How Small Business Owners Can Determine Their Salaries

Paychecks for small business owners take some time to determine the amount on them.

Small business owners must take several factors into account before writing themselves a check. (Image credit: Flickr Creative Commons)

There are countless reasons that small business owners may give for starting their own ventures. Despite this variation that exists, they can all agree on one thing – making money. Small business owners should proceed cautiously when determining their own salaries. 1800Accountant.com recommends a few simple tips on how to quantify how much small business owners should pay themselves.

No matter what kind of business entity you actually have, the major factor in determining your salary largely depends on how much money your business is making. During the startup phase, which can last several months, a full year, or even longer, it may be difficult to pay yourself a whole lot, simply because you’ll probably be spending more money than you’ll be earning. If your business is enjoying financial success, it will be much easier to pull a salary from these profits for yourself. Research has shown that successful small business owners reserve no more than 50% of the money their businesses make for their personal salaries. In terms of how often you pay yourself, this is even more dependent on how frequently money is coming in to the business. A once-a-month salary is fairly common, but it can obviously vary from one timeframe to another.

If you run a sole proprietorship, it should be fairly easy to come up with your basic salary. Sole proprietorships don’t have separate employees, hence the term “sole,” so you would be the only one who could claim any money that comes in to the business. The basic formula for setting your salary in this case is to add up all of your income and subtract your business expenses and taxes from this amount. The remaining amount can be considered your salary.

Salaries for Small Business Owners Who Have Partners or Employees

Things can get a little more complicated when determining the salary of business owners who have at least one partner in the business or who have employees. In these scenarios, it’s smart to analyze your previous and current profits, as well as to make future projections. In fact, you may want to underestimate what you expect to make in the near future and further down the road. Then consider your business expenses, how much will go to others involved in your business, and how much you will make. When operating a corporation, be sure to pay yourself a reasonable amount. When filing your taxes, the IRS may take a second look at your situation if it appears you are overpaying yourself.

With so many moving parts involved in a small business, it’s a good idea to seek out advice from an accountant or other tax professional to guide you in deciding how much your salary should be. Much like every snowflake is unique, so is every business, which is why the process someone else uses may not work for you at all. Using an accounting professional will also ensure you are keeping more of the money you make as a salary through tax deductions and credits.

1800Accountant.com is a national accounting and business consulting firm that assists startups and established businesses to stay compliant with the IRS and to find their paths to prosperity. To find out if 1800Accountant.com can help you, call 1-888-749-0117 or visit www.1800accountant.com.

4 Tips on Staying Compliant With Your Small Business

The phrase “staying compliant” is a more of a fancy way of saying “following the rules.” When an entrepreneur opens the doors to a new small business entity, the list of rules and regulations that go along with this thrilling adventure can be quite lengthy. 1800Accountant.com suggests keeping these tips in mind:

1. Comply with all local county/municipality laws.

Even though a good number of businesses have to be registered at the state level, some counties, cities, and municipalities have different laws than others in terms of operating a small business. As an entrepreneur, you should find out what these specific regulations are so that you communicate with any local offices in a timely manner and deliver any required information for you to conduct business in your area.

2. Comply with all state rules and regulations for small businesses.

Doing business in a certain U.S. state generally requires a new business owner to register with his or her state through an office in the state’s capital city. This state should be where the business is actually being operated. For example, if you live in New York and set up a DBA or a corporation, you will likely have to register the business name along with other information through the city of Albany. Each state may require a business owner to conduct business by having a license, a permit, a certification, or another type of official document that enables this individual to perform various types of work. Auctioneers, barbers, doctors, electricians, landscapers, and real estate agents are just some of the many kinds of jobs that may require a license for a self-employed person. In addition to all of this, states have rules about processing paperwork and deadlines for when certain forms must be submitted to the state, so don’t hesitate to get the details on this so you don’t get penalized.

3. Comply with IRS business tax requirements.

After accounting for local and state requirements, don’t forget about those that are on the books at the federal level. This includes working with the Internal Revenue Service. Make sure you have your business taxes prepared properly and filed with the IRS on time. Remember the quarterly filing dates for self-employed individuals, and keep in mind that business tax obligations tend to be a lot different than personal tax requirements. Retaining a professional accountant can help you stay compliant with the IRS.

4. Comply with entity-specific rules and formalities.

Certain business entities require specific rules and formalities that simply go along with running them. Some businesses are required to send annual reports to the state in which they’re registered. Others must document meeting minutes. Some must only include U.S.-based owners, while others can have partners who are non-U.S. citizens. Regardless of what kind of business you currently run or plan to start in the future, you should have a firm handle on what the requirements are so that you stay compliant at all levels.

To ensure that you are staying compliant with your small business, use the business development and accounting services offered by 1800Accountant.com. Learn more by calling 1-888-749-0117 or at www.1800accountant.com.

Business Licenses: What They Are and Who Needs Them

There are a number of rules and regulations that allow for a small business to function properly in a given location. Some of these regulations require the acquisition of special business licenses. Just as you have to have a license to drive a vehicle, states require them to do certain jobs as well. Here are several reasons why these laws are on the books that require certain self-employed individuals to maintain business licenses.

From a broad perspective, most small business owners must have some type of license or permit to conduct a particular kind of trade. Licenses are traditionally issued at the state level, which means there is some variation in terms of a company’s location and what restrictions apply to a certain area. The amount of individuals employed by a business and the type of business entity at-hand are both factors to consider when determining the licensing requirements for a company. At the federal level, the Small Business Administration assists brand new small business owners in getting state-specific license information. However, it may be best to contact your state’s filing office directly for assistance. It often takes a decent amount of time to obtain a business license, so even if you run a business, you may not be able to officially start conducting trade until you’ve obtained a license.

Who Needs a Business License?

Medical, legal, and financial professionals often need licenses to practice as both small business owners and employees of a company. For instance, a veterinarian who owns a practice must attend veterinary school and receive a degree or even special certifications to work in this capacity. Along with this higher-level education, a separate vet license is required in many cases as well. Meanwhile, accountants and CPAs must pass certain exams to receive the credentials that are required to handle the finances of their clients. The same goes for attorneys and others in the legal profession.

There are several other lines of work in which those who operate businesses must have special permits to do the activities associated with their jobs. These include barbers, cosmetologists, electricians, landscapers, and real estate professionals. Because of this, not all types of work may seem like they’d require a separate permit or license, but most kinds of jobs dealing with people, places, or animals tend to fall under this category.

No matter if you are a motivated entrepreneur or an established small business owner, it’s vital to pay close attention to the business licenses you may need to get, maintain, and renew over time. These include special permits that are often necessary to begin a certain type of business initially, in addition to those that must be renewed or updated over time. The last thing you want is for your business to become inoperable because you failed to get the proper licensing or failed to keep it up.

To ensure your small business has all of its appropriate business licenses and accounting needs covered, contact 1800Accountant.com today at 1-888-749-0117 or at www.1800accountant.com.

5 Hiring Tips for Small Business Owners

There is a lot to consider before putting up a "now hiring" sign for your small business.

1800Accountant.com offers some tips on hiring employees for a small business. (Image credit: Flickr Creative Commons)

After a small business starts to bring in a reasonable amount of revenue, the small business owner behind it may consider hiring employees to help the company continue to grow. According to 1800Accountant.com, consider these tips when hiring employees for a company:

1. Define the roles for your potential employees.

The first thing to do is recognize that you have a real need for bringing on one or more employees. Do you have the financial ability to pay them a regular salary? Do you have space in your office for them, or could they work for you from home? After you’re confident in this decision to hire, you should define the specific duties of an individual who could assist you. Think about the things you could delegate to this person and how this would benefit you as a small business owner. A good way to do this is to write a sample job description outlining specific tasks. If you can’t come up with a clear outline, you may want to reconsider whether hiring others is even necessary at a given time. Remember that opportunities for this could present themselves in the future, though.

2. Determine what work status your employees would have.

One of the most vital aspects of the hiring process is to determine the status of each and every employee you add to your team. For these purposes, “status” covers several categories. Will you hire full-time or part-time employees? Will you offer permanent positions or temporary jobs? Will they work as W-2 employees or 1099 independent contractors? Will you bring on interns who you don’t have to pay but could offer school credit to? The benefits question certainly comes into play when making these decisions as well. Full-time employees who work under W-2 status may ask for benefits, so be sure you have an appropriate plan in place for this.

3. Improve your human resources skills.

The process of interviewing job candidates and making decisions on who to hire takes lots of time and thinking. If you have a contact in your network who works in human resources, you may want to contact this person for advice. You could also do some research on reviewing resumes and interviewing tips to ensure you do a thorough vetting of all potential prospects. If you have the financial resources, look into an HR agency to get a more in-depth hiring plan. Just make sure you hire the best people for your company when it comes time to do so.

4. Consider hiring family members.

Hiring individuals you don’t know is often more difficult. If you have family members like a spouse, a sibling, or a child searching for employment, decide if one of these individuals could work for you instead. Familiarity is a big thing in the business world. There are also tax deductions available when hiring your kids if they meet certain criteria.

5. Figure out how hiring employees will specifically benefit your bottom line.

Keeping your bottom line top-of-mind at all times is a must as a small business owner. The same goes for when you hire new employees. Consider how an employee would help your business earn more revenue. Would this person be directly selling your products/services, or would they have a more indirect role in terms of generating profits? Hiring someone can be a big help for you by taking responsibilities off your plate, but if you can’t envision a reasonable financial benefit to your business from it, you may want to hold off for now.

If you’re a small business owner, an individual, or an aspiring entrepreneur, 1800Accountant.com can assist you with your accounting and business development needs. Call 1-888-749-0117 or visit www.1800accountant.com to learn more.

Why Small Businesses are Vital to Local Communities

When small businesses open their doors, it's a great sign for a local community.

1800Accountant.com explains why small businesses are a vital part of local communities nationwide. (Image credit: Flickr Creative Commons)

As you drive down the road in your local community, you’ll likely come across a variety of businesses aligning one or both sides of the street. Some of these places of business are probably national or regional chains with multiple locations, while others may be local small businesses run exclusively by small business owners and families who reside in the community. The presence of these mom-and-pop retailers is vital to the overall makeup of a community. According to 1800Accountant.com, there are a number of reasons why small businesses hold such a special place in local communities across the nation.

First and foremost, a small business represents the local cultural aspects of a community. These types of companies are not corporately owned, which gives them a bit more versatility in terms of how they can serve the area in which they are situated. In the same vein, small businesses offer employment opportunities and a more personalized feel for customers who buy products or services from them.  Larger chain stores that are not owned and operated at the local level tend to be a little more hands-off when it comes to customer service, and these types of businesses may not have the same comforting atmosphere of a local shop. Although many corporations are necessary within local areas, striking a balance by having just as many small businesses in a location is ideal.

Small Business Economics

From an economic standpoint, small businesses are a major factor in economic stability and growth in a certain area. They offer more competition, which keeps prices lower for consumers when there are multiple outlets selling similar products or services in a given place. Monopolies are much more common in areas where there are only one or two retail outlets selling things since these businesses become the only outlets where these items are locally available. This is why supporting small businesses at times can benefit both individuals and small business owners who put their heart and finances behind something they’re passionate about. If one small business starts to show positive financial signs in a community, other aspiring entrepreneurs and small business owners will be more tempted to get in on the action by starting a company of their own.

On a final note, small companies are often a significant part of the surrounding areas in which they are based. Small business owners tend to be more involved in local school systems, event sponsorships, charitable organizations, and can often offer opportunities for employment, business partnerships, and professional relationships that are beneficial to an entire community. Even though they are called “small businesses,” they can be quite wide-reaching with their influence on a specific area. Several thriving small businesses within a local community often reflect the overall progress being made in it. This is why you can gauge the economic status of a particular locale by taking a good look at the small business landscape within it.

If you need assistance with small business development or accounting, be sure to work with the experts at 1800Accountant.com. Call 1-888-749-0117 or visit www.1800accountant.com for more information.