Small Business Accounting Information

Opening a small business today can be a scary task. With so much uncertainty it is important to plan out your budgeting for small business ideas. One thing that every small business must have is a way to get the money from the customers. For that you will need to have merchant services account so that you can accept credit cards. There are several fees that are charged to use this service.

Be sure that you check out several merchant services companies to make sure that you are getting the best deal. The fees include a transaction fee (a small fee for processing the charge), the discount rate fee which is a percent of the transaction amount and a monthly fee. This is typically about twenty dollars. Do a lot of research so that you can get the best costs for this service.

With the tough economic times we are going through it is tough for small businesses to hang in there. It is better in the long run if the small business can stay in business until better economic times. You might have to make some tough decisions that will not make you popular but it is the right thing to do. It is best to have small business plans so that you can be prepared.

Regulate overtime. Make sure that the employees are working only the amount of time per day or per week to not generate any overtime.

Change phone system. Consider using the VOIP phone system, this can save you hundreds if not thousands a year over regular phone costs.

Reduce employee insurance. This is not a popular choice by employees but if it can save a job it is worth it. Look into eliminating extra insurance like dental or vision. Cut health insurance costs by using a plan with higher deductibles and co pays.

Laying off employees. Although hard to do this is mandatory through financial hard times.

If you are planning on opening a small business then you will need to get a tax ID number from the IRS. To do this you have to fill out the form SS-4 that you can get from the IRS Forms and Publications link on their website.

It will take about two to three weeks to get this tax ID in the mail. You cannot open a business bank account until you have the tax ID. If you did not plan well and need to get the ID faster, you can call the IRS at 866-816-2065 and have an ID assigned to you over the phone. Once you have the tax ID you have to file your small business taxes on your tax return every year with that tax ID. Failing to file could cost you a penalty.

When considering opening your own business one option is a franchise. Franchises are easier because they can have an established name already. However you are not free to run it the way that you might have in mind because you are governed by the terms of the franchise agreement. You are able to put in your hard work and dedication which can make your franchise a success. Currently there are 3,000 franchised businesses.

A good suggestion is to choose a couple that interest you and do the research to find out all of the particulars about each of them. Then you can decide which one is right for you. Important aspects would be profitability, a good image, integrity and a successful industry. Many of the franchises will also offer classes and small business consulting to help you get started.

Starting a business and making it a success is a very difficult task. There are many aspects to the business that it would be very difficult for one person to know how to handle each perfectly. It is best to get small business help with the areas that you need to learn more about. SBA has a free small business training network where you can take classes online to learn about anything that you need to know. Here is an outline of what they offer:

Finance & Accounting – loan information and introduction to accounting
Business Planning – how to prepare a business plan
Stating a Business – guide to starting a business
Business Management – eight choices from technology to crime prevention
Government Contracting – from winning federal contracts to government contracting workshop
Surviving a Slow Economy – down shifting business guide and information on business opportunities
Marketing & Advertising – strategic marketing information

Being able to open your own business and be your own boss has always been an American dream. Small businesses have contributed greatly to the American economy. About seventy percent of new jobs have come from small businesses in the last ten years. Because of this President Obama has a new fifteen billion dollar plan for small businesses. Below is an outline of the benefits for small businesses including small business tax breaks.

Small business lending fees have been reduced
Government guarantees on SBA loans have been increased – raised up to 90%
Steps are being put in place by the government to boost bank liquidity
Small business owners can borrow as much as two million with enhanced government assurances
If a big economic development project needs financing then up to four million in loans can be obtained
Small businesses that earn up to fifteen million can claim losses for the past five years
Small businesses can write off up to $250,000 in investments this year
Small businesses can reduce estimated tax payments to ninety percent of the previous year’s tax filings
Small businesses can take a larger depreciation deduction within the first year of when a property was purchased
For those that invest in small businesses there will be a excision of seventy five percent of capital gains

The accounting department of businesses must follow a procedure in processing transactions. This is known as the accounting cycle. Below are the step by step procedure of the accounting cycle.

Identify the transaction – to see where this originated from
Analyze the transaction – Find the amount of the transaction and figure out which of the accounts will be effected and where this will go next.(accounts payable, accounts receivable)
Journal entries – to record the transaction in the proper journal
Post to ledger – This is the transfer of the journal entries to the ledger
Trial Balance – This is a calculation to verify that the sum of the debits is equal to the sum of the credits
Adjusting entries- This is for the accrued and deferred items. They are put in the journal and posted to the T-accounts in the ledger
Adjusted Trial Balance – After the adjustments are made a new trial balance is calculated
Financial statements – The financial statements are prepared
Closing Entries – This is when the balances of the temporary accounts are transferred. Typically this is revenues and expenses and they are moved to the the owner’s equity
After-Closing Trial Balance – After the closing entries a final trial balance is calculated

It is very important that the accounting bookkeeping department follows procedures in order to keep the records straight.

This is the last business formation installment. This one is about S Corporation. with S Corporations the income and losses are passed on to the sharholders. The shareholders are then responsible for reporting this on their incomes tax reports.

The advantages are that the shareholders have limited liabilities for debts also shareholders can use the corporate losses to offset income. The disadvantages are that this is more expensive to create then a partnership, benefits are limited to owners that own more then two percent, income is allocated to the shareholders and lastly there is more paperwork that needs to be done then with limited liability formations.

Which ever way you decide for your business formation make sure that you do the research for small business planning.

This installment will look into the advantages and disadvantages of forming a corporation. With a corporation it is considered to be a separate entity from those that own the business. The owners are considered to be shareholders of the corporation. The owners can change hands but the corporation remains the same.

One of the biggest advantages is that the shareholders are not liable for debts or judgments. However officers of the corporation can be held liable for their actions. Another advantage is that any benefits paid to officers or employees can be deductible.
A disadvantage is that making the corporation takes more time and money then any other formation. Being a corporation may result in higher taxes and more paper work.

You may need to get some small business consulting when choosing this option.

In this installment we are looking at limited liability partnership also known as limited partnership. This one is not commonly used for retail or service type of business. The limited part describes the investment and the decision making.
One of the main advantages is that the partner has limited liability as long as they are not involved in business management decisions. a second advantage is that a general partner can raise money and not involve outside people in the management decesions.
The main disadvantages are: the general partners are personally liable, it costs more to create a limited liability partnership then it is to create a general partnership and this type of partnership is used mostly for investment in real estate.