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5 Best Practices for the New Small Business

Writer's picture: CourtneyCourtney
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Open a business checking account.


Many new business owners skip this simple step. If your business is an LLC or corporation, separation must be maintained between the business and personal funds. This will give you a more transparent view of your business and cash flow and reduce the cost of accounting and tax preparation services. A business account that contains all business activity is much simpler to prepare records for. Anytime there is a mingling of funds, it creates manual entries and time-consuming accounting to ensure that all expenses, contributions, or distributions are booked correctly. In addition, if compliance requirements are not met for fund separation, the business owner’s liability protection can be at risk.


Research & consult before deciding on a business type.


There are many types of business entities. Below is a list of common selections:

  • LLC

  • DBA

  • Corporation – S Corp or C Corporation

  • Sole Proprietorship

  • Nonprofit


As an owner, it is important to understand the compliance requirements and protections offered personally with each structure. For example, an individual has personal liability protection with an LLC or a corporation but not with a sole proprietorship or DBA. Annual compliance costs for each business type should also be evaluated. For some, a separate business tax return filing will be required. This creates additional costs related to maintaining separate records and tax preparation fees.

It is worth the investment to consult with a professional on a strategy that meets the goals of the small business. Many owners select a default entity structure and are not aware of compliance requirements or other issues that may arise.


Track receipts & records of start-up costs.


Special tax deductions are available for small business start-up and organizational costs. These costs typically include registration and formation fees, costs associated with creating your operating agreement, entity filings with the state and federal government, and typical expenses expected to launch a new business. Though each situation for a deduction is unique to the individual’s income, it is important to keep accurate records and receipts for any business expenses. If a personal bank account or credit card is utilized for the initial costs, keep a spreadsheet or record book to give to your bookkeeper. These will be recorded as the initial contributions to the business.


Invest in a bookkeeper & tax preparer to get your business started.


Investing in a bookkeeper or accountant at the start of the business is important. There are many approaches to hiring for this position. Some CPA firms offer a combination of tax filing and preparation alongside bookkeeping services. Many outsourced bookkeeping firms perform bookkeeping services remotely through cloud-based accounting software. An individual could also be hired to maintain the records and meet on-site needs. Reviewing the best fit for the business and how the cost will work within the budget is important. If an accounting software (Xero, QuickBooks, Wave, FreshBooks) has already been selected, ensure the bookkeeper is experienced in managing the software. Many software programs provide free or minimal-cost certifications for their products, and those can be valuable indicators that the bookkeeper has spent time in the programs.


A tax preparer is necessary to maintain compliance with federal and state filings. An excellent tax provider will assist in consulting and strategizing the business to provide the highest tax benefit. They will also give the owner additional knowledge of tax requirements that must be met to obtain certain deductions and compliance. It is a best practice to search for a tax provider before the filing season (January – April), as at that time, many are too overwhelmed with work to accept new clients. Also, the time for proactive planning has passed. Once a provider is decided on, the engagement letter needs to be closely reviewed to understand the fee structure and expectations for filing. This allows the business owner not to be surprised by items such as large hourly rates or automatic extensions for the return.

Know & understand your state sales tax requirements.


Does your business sell taxable products and/or services? If it is unclear, contact the state comptroller and speak with a representative about the items or services available for purchase. They can assist in determining if the business should file for a sales tax location. Sales & use tax can be extremely complex and varies not only from state to state but also depending on how much product is being shipped and the specific industry of the seller. It is a best practice to be aware of the compliance requirements, including deadlines & associated fees. Many business owners may not be aware of these and end up with late fees and penalties simply for being unaware. Consult with your tax advisor or provider for any questions regarding sales & use tax, as this is a unique area of knowledge.

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