Bill Lawitzke, JK Harris Small Business Services, LLC
Owning and operating your own business may seem like the perfect job, but don’t for a second think it’s an easy one. Now don’t get me wrong, it can be perfect if done properly. You can’t just wake up one morning and say, “Hey, I think I’ll open my own business,” and abracadabra, you’re a successful business owner.
It just doesn’t happen that way, especially if you are unfamiliar with the ins and outs of the world of business. One of the most important things to do when you start a business is to open a business bank account and if necessary get a business credit card. You want all of your business transactions to go through an account completely separate from your personal accounts.
Open a business account and you won’t have your business and personal funds commingling. If you commingle funds, the IRS is likely not to allow some deductions they would normally allow if you had separate accounts. Why is this you ask? Well, when you use your personal account for business transactions, it is much more difficult to prove the transaction was for business and not personal reasons.
Even with a business account, you still need to keep accurate records of transactions. Keep all of your receipts. Keep a business mileage log. And if you have business lunches or meetings, keep a list of the people who were with you and what the purpose of the lunch/meeting was.
And whatever you do, don’t forget about taxes, the IRS sure won’t. If you have employees, file employment tax returns or withhold taxes on certain types of income, you will need an Employee Identification Number (EIN).
One of the biggest mistakes made by business owners is failing to file the required tax forms and/or failing to pay the quarterly Estimated Tax Payments. Keep in mind, whether you make a profit or not in any particular quarter, the IRS expects you to pay the estimated taxes. Why? Well, those quarterly payments are based on the entire year, not just that particular quarter you are currently scheduled to pay.
For additional information on Estimated Tax Payments, visit www.irs.gov/businesses/small/article/0,,id=110413,00.html.
About Bill Lawitzke:
Bill began his stint with JK Harris in 2003 when he came to work in the Small Business Services department where he is currently a Supervisor. He became an Enrolled Agent earlier this year.