Don’t opt for sole proprietorship: Chances are you are starting your venture under this type of business structure because it entails little paper work and few legal formalities and nominal set-up costs. It’s attractive to many entrepreneurs because you don’t pay business taxes, you get to make all the decisions about your business and do not have to adhere to any government standards regarding day-to-day operations. But there are real down sides of going with sole proprietorship that you should be aware of:

  • You don’t have any liability protection. If you are sued, the plaintiff can go after your personal assets.
  • You are not automatically eligible for business tax deductions which can help shore up your bottom line
  • You are least likely to be attractive to traditional lenders should you choose to expand or grow your business.
Do consider other business structures such as partnerships and limited liability corporations instead.  Don’t commingle accounts: This is a red flag to the IRS. Though not illegal, it can get truly messy when you mix personal expenses with business transactions; and can lead to tax penalties if you are not super vigilant and number savvy. Keep separate accounts for ease of record keeping and tax preparation. You save time and, if you turn over your records to an accountant to file, you can save money.

Don’t start the year without a tax plan: Setting a tax strategy by December will allow you to take advantage of tax deductions from the start of the new year. It keeps you financially organized and in the end, can save time in preparing your taxes and even save money if you hire an accountant to do our taxes. Such a regimen allows you to better focus on growing your business through creativity, innovation and customer service enhancement.