Kelly Bullis
Just like new year resolutions, the urge to start a business early in the year happens.
A key issue to resolve is to determine when the business begins to be a business. You can form an entity with the Secretary of State, you can rent an office and stock it with furniture, computers, phone system, etc. You can attend training and certification seminars. You can have a sign put on your door, maybe out at the street too. You can have business cards made up.
All of this is fine and necessary, but the IRS doesn’t accept any of that as proof you “started” your business. Until you start providing the business activities your business was intended to do, and are in a position to generate revenue, everything you do is considered “startup” expenses. You should pull up the Nevada Appeal archives and read the article I published on Jan. 13, 2024 on the details of deducting “Startup expenses.” The short version is, you can deduct the first $5,000 of startup costs in the year you start the business. Anything over that amount steps into a complicated tier system of deductibility rules.
An important step in “starting your business up” is documenting your activities, such as contracts, customer interactions, marketing efforts, etc.
Do you plan on having employees? Find a good payroll service to assist you. I strongly recommend you NOT try to do payroll on your own. It is the number one way small businesses get into trouble with the IRS. Best is to do an employee leasing arrangement where you never sign up as an “employer” in the first place. Ask your payroll service prospect to explain “employee leasing.”
Do you have a separate bank account and separate credit card for the business? Do not make the mistake of mixing personal and business transactions together. Keep them separate. Also, sign up for an online accounting system. Our favorite is QuickBooks Online. You may see advertisements for others, like Zero. Remember, whatever accounting system you choose, your bookkeepers and tax preparers need to know how to use it. Just about everybody knows QuickBooks Online, very few know other software choices. You limit yourself when you try to be “different” and choose a little or even unknown accounting solution.
Do you have general business insurance? Find a good Insurance Broker. There are multiple decision issues you need to discuss with a professional and make good decisions before you open your doors.
If you have multiple business partners, is your operating agreement complete? Does it include buy/sell provisions?
These are just a few of the key things you need to do before actually starting up a new business.
Have you heard? Ecclesiastes 3:10 says, “I have seen the business that God has given to the children of man to be busy with.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.