Summer has officially started. This means beaches and barbecues, summer vacation for the kids, and maybe a little extra juggling for parents. It also means we’re halfway through the year, making it the perfect time to assess the legal and tax health of your business.
If your business tends to slow down a bit during the peak of summer, take the opportunity to run through this checklist and see where you’re at. These may not be the most exciting tasks, but when the summer is over and your days become more hectic, you’ll be glad they are crossed off the list.
Mid-Year Legal Checklist
Meet with a Tax Advisor — and Make Sure You Understand the Tax Reform Act
For years, I have always recommended that small business owners meet with their CPA, accountant or tax preparer in the summer when everyone has more time to discuss financials — and there’s still plenty of time to act on any suggestions for the current tax year. This year, it’s all the more important with the passage of the Tax Cuts and Jobs Act. Because, be honest: how well do you understand the new corporate tax rates, the 20% deduction for pass-through entities, the new rules for depreciation deduction or vehicle use, or how any of it will impact your business?
The IRS, as well as the accounting/tax professional community, has been working hard this year to provide more clarity and guidance around the new tax reform bill. The IRS has a page on their website dedicated to tax reform — it’s updated regularly as new guidance, information, and resources are made available. Check it out, and if you haven’t already discussed your business structure with a tax advisor (or done your own homework), set aside some time this summer.
Set Up an Accounting System
If you haven’t already done so, you should set up a solid accounting system for your small business — and I’m not talking about a bunch of excel spreadsheets or piles of paper on the corner of your desk. There are numerous cloud and software systems out there that can help you track your business finances, get organized, get paid and maybe even save money on taxes. These tools will help you manage the financial side of your business throughout the year, so you can work smarter and not harder.
Here are a few systems to choose from; each of these tools comes highly recommended with a loyal customer base (but there are many others out there that might work for you as well). QuickBooks Self-Employed lets you track clients, create invoices, track expenses, estimate quarterly taxes, and more. FreshBooks Cloud Accounting is easy to use and lets you track your time, handle estimates and invoices, accept payments, and create reports. For businesses that need full-service accounting software (complete with payroll options, bank reconciliation, etc.), there’s Xero Accounting. And, last but not least, Wave is a popular free accounting system with add-on options for payroll processing and more.
Set Aside Time to Work on the Business
There’s a famous saying: “Work on your business, not in your business.” When you’re running a business, you can keep yourself busy every second of the day, but these tasks aren’t necessarily driving your business forward. If you are constantly focused on the day-to-day tasks and reacting to every request, email, or issue, it means that no one is actually planning, strategizing and growing the business for the long-term. That means you’ll end up running faster and faster just to stay in the same place.
This summer, be sure to set aside time in your schedule to work on getting new business and your company’s long-term strategy. Some choose to focus on new business deals every morning until 11 am; others schedule Friday afternoons or Monday mornings. If you have staff, start delegating more day to day tasks to free up your time to set goals and think about the future. Stay disciplined about this (no matter how many daily fires there are to put out) — the only person who can really grow your business is you.
Make Sure your Business is Compliant
Throughout the year, we all let some administrative tasks slide — after all, you’ve got customers to help, employees to manage and a business to grow. Make some time to address some of the more mundane, but important, legal requirements.
For example…make sure your business is in good standing with the state. If you’re structured as an LLC or corporation, have you been filing your annual reports as needed? Have you reported any important changes (like address change) to the state? Are your state franchise taxes up to date? What about your sales license or other local permits? If you are using a registered agent as your official contact, is it current?
None of these tasks are particularly fun, but failing to address them can result in fees and penalties — and in worst case scenarios, you can lose your personal liability protection, putting your personal assets at risk.
Plan for Retirement
Flying solo as a business owner makes it crucial to put money away for retirement. There’s no employer to make sure your 401(k) is set up — you’ve got to do it yourself. If you haven’t done so already, take time to establish a retirement plan or reassess your contributions. Contributing to a SIMPLE IRA, solo 401(k), simplified employee pension (SEP), or other retirement plan is an essential way to plan for your future and reduce your taxable income. The specific rules, contribution limits, and deadlines vary by plan. Talk with a business, financial or tax adviser to establish the right retirement plan, as well as see if there are other retirement plans (like traditional defined contribution plans or profit sharing arrangements) that might work for your small business.
Invest in Your Well-Being
Any small business owner knows that running a small business can be overwhelming at times. A study from Bank of America found that managing a business is the top personal stressor for entrepreneurs (it ranked well above raising children or maintaining a healthy relationship with a partner). And adding to this stress is the fact that small business owners often skip free time, exercise, and other personal priorities in order to tend to business matters.
It is so important that you take care of yourself, while you’re taking care of your business. After a few debilitating panic attacks, I learned the hard way that I needed to make my well-being priority number one. Find what feeds your soul and brings you peace, and then schedule it into your calendar just like an important business meeting. Don’t forget that running a business is an ultra-distance marathon, and you need to have fuel in your tank to keep going.
Photo via Shutterstock
Thanks for the list. It is that time again for the mid-year check up.