If you own or manage a small business, the end of the year is the time to get your business into shape. Gyms and athletic clubs tend to get more crowded at that time of year from those enacting their New Year’s resolutions of weight loss, but what about your business?
Here’s a checklist of some of the top questions to ask to get your small business fit in the New Year:
1. Do you understand this year’s tax changes?
Each year always brings changes to the current tax law and the end of 2012 brought a roller coaster ride full of changes. The payroll tax holiday expired at the end of 2012. Marginal tax rates (for individuals) remained the same for most taxpayers, but were increased for those single filers with taxable income over $400,000 and married filers over $450,000.
In addition, there are changes to health savings account and retirement contributions, AMT exemptions, and more.
While it has always been smart to meet with a tax advisor or CPA at the beginning of any year, it’s practically imperative this year given all the changes to business and personal income tax law.
Education is your best tool to optimize your tax position. By meeting with a tax advisor as early in the year as possible, you’ll be in a better position to act on his or her recommendations.
2. Are you still operating as a sole proprietor?
Don’t be ashamed if you’ve been conducting business as an individual. Many small businesses start out as sole proprietorships or partnerships, and then eventually transition to a formal business structure. If your business is not incorporated, you may want to consider filing your corporate formation paperwork this year  to establish your company as a separate business entity from you as an individual.
Once incorporated as a separate entity, your company may be entitled to claim tax deductions that you could not as an individual (discuss these options with your tax advisor or CPA). In addition, a corporation or LLC structure can help shield you from personal liability when your business is sued or can’t pay its debts.
3. Have you registered your business name?
If you aren’t ready to incorporate your business yet, that’s okay. But you should at least register your business name with the state. This simple step is known as filing a DBA (Doing Business As or Fictitious Business Name ). By filing a DBA with the state, you are legally able to use a business name. And best of all, you make sure that no one else can use your business name in your state.
Bear in mind that while filing a DBA or incorporating will protect your name in your state, these actions alone may not be enough to stop someone from using the same business name in another state. If protecting your brand across all 50 states is important to you, consider filing for trademark protection this year.
4. Are you expanding to another state?
If you have plans to expand into another state this year, don’t forget you’ll need to file for a foreign qualification in order to legally conduct business outside your home state (or the state where you incorporated/formed an LLC).
For example, if you operate a restaurant in Florida and decide to expand into Georgia and South Carolina, you’ll need to file a foreign qualification in both Georgia and South Carolina. Or, if you’re a consultant living in Washington, but are going to be conducting the bulk of your work (and meeting with clients in California), you may need to foreign qualify in California.
5. Are you on top of your record keeping?
In order to understand the financial health of your business, you’ll need to get a hold of exactly how much you’re taking in and spending. In addition, you’ll need accurate and comprehensive records in order to make the most of your business tax deductions and prepare yourself in case you’re ever audited.
If you have found yourself struggling with this tax in the past, look for a new solution. Whether it’s outsourcing the task to someone else (like a professional bookkeeper), investing in a new technology tool (like a receipt scanner or cloud-based accounting app), or just resolving to dedicate 30 minutes each week to catch up on your expense tracking.
6. Have you evaluated your employees from a legal perspective lately?
If your business employs any full-time employees, part-time employees, or contractors, you should make sure your records are up to date and you are operating by the book.
For starters, make sure you have the current mailing addresses and correct Federal ID numbers for all employees and any vendors/contractors that you’ll be giving a 1099 to. If you’re employing 1099 contractors, you should make sure that they meet the terms for an independent contractor and should not be classified as an employee.
The Small Business Association outlines the differences between contractor and employee . If you have full-time employees, it might be wise to talk to an employment law attorney to make sure you are in compliance.
7. What’s the copyright date on your website?
Don’t be a year or two behind. If the copyright year at the bottom of your website still displays a previous year – now’s the time to update it.
The new calendar year is an ideal time to get your legal foundation squared away to support you for years to come. Don’t let daily interruptions keep you from doing something that is fundamentally crucial to your business’ long-term health and to the security of your finances.
Here’s to a prosperous and productive new year!
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