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Young business owners tend to make the same mistakes. The good news is, they’re easy to avoid or fix! In this post, we are discussing 4 common small business mistakes you should avoid. From unfiled taxes to co-mingling funds, we’re here to help you avoid these common mistakes!
The first of the small business mistakes is not filing all of the tax returns necessary
As a business owner, you will find that there is more to your taxes than just your income taxes now. If you sell products, you must track the sales tax. If you have employees, you must track payroll tax. Leaving these returns unfiled will cause a big mess and headache for you and your accountant later down the line. You could also suffer serious legal ramifications. The best way to ensure you are filing the right taxes at the right time is to hire a good CPA in Tucson who can keep you on track. The MOD Ventures team helps lots of business owners just like you keep on track and filing the right returns.
Misclassifying contractors that qualify as employees
The IRS and Department of Labor have certain requirements that separate an employee from a contractor. Contractors work on a project-basis and do not take advantage of company benefits. According to this article by the IRS, three factors to consider when deciding if a person is an employee or contractor, you must consider Behavioral Control, Financial Control, and Relationship of the Parties. If you misclassify an employee for a contractor, you will be liable for that employment tax. You can use this form (form SS-8) to help you decide whether or not you have a contractor or an employee.
The third on our list of small business mistakes is neglecting your bookkeeping
As easy as it is to forget about it, it’s important that you stay consistent with your bookkeeping. As a Tucson business owner, it’s important that you keep your books in check. Using a bookkeeping software like QuickBooks Online makes it easy to categorize your expenses, check your P&L, and more, all with a few clicks of a button. As your business grows, you will find that you have less and less time to do your accounting. This is normal. You went into business to do your dream job, not become your own accountant. It’s important to know when it’s time to outsource your accounting. Letting your bookkeeping be thrown to the wayside will prevent you from learning new ways to save and stretch money, and also will make your life much more difficult come tax time.
Comingling of business and personal funds
One of the biggest small business mistakes we see is when new business owners fail to separate their personal and business funds. Your personal and professional funds must be separated as soon as possible. If you fail to do this, it will be hard and confusing to distinguish what is a business or personal expense. This will be tricky if there is ever a time when you are audited by the IRS. Not only will they be looking through all of your business expenses, but also your personal expenses because it’s all in the same spot. Opening a separate bank account for your business is a great first step to separating these finds.
All in all, there are a lot of small business mistakes to avoid, but these are definitely the top four. Have you made any of these mistakes before? We are happy to help coach you through this process so that your Tucson business can be better than ever! Please contact us if you have any questions after checking out this post.