandler/Mesa border today.
Many Arizona small business owners such as realtors, business consultants and contractors work from their homes, but not all home offices qualify for tax deductions. This is a common concern, our CPA offices hears from business owners so we wanted to explain in more detail.
IRS regulations detail two requirements that must be met in order for the business tax deduction to be allowed:
- Regular and Exclusive. Part of your home must be used regularly for conducting business, and that part of your home must be used exclusively for conducting business; and
- Principal Place of Business. Your home must either be the only place where business is conducted or, if you also have another place of business, your home must be a place where a substantial portion of your business is conducted. While this does not need to be a separate room, it does need boundaries; you could likely not claim the deduction if your kitchen table doubles as your desk.
Home Based Business Tax Advice
If you believe you qualify for the deduction, a tax professional such as ones found at Sean Core CPA can help you with next steps.
Two different methods that can be used to claim the deduction.
- The “standard” option involves calculating and documenting the specific expenses associated with the home. The deduction would then be based on the square footage of the room, or of the space, dedicated to business use.
- Beginning with tax filings for 2013 and later, taxpayers now have a “simplified” option which, instead of tallying and documenting actual expenses, allows the taxpayer to simply multiply a prescribed rate by the square footage of the home used for business purposes.
There are special rules for home daycare providers, so if your business is providing childcare from your home, contact your accountant or specially trained CPA to discuss those requirements.You can also read the full requirements as published in IRS publication 587.
If you are looking for tax advice or know that you could do better at maximizing your home office deductions , or want help with your business taxes, please contact our Mesa tax & accounting office for a phone appointment!