Common Issues in Formation of Small Business

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Common Issues in Formation of Small Business

• Robert M. Baldwin CPA, PFS
• Baldwin Associates, LLC
• Charleston, South Carolina

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Employment

• New Immigration Law South Carolina
• Documents Required
• Employee vs. Independent Contractor
• Wage and Hour

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New Immigration Law South Carolina
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Documents Required

• W-4
• I-9
• Other proof as required by SC Law

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Employee vs. Independent Contractor

• Control is the key.
• Failure to withhold when required to do so is an
  expensive proposition.
• Publication 15 (Circular E).
• Dont forget Workers Compensation Certificate for
  Independent Contractors.
• Dont forget reporting!

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Wage and Hour

• Dont forget to advise the client to be mindful
  of the current minimum wage.
• Educate the client about overtime and his or her
  obligations under the Federal Law.

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Banking

• One Bank or Two
• Financing Tips
• Online Issues

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One Bank or Two

• New Businesses need to establish a single strong
  banking relationship.
• A long term relationship with a quality bank
  should be encouraged. However, go to two bank
  relationship when possible.
• Banking includes managing cash, credit card
  processing, borrowing working capital and
  financing assets.

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Financing Tips

• Plan to build a quality banking relationship over
  time.
• Expect to guarantee debt.
• Try not to use credit cards for working capital.
• Credit Cards are good for purchasing if paid off
  each month.
• Be timely on all your debts.

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Online Issues

• A great tool!
• A risky endeavor when used improperly.
• Never, Never, Never give access and authority to
  the bookkeeper.
• Use quality passwords.

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Accounting

• In House vs. Outsource
• QuickBooks or What?

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In House vs. Outsource

• It is hard to find a good part time book keeper.
• Expect to pay at least 15 an hour for quality in
  house person.
• Expect to pay 50 an hour or more to outsource.

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QuickBooks or What?

• QuickBooks is the leader.
• Microsoft Small Business Accounting Package .
• Retail requires special attention. Point of Sales
  etc.
• Use the package chosen by the majority of people
  in the business.

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Information Systems

• Credit Card Processing
• Data Security
• Check Processing.

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Credit Card Processing

• Expect to pay 1 to 5 for the use of credit
  cards.
• Should be considered a definite tool by those
  parties with working capital needs.
• The fee is a function of volume of dollars
  processed.
• Most banks provide via outsource.

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Data Security

• Should be a priority at the business set up.
• Loss of information systems can close a business.
• Loss of client information to outside parties
  will destroy a business too!
• Back Up , Back Up, Back Up!

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Check Processing

• Many Banks offer check scanning machines for
  immediate deposit.
• Watch the obligations when handling client
  checks.
• Well worth considering!

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Business Licenses

• Basis of Tax
• Planning

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Basis of Tax

• It is a Gross Receipts Tax. Not measured by
  income.
• Due at the start of business.
• Estimate 1st years revenues conservatively.
• Usually a minimum fee for the first 2000 of
  receipts then dollars per thousand of additional
  receipts.

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Planning

• Choose your venue carefully.
• Recognize that all revenues are taxable unless
  reported and taxed in other jurisdictions.
• Interstate and International revenues are taxed.

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Capitalization

• How much money do you really need?
• Generally three months expenses, so if you are
  going to have 120K annual expenses, you better
  start with 30K.

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Entity Choice

• Listen to next presenter but I like to start with
  Limited Liability companys taxed as disregarded
  entities or partnerships.

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Resources

• Internet-
• WWW.IRS.Gov
• WWW.SCTAX.ORG
• WWW.AICPA.ORG
• Library

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Tax Issues

• Sales Tax
• Property Tax
• Withholding Tax and Payroll Tax

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Sales Tax

• Collected on all sales of tangible personal
  property in South Carolina.
• Use tax on goods purchased outside SC and bought
  into SC for use by the business.
• Monthly reporting (can be electronic).

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Property Tax

• Business are required to report to either the
  County Assessor or SC Department of Revenue
  (PT-100).
• Due by the end of the 4th month following the
  close of the tax year.

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Withholding Tax and Payroll Tax

• Generally best to use a payroll service or CPA.
• Dont fail to deposit on time, most expensive
  form of borrowing.
• IRS wants taxpayers to pay EFTS. (Electronic
  Funds Transfer System).
• Returns due both quarterly and annually.
• Personal Liability

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Legal

• Pay me Now or Pay me Later?
• Need I say that competent counsel is always a
  must!

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Insurance

• Liability
• Property
• Health
• Life

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Liability Insurance

• Very important as assets grows.
• Get from quality insurance agent.
• Dont over insure.
• Obviously, entity selection is important here.
• Dont leave to much excess cash in the entity
  (business).

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Property Insurance

• Use a competent agent.
• Insure the IT systems.
• Dont over insure, but dont forget to insure.

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Health Insurance

• Hard to do with less than 3 employees.
• Use Benefits advisors.
• Seek to use trade association group plans.
• Dont forget Health Care Savings Accounts.

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Life Insurance

• If business is owned by two or more you should
  consider insurance to fund buy outs at death.

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Retirement Plans

• Alphabet Soup
• Profit Sharing
• 401K
• IRA
• SEP
• Simples
• Self?