3 Types of Taxes You Need to Account for as a Small Business Owner

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3 Types of Taxes You Need to Account for as a Small Business OwnerThe longer a business stays open, the greater the chance it will survive. The latest statistics show a third of new businesses fail within two years. Things are more difficult for small businesses. Many small businesses try to stay afloat by cutting corners. The owners may try to handle their own accounting and tax returns. This is difficult for those who don’t have the proper training.

Start Out The Right Way

Failing to pay taxes can kill a business. Indeed, the IRS places a lien on a company’s bank account when they don’t make payroll tax payments. Likewise, a business can be closed for not paying sales tax. That’s why experts recommend hiring a company to handle Business Tax Services. The government scrutinizes the payment of payroll taxes. Owners face harsh fines and penalties for abuses. That’s because payroll taxes are taken out of the employees’ money. Payroll taxes include federal income tax, state and local tax, and medicare and social security taxes.

Payroll Taxes

The employer withholds income taxes on employee wages after deductions are subtracted. Withholdings are based on marital status, tax bracket and the number of dependents. Medicare and social security taxes are known as FICA. 6.2 percent of the employee’s salary is withheld for social security. That amount is matched by the owner. Likewise, each party pays 1.45 percent for medicare. Business owners must file the IRS form 941 quarterly. This form reports withholdings that were taken. The withholdings must be paid to the IRS by a certain time each month. It’s a lot easier having a company do this work. Employers are also legally obligated to pay unemployment taxes. This money has to be available when unemployment claims are made.

Income Taxes

The business owner pays income taxes to the federal and state governments. Indeed, the business’ status can help when it’s tax time. Sole proprietors are the only owner of a business. Hence, they can pay business and personal taxes on one return. A schedule C must accompany the tax return to show the business profits and losses.

Corporations have the most complicated tax system. A corporation must pay income tax twice. The corporation and its owners file separate tax returns. This means owners report after-profit dividends on their tax returns. They’re taxed for the same money as the corporation. LLC owners only have to file one tax return. Sole proprietors pay 100 percent of their FICA taxes. This is known as self-employment tax. This tax makes sure the business owner can get retirement, disability, medicare and survivor benefits.

Sales Tax

Small businesses that sell goods and services must pay sales tax. The owner must apply to collect sales tax before the business opens. Sales tax is kept in a separate bank account and turned over to the Department of Revenue with an accounting. Sales tax must be paid at regular intervals depending on what state one lives in. This is another job for a good accounting service.

Small businesses face a lot of liability if they don’t pay taxes. Sometimes, it’s difficult to keep up with varying tax schedules and do regular work. That’s why it pays off, in the end, to have someone do it for you. This is one area where the company shouldn’t try to save money.

5 Unexpected Benefits of Using Freshbooks Cloud Accounting

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StrategyDriven Managing Your Finances Article |Freshbooks Cloud Accounting |5 Unexpected Benefits of Using Freshbooks Cloud AccountingEvery month, half a million people become entrepreneurs. While that number may seem inspiring, it’s important to note that the vast majority of those businesses will be forced to cease operations or subsidize them with other means of employment.

One of the biggest factors that differentiate winners from losers in business is the ability to integrate processes that eliminate menial tasks and promote growth. Therein lies the value of FreshBooks cloud accounting.

FreshBooks provides small business owners with an end-to-end means of managing their financials. In this post, we share five advantages of empowering your business’s workflow with FreshBooks.

1. FreshBooks Trumps Manual Spreadsheets

Small business owners have long used tools like Microsoft Excel to track their income and expenses. While spreadsheets served a purpose for managing financials in the past, with how far technology has come in the last decade, you’d be hampering your operation by using Excel over tools like FreshBooks today.

Sure, spreadsheets can be free to use, depending on the provider that you get yours from. Consider the amount of time you’ll spend manually inputting data into spreadsheets, though. When you do, you’ll find that FreshBooks’ automation makes it less costly.

2. FreshBooks is the Cloud Financials Leader

FreshBooks is not the only cloud bookkeeping/accounting tool on the market. As a matter of fact, its leading competitor, “QuickBooks,” commands a larger market share.

When you read a formal comparison between FreshBooks and QuickBooks, we think you’ll prefer FreshBooks, given its sole focus is on bookkeeping/accounting. QuickBooks, on the other hand, is just one product of many whose parent company, Intuit, divides its time between.

3. Subscription Packages are Flexible

Businesses have different needs. FreshBooks takes that reality into account and offers several flexible subscription packages. These packages ensure that you only have to pay for features that are valuable to you.

You can learn more about what’s included in FreshBook’s Lite, Plus, Premium and Select tiers on its pricing page.

4. Freshbook’s Features are Boundless

Whether you need to track your corporate vehicle’s miles or you need to project how much you’ll owe in taxes this year, FreshBooks has you covered. Small- to medium-sized businesses will never be in a situation where FreshBooks can’t accommodate what they need to do.

5. Your Business Will Become More Scalable

Armed with FreshBooks cloud accounting, you’ll be able to do anything that you need to related to your financials from anywhere in the world. That flexibility will allow you to scale much faster than organizations relying on legacy workflows.

Start Your Free Trial of FreshBooks Cloud Accounting

With all of the FreshBooks cloud accounting advantages that we’ve just hit you with, we hope you’re excited to give it a try. As an added bonus, sampling FreshBooks is 100% free!

That gives you no excuse not to explore how FreshBooks might be able to revolutionize your company.
Are you looking for more tips on how to upgrade your business’s structure and strategy? If you are, browse more of the content on our blog.

Using a credit card to finance your business

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StrategyDriven Managing Your Finances Article |Business Credit Card|Using a credit card to finance your businessEvery company is different, and so every business owner needs to decide which finance options they want to use for daily expenses and longer term investments. Here, we weigh up the pros and cons of using business credit cards.

Many small business owners decide to use credit cards to cover costs, buy stock and seize opportunities. It’s easy to see why – they’re relatively straightforward to apply for and offer a flexible way to access credit quickly. But that’s not to say they’re the best funding option in all scenarios. This article details the ins and outs of using business credit cards, so you can figure out whether they’re right for you.

Generally speaking, there are five reasons to use a business credit card. These include: ensuring your business operations are kept separate from your personal spending, building up a credit profile for your business, managing short-term expenses, keeping on top of cash flow and picking up any rewards offered by the card provider.

What is a business credit card anyway?

In basic terms, a business credit card is similar to a normal consumer credit card – just designed for business use, rather than personal. Once secured, business owners and specific employees are able to use the card, or cards, to pay for things on credit – everything from small one-off costs, to recurring subscriptions and larger invoices.
Any accrued credit will need to be paid back, usually scheduled on a monthly basis, along with any interest that’s built up. Each card is different but most offer a period of free credit – this is often around 56 days. As you can imagine, to get the best out of a business credit card, many business owners use them for short-term expenses that they know they’ll be able to repay in a few weeks.

Can I use a personal credit card to fund my business?

Credit profiles take time to build up, so many new business owners can find that their company has a ‘thin’ file. This means they might not have enough of a credit profile to get a business credit card. In this case, owners sometimes use personal credit cards to fund their businesses.

However, by doing this the owner makes themselves personally liable for the debt incurred. In short, using a personal credit card for business finance means taking on a certain amount of risk. It is possible to use a personal credit card to fund a business, but many choose to upgrade to a business credit card as soon as they can.
What kinds of business use credit cards?

The use of business credit cards is highly common. Companies across all industries and sizes use them for their flexibility, to benefit from rewards and – in some cases – collect air miles. Almost all business credit cards come with the business owner’s or an employee’s name printed on, however, it’s the responsibility of the business to pay monthly bills.

Should you use a business credit card to fund you business?

As we mentioned up top, every business decision-maker should assess their situation according to their unique position. It’s certainly possible to use a business credit card to cover general expenditure and costs. That said, they tend to have five main disadvantages.

One of the key drawbacks is that business credit card suppliers typically don’t offer the scale of finance available through other types of borrowing, such as a business loan. Simply put, loans can give business access to larger sums of finance.

Something else to watch out for is that a number of card providers charge you a fee to withdraw money from a cash machine. That might not be a problem for many, but it’s worth bearing in mind if spending cash is a key component of your operation. Similarly, you may find that the fees you’re charged for foreign transactions are larger than with other options, such as a prepaid debit card with an overseas-focus.

Many business credit cards also come with a recurring annual fee. These are fairly small, but certainly worth checking out before you apply. Finally, unlike personal credit cards, business cards are not protected by the Consumer Trade Act, so the card provider is not obligated by law to protect you in the event of faulty goods or erroneous transactions.

What are the alternatives to a business credit card?

If you’re thinking about applying for a business credit card, you could consider the other finance options available for your business. First off, you could explore charge cards, which work a bit like credit cards. The main difference is that you’ll need to pay off the full amount of money each month, as charge cards don’t extend credit. Credit cards allow you to pay what you owe over time, though will likely charge interest left unpaid.

Beyond that, it could be worth looking into business loans or credit facilities. These enable enterprises to access more substantial amounts of money. Credit cards with high limits are hard to come by, so when requiring significant funds many businesses turn to these types of borrowing.

In summary

As you can see, there’s plenty to consider when thinking about business credit cards or the alternatives. So think about you business situation and try to plan out what kinds of funding will suit your unique situation best. After all, you’re the boss.

How to choose a loan that is best for your business

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StrategyDriven Managing Your Finances Article|Business Loan|How to choose a loan that is best for your businessWhen your business is in dire need of a financial injection, you might be tempted to apply for the loan in haste. People do that all the time not realizing the golden rule that “haste makes the waste”. By the time reality shakes them, it is often too late. They can’t do anything but bear with the scary consequences.

Smart businessmen take their time before stepping into this extreme decision. Because they know it can make or break their years of hard work. You should also take a leaf out of their book and choose the loan by carefully evaluating the following angles:

Be Crystal Clear About Why You Need a Loan

That’s the first and the most critical step at the same time. It is very important to have clarity about why exactly you need the loan because the choice of your loan will be based on that. Understand, there are different types of business loans for everything.

For example, account receivable loans might not be an ideal choice to tackle issues other than cash flow. Similarly, if you want to buy office equipment, you will have to stick to the loans which are modeled according to this very need. For acquisitions, refinancing or obtaining working capital, a credit union small business loan is a good option.

The takeaway message being, you should nail down the precise reason and purpose of the loan otherwise you will lose your way in the cobweb of multiple choices of lenders.

Consider the Duration of Getting a Loan

Well, some loans take more time in approval than the others. At times, businesses foresee the need for a loan and apply beforehand to avoid any delays. However, sometimes we are met by emergencies or it is simply not convenient for us to wait for weeks and need the loan in a matter of a few days. In such cases, fast loans swing into actions.
It is pertinent to mention here that if you have a good record of previous loans, you can save a few bucks on fast loans. However, generally speaking, these loans come up with easy and flexible process but they are comparatively more expensive.

For example, factoring is one of the main types of fast cash. But there are multiple factors will affect your invoice factoring rate such as your industry, size of invoices, creditworthiness and so on.

Estimate the Amount Needed

It is equally essential to know how much money you actually need. Many people apply for the loan just to get as much money as possible. This approach is sure to backfire in the long run.

Even if your documents are in good shape and you can easily be qualified for the bigger finance, still you should not transgress the amount you need. Because businesses have their ups and downs so why take a risk that does not make any sense?

That being said, you should also not apply for an amount so small that you become cash-strapped in the middle of a project. Therefore, be watchful while calculating the costs of your assignment. To be on the safe side, consult an expert who can estimate the right amount for you.

Shop Around

Once you are done with the above steps, it is time to seek a lender. The majority of the borrowers tend to settle for the nearby lender. Just because it saves them time and energy. That’s a non-starter. The best way is to shop around and compare rates.

Better still if you ask for suggestions from your friends. Being affiliated with a trustworthy lender comes up with a cushion.

The Last Verdict

It is important to qualify for a loan but it is even more important to get a suitable loan – the loan of your liking. There is no use of getting a loan that does not seem fit for your end goal. A bad choice of financing is more likely to haunt you in the big scheme of things.

7 Common Mistakes to Avoid When Doing Payroll for a Business

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StrategyDriven Managing Your Finances Article |Payroll for a Business|7 Common Mistakes to Avoid When Doing Payroll for a BusinessDo you have employees? That’s great! All you have to do is cut them a check to pay them, right?

Unfortunately, it’s not that easy. That’s what has led the payroll industry to grow to a size of $81.5 billion.
If you’re handling payroll for a business yourself then you need to know what to look out for, so you don’t make any mistakes. Keep reading to learn seven common payroll mistakes that can cause problems for your business.

1. Missing Deadlines

When you deal with payroll, your employee paychecks aren’t the only money that you’ll be paying out. You also have to deal with government taxes.

You need to make a note of when your federal and state tax deadlines are for payroll. If you want to avoid missing your deadline, then either set reminders or automated payments for your tax obligations.

2. Not Keeping up With New Laws

Laws for payroll don’t stay the same. In fact, they change all the time. If you don’t stay up to date with what’s happening with the current laws, then you’re asking for trouble.

By staying up to date, you can make sure that you’re always following the law. You won’t have to worry about your next audit finding something that you missed.

3. Not Sending Tax Forms

Every penny you pay your team gets reported to the government. Shouldn’t they be the ones who send out your employee’s earnings for the year?

Wrong. That’s up to you to do. Make sure that all your employees receive their 1099 forms by the due date.

4. Bad Records

It’s required by law to keep all your records up to date, accurate, and available for several years. If you don’t, then you can face fines from the government.

This is why it’s necessary to invest in a record-keeping system that will keep things up to date. But keeping records in order isn’t easy. Contact a payroll service to get help getting your data in order.

5. Ignoring Garnishes

It doesn’t feel good to take payment from your team’s checks. But if you get a request from the government, you need to take action immediately.

Any mistake here can lead to a time-consuming process to correct.

6. Miscalculating Overtime

Overtime pay isn’t optional when you have hourly employees. You’re required to pay them for any extra time they work for your company. If you don’t keep accurate records of overtime hours, then you’re going to have problems paying people for their time.

7. Not Keeping Backups

If you’re using cloud software to handle payroll, then you don’t have to worry much about data loss. But if you manage everything locally on your office computers, then you run the risk of losing data.
Make sure to put a backup plan in place to save your data in case this happens. A backup service costs money but will save you time and money in the long run.

Payroll for a Business Isn’t Easy

If cutting a check to your team was all it took to do payroll, then the payroll industry would be doomed. But payroll for a business isn’t that simple. Make sure you avoid the mistakes above so you can prevent costly mistakes.

Are you looking for more business advice? Keep browsing our blog to read through our latest tips.