The Seven, not-so-deadly, Sins of Small Businesses

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Be Sure Your Business Isn’t Making These Common Mistakes

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During my time working with small business owners, and of course being one myself, I have found that there are certain common mistakes that can ultimately doom most businesses.  All too often, small business owners become enamored with the idea of “being their own boss” and doing something they “love”.  These thoughts often cloud the judgment of even experienced business owners in their desire to pursue the American Dream.  In order to avoid these pitfalls you have to establish a strong foundation to your business; put in place systems that will help you keep your feet firmly planted in reality while you pursue your dreams.  Below, I have listed seven common mistakes that prevent entrepreneurs from building that strong foundation for their dreams;

  1. Seek professional advice

“Concentrate on your strengths and seek help for your weaknesses.”, that is the first piece of advice I give to any new entrepreneur.  Seeking out trustworthy professionals to guide you through the start-up process will help you to avoid all manner of financial and legal problems.  Later on, when the company is up and running, these same professionals will continue to be valuable members of your team. In order to grow your business you need to be able to concentrate and put your energy into your core business. Allow the professionals to take care of tasks such as; accounting, marketing and legal affairs while you manage growing your business.

2Create a formal business plan

Creating a formal business plan is important for any business. Think of a business plan like a road map.  It can aid you in determining specific goals and be a guide to help you stay on track.  In the process of creating one you will determine the size, location and buying pattern of your target market and the feasibility of your business idea. It can also be useful when seeking outside funding from banks or other types of investors.

3. Form a legal entity

If you are thinking of starting a business as a sole proprietor or are already doing business as a sole proprietor you need to examine your threats and determine if it’s really right for you. It’s important to note that a sole proprietor is not a legal entity. There is no separation between the business and the owner. Because of this, the business will cease to exist when the owner dies. Also, this form of business does not provide any type of personal liability protection between your business and personal assets. If you want to develop a successful long term company, it is advantageous to form the proper legal entity

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How to Keep Your Small Business Out of Hot Water

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Is Your Small Business in Danger of an Audit?

In recent years, the total number of audits on small businesses has increased at the IRS despite a decrease in the overall number of audits.  Sadly, this change in focus by our IRS is based almost solely on their search for more revenue.  Because of the nature and number of small business deductions, the potential for error is greater.  If you qualify for a deduction don’t be afraid to take, but be prepared to prove you deserve it.  Below, is a list of some of the more common deductions that will set off a red flag at the IRS;

5 of the top reasons for an IRS audit 

Home office deduction 

There are two primary areas where filers make mistakes with this one.  First, is calculating the amount of square footage actually being used for the office accurately.  Second, the office space must be used “…exclusively and regularly for your course of business…”  The problem arises over subjectivity; what do they mean by ‘exclusive’?…or ‘regularly’? Should I include that part of the home or not?  These questions can be difficult, but not impossible to prove and justify.

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