Accounting & Taxation

As a startup, there are many things to think about when it comes to finances, but perhaps none is more important than accounting and tax considerations. Failing to get these rights can lead to severe consequences for your business, including penalties, legal action, and even bankruptcy. In this article, we’ll explore some key accounting and tax considerations for startups, and offer practical advice on how to stay on top of them.

Get your Books in Order

The first step to ensuring proper accounting and tax compliance is to keep accurate records of all financial transactions. This means recording all income and expenses, tracking inventory, and reconciling bank accounts regularly. While you can do this manually using a spreadsheet, it’s much easier and more efficient to use accounting software like QuickBooks or Xero.

These tools allow you to automate many accounting tasks, such as generating invoices, processing payments, and producing financial statements. They also provide real-time visibility into your financial position, which can help you make informed decisions about your business.

Choose the Right Accounting Method

When it comes to accounting, there are two main methods: cash basis and accrual basis. Cash basis accounting records income and expenses when cash is received or paid out, while accrual basis accounting records income and expenses when they are earned or incurred, regardless of when the cash is received or paid.

For startups, accrual basis accounting is usually the better option, as it provides a more accurate picture of your business’s financial health. It also allows you to track your accounts receivable and accounts payable, which can help you manage your cash flow more effectively.

Understand your Tax Obligations

As a startup, you will have several tax obligations, including income tax, sales tax, and payroll tax. It’s essential to understand what taxes you need to pay and when they are due to avoid penalties and interest charges.

For example, if you have employees, you’ll need to withhold and pay payroll taxes on their behalf. You’ll also need to file quarterly payroll tax returns and an annual Form W-2 for each employee. If you sell products or services, you may be required to collect and remit sales tax to the state or local government.

Consider Outsourcing your Accounting and Tax Functions

While it’s essential to keep on top of your accounting and tax obligations, it can be challenging to do so while also running your business. That’s why many startups choose to outsource their accounting and tax functions to a third-party provider.

Outsourcing your accounting and tax functions can save you time and money, as you won’t need to hire a full-time accountant or tax professional. It can also ensure that your financial records are accurate and up-to-date, which can help you make better business decisions.

Take Advantage of Tax Incentives

As a startup, you may be eligible for tax incentives that can help you reduce your tax burden and free up cash flow. For example, you may be able to take advantage of the Research and Development (R&D) Tax Credit, which provides a tax credit for eligible expenses related to developing new products or processes.

You may also be able to take advantage of tax deductions for startup costs, such as legal and accounting fees, marketing expenses, and rent. It’s essential to work with a tax professional who can help you identify and take advantage of these incentives. In addition, consider working with a business that handles back office operations, such as Levy which offers comprehensive accounting and tax services for startups.

Separate Business and Personal Expenses

It’s crucial to keep your business and personal expenses separate to avoid confusion and potential legal issues. This means having separate bank accounts, credit cards, and accounting records for your business and personal finances.

Not only will this make it easier to track your business expenses and calculate your tax obligations, but it will also help you avoid piercing the corporate veil. Piercing the corporate veil is a legal term used when the courts disregard the separation between the business and personal assets of the owner, which can expose the owner’s personal assets to business liabilities.

Plan for Taxes in Advance

It’s essential to plan for taxes in advance, especially if you’re operating in a high-tax state or jurisdiction. This means setting aside money throughout the year to pay your estimated taxes, rather than waiting until the end of the year to pay them all at once.

By planning for taxes in advance, you can avoid cash flow issues and penalties for underpayment of taxes. You can also work with a tax professional who can help you identify deductions and credits that can reduce your tax liability.

Stay Up-to-Date with Regulatory Changes

Tax laws and regulations are constantly changing, which can make it challenging for startups to stay compliant. It’s essential to stay up-to-date with regulatory changes that may impact your business, such as changes to tax rates, deductions, and credits.

Working with a tax professional can help you stay informed about regulatory changes and ensure that you remain compliant with all applicable laws and regulations.

Conclusion

In conclusion, accounting and tax considerations are crucial for startups to ensure they stay compliant with regulations and maximize their financial position. By keeping accurate records, choosing the right accounting method, understanding your tax obligations, outsourcing your accounting and tax functions, and taking advantage of tax incentives, you can set your startup up for success.

Jason Obrien

Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.

As a small business owner in Canada, it’s important to understand the various tax deductions that are available to you. These deductions can help reduce your taxable income and ultimately lower your tax bill. However, with so many different deductions available, it can be difficult to know where to start. In this article, we’ll take a closer look at the top Canadian tax deductions for small business owners.

Home Office Expenses

If you operate your business out of your home, you may be able to claim a portion of your home expenses as a tax deduction. This includes things like rent, mortgage interest, property taxes, and utilities. To be eligible for this deduction, you must have a dedicated space in your home that is used exclusively for business purposes. The amount you can deduct will depend on the size of your home office and the percentage of your home that is used for business purposes. If you are not sure what is deductible or how to much to deduct, consult a tax accountant otherwise the CRA may not be happy with your choices.

Vehicle Expenses

If you use a vehicle for business purposes, you may be able to deduct certain expenses related to the vehicle. This includes things like gas, maintenance, insurance, and lease payments. To be eligible for this deduction, you must keep detailed records of your business mileage and the expenses associated with the vehicle. You can then deduct a portion of these expenses based on the percentage of your total mileage that was driven for business purposes.

Business Meals and Entertainment

If you entertain clients or customers as part of your business activities, you may be able to deduct a portion of the associated expenses. This includes things like meals, drinks, and event tickets. However, it’s important to note that only 50% of these expenses are deductible.

Professional Fees

If you use the services of a lawyer, accountant, or other professional as part of your business activities, you may be able to deduct the associated fees. This includes things like legal and accounting fees, as well as fees for consulting services. However, it’s important to keep in mind that the fees must be directly related to your business activities in order to be deductible.

Office Supplies and Equipment

If you purchase office supplies or equipment for your business, you may be able to deduct the associated expenses. This includes things like computers, printers, office furniture, and other business equipment. To be eligible for this deduction, the equipment must be used exclusively for business purposes.

Advertising and Promotion

If you spend money on advertising and promotion for your business, you may be able to deduct the associated expenses. This includes things like website development, print ads, and social media marketing. However, it’s important to keep in mind that only expenses that are directly related to promoting your business are deductible.

Travel Expenses

If you travel for business purposes, you may be able to deduct certain expenses related to the trip. This includes things like airfare, lodging, meals, and transportation. To be eligible for this deduction, the trip must be primarily for business purposes.

Bad Debts

If you have outstanding accounts receivable that you are unable to collect, you may be able to deduct these bad debts as a business expense. However, you must be able to demonstrate that you made a reasonable effort to collect the debt before it was deemed uncollectible.

In conclusion, as a small business owner in Canada, there are many tax deductions available to you that can help lower your tax bill. These deductions include home office expenses, vehicle expenses, business meals and entertainment, professional fees, office supplies and equipment, advertising and promotion, travel expenses, and bad debts. However, it’s important to keep detailed records and ensure that you are only deducting expenses that are directly related to your business activities. By taking advantage of these deductions, you can reduce your taxable

Ifama

Hi! This is Ifama. I am a student and giving my services in SEO. I have a lot of experience in digital marketing. Travelling is my hobby and I love visiting different hilly areas and doing adventures.

All businesses, whether small-scale or large-scale, require efficient finance management. This is only possible with proper bookkeeping and accounting. Manual inputs and finance handling are quite taxing and time-consuming, which is why online services, software, and outsourcing are quickly gaining popularity. You can even find accounting packages for small businesses that cater to your needs. The real question is whether or not bookkeeping and accounting are beneficial for your business. If you are looking for answers, keep reading to learn more.

What are Bookkeeping and Accounting?

Before we get to how bookkeeping and accounting are necessary, you should have a good idea of what it is. Bookkeeping and accounting are used to simply track finances, such as:

• Cash flow
• Taxes
• Expenses
• Income
• Transactions
• Invoices

Reports, data collection, bank management, and handling any incoming or outgoing transactions are also part of an accountant’s job.

5 Advantages of Bookkeeping and Accounting

Let’s examine the major benefits bookkeeping, and accounting can bring to a business:

Accurate Budget and Expense Management

A sound grasp of budgeting can make or break a business. Accounting and bookkeeping use financial literacy to keep a record of all company transactions, making it easy to find data relevant to expenditure. Better expense management helps businesses divide resources uniformly and make crucial decisions better. Having graphical, numerical, or visual representation further aids this process. A company will know exactly what they are investing in and what they are making out of it.

• Easy to deduce what products or services are bearing more profits
• Expense shifting and cutting down on additional costs increase business sustainability

Ensures Transaction Accuracy

Accounting and bookkeeping ensure the information or data you collect is accurate. Automation and use of software track all financial records and ensure they are accurate to the dot. Accuracy makes it easy to see the amount spent and profits gained clearly. Any discrepancies between business owners and employees are also eradicated. Ledgers keep things streamlined, obvious, and intact.

Aids Analysis, Planning, and Reporting

Accountancy solutions help the owners view a company’s progress and make it obvious where adjustments need to be made. Clear and precise analytics aid decision-making and allow investors to see your company’s current situation and progress. If they see you are on the right track, they are more likely to stick by and make further investments.

New solutions and ideas based on generated reports sound more credible and will be easier to adapt. This gears a company towards added success. Not only do accounting and bookkeeping aid planning, but they also allow a company to compare its success with a competitor’s to come up with better plans and strategies. Any damages, risks, and hurdles can also be easily avoided if they make a loss of profit obvious.

• Allows adjustable data entry preparation
• Aids income tax handling
• Allows owners to assess the financial standing of their company
• Operation costs are analyzed better
• Financial statement handling becomes easier

Allows Peace of Mind

The worry and stress associated with financial success can take a huge toll on the company. Organized books and ledgers with precise detail of financial/transactions prevent a company from facing any penalties during audits.

You are allowed peace of mind and a better hold over your financial situation with data on expenses, profit, income, and opportunities. Even handling taxes becomes easier and allows business owners to make sound decisions.

Accounting and bookkeeping also provide a learning curve that a company conquers while performing it. This way, you are knowledgeable and fully aware of financial processes and techniques as time goes on. You also become less likely to be scammed.

Easier Tax Management

Handling taxes confuses even the most knowledgeable people. Making mistakes can lead to a lot of trouble. Therefore, having sound knowledge of bookkeeping and accounting or using outsourcing services is your best option. Accounting solutions ensure that taxes are well-sorted and organized. Invoice generation used to file taxes also becomes a whole lot simpler.

Proper tax filing prevents ruining compliance rules and requirements. You will be more likely to pass during company audits and less likely to face penalties. You also do not need to worry about breaking IRS rules and risk damaging your company’s reputation.

Endnote

Bookkeeping and accounting are super crucial for any business. Without them, business owners have no sound knowledge or control over a company’s finances. Decision-making becomes impossible, and penalties or losses can cause a company to go bankrupt. Opting out of accounting and bookkeeping is not a beneficial idea.

Ifama

Hi! This is Ifama. I am a student and giving my services in SEO. I have a lot of experience in digital marketing. Travelling is my hobby and I love visiting different hilly areas and doing adventures.

If your business uses a lot of leases, whether leasing to other businesses or individuals or leasing items for yourself, the new ASC 842 update will change the way you account for them. Some businesses only use leases to a lesser extent as either a lessor or a lessee but others have built their entire business on the back of them. Equipment leasing and finance estimate that approximately 79% of USA businesses use some form of lease arrangement. In short, it’s entirely likely that ASC 842 will directly impact your business accounting.

ASC 842: What is the New Lease Accounting Guideline?

ASC 842 is a new accounting standard/guideline issued by the FASB (financial accounting standards board) and it, in essence, governs how companies (entities) record the financial impact of all of their lease agreements. There are a few changes to lease accounting treatment with this guideline. The main change that most businesses will notice is that if you report under US GAAP (so all USA based businesses), then ASC 842 requires you to record pretty much all of the leases to the balance sheet. Before, there were more allowable off balance sheet transactions. Of course, with leases on your balance sheet, your business will be far more transparent to those wanting to look through your accounts.

Why has ASC 842 been Rolled Out?

Accounting standard ASC 842 has been rolled out to ensure a better level of transparency for businesses in the USA. Now that the majority of leases are recorded on the balance sheet, auditors and those interested can easily and immediately get a good view of where the business is at and what kind of agreements it has in place. Some businesses might not like this, but remember, they’re all in the same boat. If you’re not too happy about your business being more transparent, the same will happen to your competitors too.

How can you and your Business Stay Compliant

To stay compliant with ASC 842 you simply have to use those guidelines when accounting for your lease arrangements. There is lease accounting software out there that can help you in your pursuit of better financial health. You can also hire an accountant who is well versed in lease accounting arrangements. It’s important to keep up to date with these accounting changes so that you and your business can pivot and adapt to the newest guidelines as quickly as possible. Usually, accounting bodies often give more than enough time to make sure you can move from one method of treatment to another.

How can you be sure to Stay Up to Date with Further Lease Accounting Changes?

Business owners are often quite busy and unable to spend too much time focusing on accounting updates. Here are some quick tips to stay in the know:

• Follow an accounting or finance website that is reputable and often posts updates.

• Speak to your accountant often and check up on whether or not things are going well.

• Keep an eye on industry body websites like FASB

• Follow accounting journals and keep an eye on the headline changes

How much you keep up to date entirely depends on the time available. Again, you usually get a good run time before the changes kick in but it’s always worth checking every now and then just to make sure you’ve got the treatment right.

Jason Obrien

Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.

Just when you thought filing taxes was complicated, a new set of forms have been presented that can be utterly bewildering. Yet, comprehending the disparities between them will make your tax crunch much more manageable. These particular documents are associated with health coverage and must be reported on accordingly if you’re an employer or provider of  necessary minimum  coverage; this is non-negotiable!

Form 1094-B is a cover form which accompanies the 1095 Series Forms filed with the IRS. The 1094-C is used for specific information reporting by employers subject to the employer mandate under the Affordable Care Act (ACA).

This blog post will learn more about form 1094 b and take a closer look at what both forms include and how one should use them during tax season.

Is Form 1094 B and 1094 C Similar?

It’s important to note that even though Form 1094-B and Form 1094-C have similar names, the forms are distinct. Some of their differences include the following:

• Form 1094-C is used by employers subject to the Affordable Care Act (ACA), while the 1094-B is typically filed by health insurance providers or other organizations that provide minimum essential coverage.
• Form 1094-B is designed to communicate crucial information about a single employee’s coverage, while Form 1095-C was created for employees of companies that don’t offer group insurance.
• Form 1094-C is more in-depth than Form 1094-B. While both forms are used to report employee coverage information under the ACA. Form 1094-C includes additional details about the coverage offered and completed by your client’s employees.

What Makes Form 1094 C More Detailed?

Unlike the form 1094 B that has few sections,  the 1094 C is divided into 4 sections that have many other subsections:

(ALE) Applicable Large Employer Member

One is an ALE member if they have a certain number of employees during the previous year. The  member is responsible for providing information about their employees’ coverage to the IRS and each employee.

This section is divided into 19 subsections with basic information about the filer, such as name and Employer Identification Number, company name and address, and contact information of the individual responsible for filing.

ALE Member Details

This section contains information regarding the employees of the ALE member, including their personal details.

ALE Membership Monthly Measurement and Stability Periods

This section contains information about the months covered by the ALE membership and their associated measurement and stability periods.

ALE Members of the Aggregated ALE Group

This section includes information about any employers that are part of an aggregated ALE group. It includes basic details such as the

• Employer name
• Employer Identification Number
• Contact information for the individual responsible for filing
• Summary of the coverage provided by all members in the group over a given tax year.

Who Fills these Forms?

Both forms must be completed by any person who is an employer and offer group health coverage, including:

• Self-insured employers.
• Churches, governments, and other tax-exempt organizations provide coverage to employees.

The difference between Form 1094-B and 1094-C can be confusing, but understanding their differences is essential for successfully filing your taxes during tax season. Whether you’re a health insurance provider or an employer subject to the ACA, it’s important to be aware of these forms’ details.

Ayesha Saeed

A happy mom, professional article writer, SEO practitioner, blogger, guest blogger & freelancer. She’s been in digital marketing since 2018. She loves reading books and spending time with her family.

If you want your business to be successful, then you’ll need to manage its finances as well. Financial management is a task that needs to be handled carefully. One way to make this process easier is with the help of a fractional CFO.

A fractional CFO is an outsourced CFO, who works either part-time or temporarily for a business. They help business to manage their finances. A fractional CFO is an expert in both finances as well as accounting. But why hire fractional CFOs?

The Benefits of Hiring Fractional CFOs

You may be wondering what the benefits of hiring a fractional CFO are. They include:

Improved Ability to Make Decisions

A fractional CFO can provide you with all the information you need, in order to make informed financial decisions. Fractional CFOs can provide invaluable insights, that can help you in making critical decisions. You can find help with exploring various financial options, during the launch of new products or services, and more.

A fractional CFO will first analyze the financial position of your business, and then help you regarding what decisions you should make to improve your finances. They can provide how with detailed plans, which come with the actions you need to take. They’ll analyze where your business stands financially and can help you make investments.

Saving Time and Resources

When you hire a fractional CFO, you’ll be able to save time as well as resources, over hiring a full-time CFO. A fractional CFO will work remotely. A full-time CFO on the other hand needs to be provided with an office space.

Your fractional CFO will only work when you need them to, so you don’t have to pay them more to hang around your office. This can help you reduce your overhead costs. The work that a fractional CFO does, is also more focused than what full-time financial managers do. A fractional CFO can work for your business using fewer resources, and in less time than it would take a financial manager to do the job.

They are Experts on Financial Information

Fractional CFOs have deep knowledge in the fields of accounting and finance. They understand how taxation works, how to make budgets, how to analyze financial statements, dealing with acquisitions and mergers, and more.

Your fractional CFO will be able to provide you with information on how profitable your business is. They can look at your cash flow, and let you know where you’re losing money. They can also provide you with suggestions on how to better streamline business operations. They can help you recognize areas where you can improve your business, and provide you with a better understanding of your business finances. This can in turn help you scale your business.

Boosting Productivity

When a fractional CFO is managing your business finances, you as well as your employees can focus on business tasks that add value. Instead of monitoring your business finances, your employees can turn their focus on marketing better to clients. You’ll also be able to allocate business resources toward the development of new products or services when they’re needed.

Since you’ll be assisted with financial management, this frees up your time, which you can then devote to growing your company. This helps your workers become more efficient and productive as well. You’ll be able to add value to your business, improve employee productivity, and focus on business growth, instead of focusing on financial management.

Conclusion

Fractional CFOs can assist big and small businesses alike. With the help of a fractional CFO, you’ll be able to tackle the financial challenges that your business might face. This guide helps you learn who a fractional CFO is, as well as why you should hire one.

Ifama

Hi! This is Ifama. I am a student and giving my services in SEO. I have a lot of experience in digital marketing. Travelling is my hobby and I love visiting different hilly areas and doing adventures.

As a freelancer or an artist, you spend a lot of time contacting clients and working on various projects and their respective deadlines. Often the clients demand more than what is offered, and you need to keep working on the changes. With such frequent scenarios, it isn’t easy to focus on other aspects of your work, such as your finances. Finances and bookkeeping are crucial to your work and help you understand your growth as a professional artisan or freelancer.

Financial management is not easy unless you are great with numbers and economics. It requires well-trained methods of organizing documents and going through information to see how you can save money and taxes, which is something professionals help you with. Their experience over the years enables you to pay what you owe as income tax and also learn about the deductions you are entitled to.

When you hire a professional to help you with your finances, you can easily manage the other aspects of your life and balance your work and personal time. You could use this time to relax or to focus on essential things such as marketing your work and investing time in creating your next masterpiece. There are various services offered by accounting firms, such as bookkeeping for artists, that you can benefit from. Here are a few of the services provided by accounting firms.

Bookkeeping

It is the most common service offered by accounting firms. It involves going through various transactions that the client has made through their business account and the valuation of the business to understand where the money was used. Every client may have a different portfolio, and it is essential to know which one was used to evaluate the client’s overall income. They do this all while making records for future reference.

Accounting

Similar to bookkeeping, accounting includes identifying the transactions made, keeping a track or record, and evaluating the business. The only difference with this service is that it also includes interpreting these records. The interpretation helps to understand if the client has been profiting or not. It also lets artists understand if their work is growing compared to the previous year or month.

Tax Planning

For every tax season filing your tax is the most dreaded task that one is on the verge of avoiding and skipping. But doing so will not only lead to you giving more money but can also lead to legal issues. Here professionals can help you take your workload and prepare the tax files and documents needed.

Accountants need transcripts of the money flowing in and out and their various reasons to see if some of them can be written off. Apart from that, the tax laws are known better to professionals in the same field and can benefit you by saving time, effort, and money.

Final Thoughts

Bookkeeping for artists or any other service can help you focus on the central part of your work which is delivering the product or service. Find professionals because they work efficiently and keep the records organized and easy to understand. 

Ayesha Saeed

A happy mom, professional article writer, SEO practitioner, blogger, guest blogger & freelancer. She’s been in digital marketing since 2018. She loves reading books and spending time with her family.