Our Two Cents

 

Welcome to David in Taxland - a series of tax articles written for business owners. Spoilers: a deduction is a deductible expense – and – pancakes and pianos should be kept separate.

Do you find taxation confusing? I did. Then I became a tax accountant. I still find it confusing. Just not as much or as often. I write these articles to help you wrap your mind around key concepts and practices. I want taxation to make sense to you.

Hey, before we start, let’s get this out of the way: there are a gazillion articles out there on business deductions; many are worth reading. IRS Publication 535 Business Expenses is a very good guide. When you make tax-related business decisions, please rely on appropriate and legit sources, not blog articles—especially not mine. When in doubt: study, learn what you can then talk with a tax pro. Enough about that. Let’s get right to it.

 

You already know your startup needs funding in order to succeed. No matter how strong your vision is, without sufficient capital, you won’t be able to bring your idea to life.

What you might not know is which types of startup funding are ideal for your goals and circumstances. This guide will clarify the topic.

The following are five common types of startup funding. As you strategize, consider which you should pursue.

 

Welcome to David in Taxland - a series of tax articles written for business owners. Spoilers: all income is taxable unless it’s not and the moral to the story is to pay and file your taxes on time.

Taxable income is cleverly defined by the IRS. Instead of making certain types of income taxable, and leaving the rest not taxable, it took an opposite position: all income is taxable—unless it’s not. The basic idea is this: any increase in wealth for a taxpayer (individual or business) is taxable unless the IRS provides a specific exclusion or deduction. Note: income can be cash or non-cash (such as fringe benefits).

 

As a small business owner, you might be worried when you find out how frequently small businesses fail. Especially when you read that according to the Small Business Administration, only about half of all businesses survive past the first five years.

Statistics like that can be troubling, but you shouldn’t let it deter you from your dream to start your own business. A wide range of factors can come into play when a business fails, and there is a lot you can do to protect your business. One thing every small business owner should do is to find out the different causes of small business failure so they can learn how to avoid them.

 

The Story of Nolan, an NOL and a Very Bad Haircut

Welcome to David in Taxland—a series of tax articles written for business owners. Spoilers: this article only considers C-corporations. Hint: don’t be like Nolan. Future articles will bring happier subjects, shorter articles and, of course, Al Capone.

Businesses are usually created for profit, but many operate at a loss in the early years. In Taxland, a business is profitable when it has more revenue than deductions. If it has more deductions than revenue, it’s operating at a net loss—it has a Net Operating Loss, an NOL. We call a C-corporation with an NOL a loss corporation.

Some companies are better equipped than others for growth. The difference can come down to something as seemingly simple as business structure—not leadership vision, not go-to-market strategy, but the details of an incorporation document. Specifically, we’re talking about the distinction between an LLC and a C corporation.

If you own a startup, chances are good your business is structured as an LLC (short for limited liability company). Chances are also good your business could benefit from converting to a C corporation (AKA “C corp”).

Like getting struck by lightning or dying in a plane crash, an Internal Revenue Service audit is as terrifying as it is unlikely. The IRS audits fewer than 1% of taxpayers every year. Nonetheless, there is always a remote possibility you’ll receive a notice that your tax return has been selected for examination.

If you’re one of the (un)lucky ones, don’t panic. Take a deep breath and do the following:

Getting your taxes filed on time is a lot easier when you a) have a year-round accounting system and b) have a clear deadline to aim for. By outsourcing your business’s accounting and taxes with inDinero, your covered on both fronts. In the article we’ll focus on the latter to help all business owners build a 2019 business tax calendar to keep up with filing responsibilities and avoid late penalties.

(Still working on your 2018 business taxes? Check out those dates in the 2018-2019 version of this calendar.)

Hate using your time to keep track of your business’s finances? You’re in good company. Many business owners consider bookkeeping, accounting, and tax filing the least enjoyable aspects of running their companies.

Yet countless business owners still manage their finances by themselves—not because they like punishment, but because they believe they’re saving money by doing so. Particularly for early-stage companies, an accountant or accounting department seems like a luxury that’s difficult to justify.

This belief frequently has little basis in reality. For a growing business, outsourced accounting can absolutely be worth the cost. By outsourcing your company’s books, you can save money on taxes, make better use of your and your team’s time, and gain the perspective you need to more effectively communicate about your organization and your vision.

Here are a few reasons outsourced accounting is worth the cost:

It’s that time of year again. Tax season. This time, you’re sure you’ve got things under control. Yes, you’re stressed, you have eight different spreadsheets open on your screen, and you’re waiting for yet another government website to load, but you’re almost at the finish line. And after spending hours filling out multiple forms—triple-checking that you’ve made the right estimated payments, tracked the right expenses, and applied the right deductions—you finally file your taxes.