by Andre Franco and Rocky Law

oddrose—istoc

January, 2011 — It’s a new year and a perfect time to address some resolutions for your business. You wear many hats and you have to be a jack-of-all-trades to run your business. You don’t always have time to make sure that everything is taken care of appropriately, no matter how hard you try. Having worked with many different types of small businesses for the past 23 years, we have seen all the little things that can cause problems, especially in audits. A little time spent now getting your accounting in order may save you time and money in the future.

First, whatever software you use, it is important that your chart of accounts is appropriate for your particular business, that it is clear and simple, and that it addresses your tax return preparation needs. Be consistent in your posting of expenses, have clear descriptions, keep backup documents for capital expenditures, post credit card charges to payables, and make sure your balance sheet is correct.

Second, it is also very important that you keep your personal life separate from your business books. You need to have a separate checking account and credit card for your business. Reimburse yourself for all personal outlays made for your business, whether they are paid by cash, check or credit card.

Third, if you have a home office situation, be sure that you understand the rules, the pros and cons, and what happens when you sell your home. Too many small business owners take a home office deduction only to find out that they did not qualify or they over-deducted the expenses. Others are caught off guard when they have to recapture depreciation taken when they sell their home.

Fourth, if you are a C- or S-Corp, you need to be on payroll. It is also very important that you understand the independent contractor rules when you engage services for your business. Along with payroll comes the need for worker’s compensation. Although you can exclude yourself and family members from coverage, you must cover anyone else who cannot qualify as an independent contractor.

Fifth, consider all your options for retirement planning and understand the rules for coverage of your employees. Also, be very careful about over-funding your plan. It is very easy to over-estimate your earnings for the year and be lured into investing too much up front. If you are not able to withdraw the over-contributed funds prior to the year-end, you may be subject to penalties and interest.

Sixth, make sure that you have prepared for the continuation or closure of your business in the event of illness or death.

Seventh and final, know when to ask for help.

Andre Franco and Rocky Law of ANDROC Business Services have been providing business consulting, taxes, bookkeeping and payroll to small businesses on the Coastside for 23 years. Both Franco and Law are CTEC Tax Preparers and Law is a CFP® practitioner. They can be reached at 650- 726-2359 and at www.androc.net.