Small Businesses: Getting Started
BOSTON (CBS) - According to the SBA's latest numbers, Massachusetts has close to 640,000 small businesses which employ 1.4 million folks which is about half the workers in Massachusetts and represents 99% of the businesses in the state.
The number of small businesses without employees is 480,000. These businesses are sole proprietorships. These are the individuals we will talk about this week. The really small businesses, the one-person firm.
We have a huge underground economy in this country. It's a cash only economy. Individuals think that they will have more money in their pocket if they don't share it with Uncle Sam.
That may be true for your current income, but if you don't pay taxes, whether they are income taxes, social security, or Medicare taxes, you will not be eligible for future benefits.
I am not recommending anyone pay more taxes than they should, but you do need to report all of your income and then look for the deductions you are eligible for as a self-employed individual.
The IRS has a section for small businesses on their website and they do offer some good advice.
They even have links to a tutorial on writing a business plan. Request publication 583, Starting a Business and Keeping records and publication 334, Tax Guide for Small Business to get you off on a good start. Both can be downloaded from the IRS' website.
Another helpful government resource for the small business owner is the SBA, Small Business Administration; they have key information on running your business and where to get financing. And they offer webinars and consulting as well as seed money.
Another good resource would be a good accountant, a CPA, as you struggle to start your new business. Well worth the dollars spent!
Check out the many books available for starting your own business whether it is a day care or a landscaping firm. Both the Complete Idiot Guides and the Dummy series have some good offerings.
One more thing: Five Tips for Starting a Business from the IRS -
Understanding your tax obligation is one key to business success. When you start a business, you need to know about income taxes, payroll taxes and much more. Here are five IRS tax tips that can help you get your business off to a good start:
- Business Structure. An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you file.
- Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated tax payments. If you do, you can use IRS Direct Pay to make them. It's the fast, easy and secure way to pay from your checking or savings account.
- Employer Identification Number (EIN). You may need to get an EIN for federal tax purposes. Search "do you need an EIN" on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.
- Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.
- Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. You're eligible for the credit if you have fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers, such as charities. For more information on your health care responsibilities as an employer, see the Affordable Care Act for Employers page on IRS.gov.
Get all the basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center.
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You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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