Small Business Accounting & Legal Tips

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Starting a successful small business is no easy feat. Having the guts to make your dreams a reality is step one. Once you’ve accomplished that goal, there are a number of steps to take along the way to ensure your business soars legally and financially. From tracking expenses to taking inventory and preparing for taxes,…

Starting a successful small business is no easy feat. Having the guts to make your dreams a reality is step one.

Once you’ve accomplished that goal, there are a number of steps to take along the way to ensure your business soars legally and financially.

From tracking expenses to taking inventory and preparing for taxes, you’ll have plenty of accounting and bookkeeping tasks on your to-do list.

With a solid plan in place and a handful of helpful tools and resources, you can creatively and effectively manage your business.

Use this guide as a starting point to get your legal and accounting considerations on track so your small business can be a flourishing one.

Our Top 5 Legal and Accounting Tips for Small Businesses

There are more components to running a successful small business than the steps presented here, but they are critical to establishing a strong foundation for your company.

With the tools and tips below, you can strategically manage your business’s finances.

Open a Business Account

Mixing personal and professional finances can be tricky, especially when you’re the owner of a small business.

If you haven’t done so already, you need to open a separate checking account for your business. Period.

In fact, if you become an LLC or a corporation, you’ll be required to have a separate account. Even if you’re a sole proprietor, you should open one to simplify your bookkeeping and save yourself a headache at tax time.

A lot of the best banks offer business checking and savings accounts optimized for small businesses’ tax and accounting needs. When you register for an account, you’ll be asked to provide legal proof of your business, so be sure to check the bank’s requirements.

You can also get a debit card or business credit card to streamline your company’s spending and expense tracking. Compare accounts to be sure you’re getting the best rates available.

Hire a Professional

Sometimes, financial matters are better left to professionals. With so much at stake, your small business could benefit from hiring an expert advisor, especially in areas where you’re less adept.

There are primarily two types of professionals every small business could benefit from having on the payroll: a lawyer and an accountant.

From putting a solid system in place to manage your day-to-day finances and safeguarding your company legally to putting out fires when they arise, good lawyers and accountants are an invaluable asset to small business owners.

Lawyer: While you may not have any legal issues today, small businesses are constantly at risk of being sued. Rather than waiting until you’re being served papers, you should protect yourself early on by hiring a lawyer for your small business. The fees you pay for a lawyer today could be far lower than the legal fees you could be slapped with if you leave yourself unprotected.

Accountant: You may want to look into hiring a CPA (Certified Financial Planner) if your finances are complex, or if you’re inexperienced with recording and interpreting business finances. Hiring an accountant can remove one more stress factor from managing your business and help to ensure your spending and earning are properly recorded on the books.

Track Your Expenses

Tracking expenses is one of the most critical components of small business accounting. At any given time, you should be able to quickly identify any one of your purchases without rummaging through a drawer full of receipts.

You should also be able to access all of the payments you’ve made, from invoices to biweekly checks to your employees.

Apps and software can simplify expense tracking (more on that below), allowing you to spend more time doing what you love.

Effective expense-tracking helps you to pinpoint the way your company spends, categorize your expenses, and get the most out of tax credits and write-offs.

Some common expense categories include entertainment, business travel, dining, vehicles, office purchases, and gifts. Itemizing your expenses goes a long way in terms of simplifying your finances and supporting your tax claims.

Plan Your Payroll

Even if your business is a one-man show, you’ll need to put some thought into how you want to receive payments. Old-fashioned checks or a service like Venmo may suit your needs in the early days, but as your business grows, you’ll probably want to consider a more robust merchant service to process your payments.

As you expand and begin to hire more employees, you need to establish a payment plan for employees. You may have a combination of freelance contractors, part-time employees, and full-time employees. You’ll also need to decide on hourly rates and salaries for each of those employees.

Beyond that decision, you’ll be tasked with determining the schedule for your payroll and be mindful of tax withholdings. There are a number of payroll systems that can help streamline all of these considerations for you, which we’ll cover below.

Take Advantage of Apps for Small Businesses

From bookkeeping to bankrolling your operations, the online market is filled with platforms tailor-made to meet small businesses’ accounting needs.

Here’s a quick look at some of the best services to help you manage your businesses’ finances.

  • PayPal Business: PayPal is one of the most popular apps for processing payments, and its business accounts come with low transaction fees and quick access to your funds. Platforms like PayPal and Dwolla offer a secure and affordable merchant service to small and medium-sized businesses.
  • Expensify: Expensify is a newcomer to the accounting software game, simplifying expense tracking for new business owners with an easy-to-use platform that takes the heavy lifting out of Expensify.
  • FreshBooks: FreshBooks is a versatile platform that can track your expenses, invoices, hours, and payments. It can also be linked to apps like Gusto, Quickbooks, and Xero. If you’d like to give FreshBooks a go on a trial basis, it comes with a 30-day free period. After that, you can decide whether or not to upgrade to a more comprehensive package.
  • Quickbooks Online: Offered by Intuit, Quickbooks Online provides expense tracking, easy account syncing, and reporting features that help you assess your profits and spending, along with tax preparation tools that allow you to easily transfer your records to Turbotax.
  • Xero: Xero offers its accounting services through the cloud, managing expenses, payroll, invoicing, and payments, with a 30-day free trial and affordably priced packages for businesses at every level.
  • Gusto: Formerly known as Zen Payroll, Gusto is another one-stop shop for small business accounting, compatible with other leading accounting software. Gusto comes with workers comp management, payroll, benefits, and HR services with some plans.
  • Paychex: Much like Gusto, Paychex offers full-service legal and accounting assistance to business. With Paychex, you can access business insurance. HR and compliance, retirement accounts, benefits, payroll, and tax services.

Bottom Line

Your day-to-day business shouldn’t be hindered when tax time rolls around or an unexpected legal battle comes your way.

With a plethora of apps and software custom-made for small business accounting and professionals trained to deal with small business needs, you can rest assured that your business’s finances are in order.

Whether you need to hire a lawyer or enroll in a payroll service, take the steps today to ensure your small business accounting is in order.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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