With new businesses sprouting up almost everyday, business financing has gained a lot of importance. A certain level of complexity is always involved due to the large amounts of money often on the line.
Preparing your taxes and planning as to how to keep more of your hard-earned dollars in your pocket becomes increasingly difficult with each passing year. Your best course of action to save time, frustration, money, and an auditor knocking on your door, is to have a professional accountant handle your taxes.
New business owners with their limited knowledge, often get to hear a lot of outdated & misguided information. Here are a few misconceptions & their truths!
- Funding is always overpowered by expenses- This is less of a problem if you select your financing company with great care and express concern about maintaining as much available cash as possible. There are many financing structures possible, and they often use creative models to accommodate every customer’s financial situation. This includes financing up to 100% of expenses, and at times, even financing down payments and other upfront fees. This isn’t a given for every situation, but you never know what’s possible until you talk to one of our professionals and discuss your needs.
- Never start your business if you have to take loan- If you can secure financing through crowd-sourcing or get investors to sign on for equity, you may not need to take out a loan or line of credit to get your business started. There’s one thing to keep in mind here: a loan that you use responsibly won’t interfere with your profit potential.
- Immediate Break even point- Business start-up costs refer to expenses incurred before you actually begin operating your business. Business start-up costs include both start up and organizational costs and vary depending on the type of business. Examples of these types of costs include advertising, travel, surveys, and training. These start up and organizational costs are generally called capital expenditures. Do not expect o achieve all the cost that you have invested immediately & be dishearten when it doesn’t happen. Give it some time! Give your customers some time!
- Paperwork is scary- This is true of some financial institutions, but it’s also true that some are extremely quick to issue a denial if your financial standing isn’t the picture of perfection.
- ”I can pay myself whatever I please.”- Say you typically pay yourself $100,000 a year. After a good year, you decide to increase that to $300,000. You have to substantiate a reason for the increase, or part of the money can be disallowed by the tax department as unreasonable compensation. Then it can be taxed at the corporate level, and distributed as a dividend. And then you’ll pay tax on the dividend.Ouch!
- Family should never be involved in Business- Well, sure you can. Especially your kids who are in college. Pay them a reasonable wage for the work they perform and you’ll be able to deduct their wages as a business expense. Then, have them use the wages to pay for college. Voila! You’ve just made college tuition deductible.
Unless you’re a financial wizard and study tax laws for fun, chances are licensed prepares know way more than you do about taxes and how to save your business the most money. Don’t shy away from taking their help.