Dec 19

Tips from the Top – 3 Must-Knows for Financial Success

What are the best ways to handle taxes?

 

The key with taxes is to stay on top of things and if the weekly routine referred to in the tips on managing money section is being followed, it will make a huge difference. Here are three more recommendations for handling taxes:

  • Use a tax accountant for Federal and Franchise Tax filing preparation.  The costs for this service will be very reasonable if the books are in order.
  • Payroll related and Sales & Use Tax is most effectively managed on a monthly routine where a day is set aside each month (e.g. the 5th of the month) to comply with these various filings and payment obligations.  Almost all of these filings and payments are able to be taken care of online, which will reduce paperwork and your time involved.
  • Financial Planning is very important as some of these tax related cash outlays can be a meaningful amount.  With some basic planning that incorporates these payments into the projections, the business would not be caught off guard having to make these payments on short notice.

How can I improve my chances of getting a loan?

 

Getting a loan these days seems to be more difficult than it’s been in the past. However, having at least two years of business history and having made timely payments to your vendors will greatly increase your chances. Being able to provide accurate historical financial statements with a financial forecast that portrays a reasonable projection in light of the history, along with a summary for the assumptions made will also increase the likelihood of getting a loan.

Be prepared to start with a small amount of credit to establish a track record.  This is the case even if you need to set up a small loan where it’s secured by a cash deposit of the same amount.  The key here is to demonstrate a track record of timely payments and financial responsibility and then seek to expand the amount extended on credit.

What are the best ways to protect personal finances?

Totally separating business and personal funds is an absolute must and is the minimum step in protecting personal finances by keeping track of how much personal funds are ‘invested’ into the business.

While being set up as a sole proprietorship is convenient and certainly has minimum set up and maintenance costs, it does nothing to protect personal finances since there is no legal distinction between the owner and the business.  As such, the owner has unlimited liability for all losses and debts.

Depending on your company’s level of sophistication, risk exposure, and maturity of the company, it would be worth exploring a Limited Liability Corporation or a Limited Liability Partnership legal entity structure.  Both of these structures do exactly what the name implies; limit the liability of the owners and their personal finances.

Great advice, isn’t it?

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