Forums: Discussions for entrepreneurs and small business.

Hi Diggity,

Choosing a business entity can be a difficult task.  There are a ton of tax reasons to go one way or the other.  Here is a link to the IRS site that gives explanation to all forms: http://www.irs.gov/businesses/small/article/0,,id=98359,00.h tml.

Also, look into your local SCORE chapter and go and talk to a business counselor.  The service is absolutely free to you: http://www.score.org/.  They can give you some good advice on what direction to go; at least be able to translate the tax mumbo jumbo for you.

Rather than going as a sole proprieter, I`d look into doing an LLC.  Even if you just put one of you as the member, you can do this form of business entity.  There are tax benefits and protections going this way.  

I don`t understand where you got information that if your wife works, that you cannot file a joint tax return.  I guess I`m confused about this comment.

Check out the two resources I gave you.  Hopefully, it will help you out.

Cheers,

Tammy

First off, I do know I should be going to an accountant for these questions and I will be sometime this month but I`m too impatient and am very curious about the questions.

Just to set the stage, this year I formed an LLC with a partner for a software/webdesign company.  We both have normal 9-5 jobs and do this work mostly in the evening.  This past year we had no revenue (as we`ve bee doing mostly development) and a small amount of direct expenses.  So now a few questions

1) Even though we have little expenses and no revenue should we still see a CPA (I`m pretty sure I know the answer but figured I`d ask)?

2) Since this year (and probably next year) revenue will be low and expenses high (or at least higher) do our losses roll over to regular income to reduce our net?

3) If my partner and I plan to be 50/50 partners but we spend different amounts on expenses can we easily write off different amounts as losses?

4) In a situation like ours what would you consider reasonable things to expense?  Home office space? Home office supplies? Any other common things I may be forgetting?

5) Any other things a newbie like me should be thinking about and/or doing?

Thanks in advance,

Frank

1)  No way.  This should be easy to do with tax software.  (Schedule C)

2)  Your losses roll over to reduce each of the partners regular income as a % of ownership.

3)  You can`t write off different amounts if you are 50/50.  You should square up with each other before filling the taxes.  Or change the % ownership accordingly.

4)  This is where an accountant is useful.  Or due so web research.  Tax software helps here as well.

5)  Keep good records of all transactions.  Set up a seperate business account if you haven`t done that yet. 

1) I don`t think you need a CPA. I do think you need an accountant or bookkeeper. You will be greatly rewarded with what they can teach you. A good one should help you see where to make improvements in spending, billing, pricing, etc.

2 & 3) I agree with MNGrillGuy.

4) You need a separate bank account for your business. EVERYTHING having to do with your business should come into and go out of that account. If you try to keep it straight with receipts and journals, you`re just creating a lot of extra work for yourself and will very likely miss deductions.

You might consider using a simple accounting program like Quicken or Microsoft`s newOffice Accounting 2007. Right now they are offering it for free. You just need to download it from their site.

Pat Palmer

Accutrack Business Solutions

Working with You to Keep Your Organization on Track

407-957-4140

“A taxpayer is someone who works for the federal government but who doesn`t have to take a civil service examination.”           - Ronald Reagan, US President

We`ve already purchased supplies from a business that won`t tell us its EIN.  The owner thinks that if we don`t have his EIN, we can`t report his income to the IRS and he can then dodge taxes.  Is there a way to track down the EIN of a supplier who refuses to provide it?  Is there a way to look up the supplier`s EIN online?

I have had this problem many times in the past. I have a technique that works every time.

Tell your vendor, that unless they are a corporation, if you pay them more than $600 in a year, you are required to file a form 1099 with the IRS.  You can`t risk your business and your reputation, so if they don`t want to give you their EIN, you can just write "REFUSED" in the box. 

Have the vendor fill out a form W-9 for you  and keep it with your records.