10 Ways to De-Stress Your Business Tax Time

10 Ways to De-Stress Your Business Tax Time

As a small business owner, tax time can be very stressful, especially if you wait until the last minute to try to organize a year’s worth of paperwork. In order to ease the stress and avoid potential trouble with the Colorado Department of Revenue or Internal Revenue Service (IRS), start thinking about tax time as all year round. There are steps you can take throughout the year to make a big difference in your total income and tax liability when it comes time to file. A small business attorney can give you tax advice on the right business structure and paying the right taxes on time as well as provide representation in the event of an audit or penalty. This post will cover 10 keys to getting organized and keeping accurate records to eliminate the anxiety of tax season.

Getting Your Taxes Organized

  1. Appoint time each month to reconcile your receipts, bank slips, statements, invoices, etc. By dedicating just a couple of hours every month to basic bookkeeping, you will avoid dealing with 12 months’ worth of accumulation all at once. You can make a list of steps to be prepared and add important deadlines, dates, and digital reminders to your calendar.
  2. Create a simple filing system for your paperwork. Keep everything in one place, and clearly label or name your folders. Both paper and electronic bookkeeping can be organized by month and type of record.
  3. Separate business and personal finances. Not only will separate bank and credit card accounts for your business make it easier to manage your books, it will enable you to produce legitimate business documents in the event of an audit.
  4. Review your business reports and records even if you have a bookkeeper or an accountant. It is your business and liability on the line, so it is vital to know what is going on. If you are looking to hire someone to do your taxes, the IRS suggests a list of questions to ask the prospective tax preparer.
  5. Prepare for next year as soon as you have filed for the current year. Make a list of steps and possible improvements for the following tax season while the success and/or struggle of the current one is still fresh on your mind.
  6. Keeping Accurate Tax Records

  7. Understand your business structure and how it impacts your taxes. As your business grows and changes, it is important to reevaluate whether your current structure still works for you.
  8. Know how to claim your home office on your taxes. Whether you rent or own, you can claim a space that is designated for your business. It can be a partial space, rather than the whole room, and it must not be used for any other purpose. Once you have measured the space, you may be able to deduct a portion of expenses, like your mortgage interest, insurance, and utilities. The IRS has a home office deduction page with instructions.
  9. Record your mileage and car expenses if you use your car for business. There are two methods for calculating this deduction – one is based on your standard mileage rate, and the other is based on actual car expenses, like gas, repairs, and insurance. Whichever formula you choose, you will need documentation, including dates, mileage, tolls, parking fees, and the reason for your trip.
  10. Remember to save receipts from meals, travel, entertainment, and gifts. While you can deduct 50% of business-related meals, the cost of travel is 100% deductible. Most client entertainment expenses fall under the 50% deduction limit, while a direct gift to a client or employee is 100% deductible (up to $25 per person per year).
  11. Deduct office supplies even if you do not take the home office deduction. Furniture and other equipment, software/subscriptions, and telephone charges are also tax-deductible.

There are endless tips on how to streamline your business tax process as well as how to avoid a business tax audit. From starting a retirement plan, donating, and deferring income to not hiring too many independent contractors and limiting your business loss claims, the possibilities are seemingly endless. A small business attorney will help you sift through the checklists and keep prepared for each new tax season.

If you need help with your business taxes, or just need to find ways to de-stress business tax time tasks for your small business, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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Is It Time For Your Home Business To Move Out?

Is It Time For Your Home Business To Move Out?

The rapid pace of Colorado’s economic environment is both alluring and daunting for small business owners. Consistently ranked at the top for everything from best city to live in (Denver) to technology and business, Colorado is not only attracting people, but it is also bringing in major retailers from around the globe. According to the U.S. Census Bureau, Colorado’s population grew by nearly 200,000 between 2014 and 2016, reaching more than 5.5 million. This boom has created a robust business climate and economic opportunities for entrepreneurs of all shapes and sizes. There are nearly 600,000 small business owners in Colorado despite rising real estate and cost of living rates. While you may have started as a home business because of these rising costs, there may come a time when you must expand beyond the home. This post will cover five reasons to move your business into a retail or office space. A small business attorney can help you make the right decisions for the future of your home business whether you stay where you are or move.

Moving your small business outside of the home is a major decision with a host of added expenses. Rent, agreements, utilities, cleaning and maintenance fees, movers, equipment, furniture, gas, taxes, and permits are just some of the overhead costs and regulations that will differ from your home operations. However, there are many benefits. Entrepreneur magazine discusses some of the arguments for giving up your commute to the spare bedroom.

1. A Growing Business Requires More Space

If your business is thriving, you have no doubt experienced some growing pains. Depending on the nature of your product or service, more customers can lead to storage and space issues. This is further complicated if you need additional staff. Unless you are willing and able to renovate your home to accommodate your expanding needs, you will likely have to rent outside space. In some cases, zoning laws prohibit you from having more than one employee in your home business.

2. Rented Space is Perceived as More Professional by Some

Clients may already come to your home office, which can be a bit of a juggling act when you are trying to portray a professional image. There may be a much broader audience you are not reaching – an audience who is deterred by or skeptical of the home setting. For those potential clients, a larger commercial space instills consumer confidence. The increased revenue from this larger client-base should eventually exceed the costs associated with renting outside space.

3. You May Not Want Non-Family Employees in Your Home

Having staff members in your home, especially if you have a large family or young children, may not be ideal. Unless they work virtually, it can even be difficult to hire the type of employee you are looking for. While a casual, flexible atmosphere is enticing to some, others have a bias associated with home business settings.

4. Your Home Has Too Many Distractions

It can be difficult to stay on task. The perks of making your own hours and dress code can also lead to an informal attitude and procrastination. It might take leaving the home to instill a more focused, productive work ethic, especially with piles of laundry or dishes taunting you in the other room. The demands or interruptions from family members will also lessen without your constant physical presence to which they have become accustomed. Moving into a retail or office space could restore your work-life balance.

5. Working Outside of the Home is Stimulating

Humans are social creatures, and working from home can be lonely. Without the stimulation of colleagues or peers, creativity and progress can be stunted. Even if you cannot afford a larger commercial space, co-working spaces provide lower cost options. If you find yourself easily distracted by isolation, overcompensating by doing housework, running errands, or visiting with neighbors, it is time to move out.

In a community of small business owners, networking and support abound for your growing home business. Everyone, including your competitors, want to see you succeed and stay in Colorado. Financing and grant opportunities are available through the U.S. Small Business Administration District Offices, and there are dozens of development centers for small businesses throughout the state. If the future of your business rests on expansion, but you are still not ready to relocate, there are ways to make it work. You are, after all, your own boss and landlord! If you need to hire employees, perhaps you can hire other free agents or ask that they work remotely. Storage facilities may offer a solution to your overrun piles and stacks. Business centers are temporary offices that provide space and amenities, like meeting space, office equipment, and receptionists. A small business attorney will help you decide whether it is best to stay or go and adapt to your changing needs.

If you need help deciding what to do with your home business, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

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Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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Future Expectations and Your Small Business Structure

Future Expectations and Your Small Business Structure

You have had your brilliant idea for you new business – whether it’s software development or a boutique bakery – and now you need to know how to make it come to life. One of the most important things you will do for your new business will happen at the very beginning and concerns your future expectations and your small business structure.

Choosing your business structure has important implications for your future taxes, who owns your company, and who is responsible for any losses. Your business structure can mean the difference between paying employment taxes on everything you make and being able to take part of your business’s income as non-employment taxable dividends. Without the correct business structure and operations, you may fail to have limited liability and be personally liable for any damages caused by your business, you, or your workers. A Colorado attorney will help you choose the best business structure for your individual needs. Here is a brief summary of the most common small business types:

Sole Proprietorships

Sole Proprietorships are the most basic business type. If you are a freelancer, you probably are already a sole proprietor. There is little paperwork to be filed or forms to fill out, as it is the default status for running a business in the U.S. While simple, this business type comes with a lot of risk as there is no delineation between you as a person and you as a business. You are the only person responsible for the profits, and also for the loses. “This risk extends to any liabilities incurred because of employee actions” (SBA.gov).

Partnerships

If you are part of dynamic duo (or trio, or beyond), and you want that to continue into your business, a Partnership may appeal to you. The IRS sets the expectations of a Partnership as “Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.” There are different types of business structures housed under the umbrella of Partnership, each with different expectations for the length of the collaboration between parties, and the amount of liability and input for each party. The Small Business Administration has a helpful list of things you should discuss with your potential business partners before filling your paperwork. However, like a sole proprietor, partners typically have personal liability so careful consideration of this business structure should be had with an attorney before entering into it.

Limited Liability Company (LLC)

Limited Liability Companies (LLCs) is a business structure that does just that – limits your liability. It is a relatively new business structure – the first one was created in 1977. LLC laws are determined at the state level, so the state you form your LLC in matters. Due to the variation between states, LLCs can get a bit complicated, but Attorney Elizabeth Lewis is experienced in business formation and will help you navigate the formation of your LLC correctly. A few types of businesses generally cannot be LLCs, such as banks and insurance companies.

C-Corporations Taxes as C-Corporations

“From a legal standpoint, a corporation is a different person than the person or people who created it, and is therefore able to own property of its own, accrue its own profits, and be responsible for its own debts and civil liabilities.” (Upwork.com)
Most large businesses are Corporations, and a lot of legislation regarding Corporations has these large businesses in mind. A corporation taxed as a c-corporation may not be a good fit for your small business, as owning one tends to place a large burden on owners. Additionally, you may be taxed twice, since your corporation is a separate entity from yourself if you are a c-corp. It is a better a company type than the previously listed ones, however, if you plan on taking your company public.

Corporations and LLCs Taxed as S-Corporations

You can only have s-corporations if you have an LLC or corporation formed under state law. Many small businesses use them since they do not cause the double taxation problem. Not all companies can become S-Corporations however. From the IRS:

“To qualify for S corporation status, the corporation must meet the following requirements:

  • Have only allowable shareholders
  • May be individuals, certain trusts, and estates and
  • May not have owners that are partnerships, corporations or non-resident alien shareholders
  • Have no more than 100 shareholders
  • Have only one class of stock
  • Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations)”

The way you structure your business will have long lasting implications for your earnings, liability, and taxes. Improperly done filings can cost hundreds of thousands of dollars, and create stress year after year. It is best to consult an attorney before creating your business.

If you need help evaluating your future expectations or deciding on your small business structure, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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What’s in a Name for Your Home Business?

What’s in a Name for Your Home Business?

Your home-based business may be something you have been dreaming about for a long time, or it may be the result of a lay-off or need to supplement your existing income. Being your own boss, making your own hours, and having endless possibilities for growth are just some of the many perks. Whether you are a designer making custom jewelry or a freelance programmer looking to expand your business, you will need to consider all of the legal, technical, creative, and minute details of starting, protecting, and broadening your home business. Small Business Attorney Elizabeth Lewis will not only help keep your business legally upright, but she will also help with the things you may not have considered. This post will cover three often overlooked areas of home business planning:

  1. Choosing a Name
  2. Choosing a Legal Structure
  3. Choosing an Address

1. Choosing A Name For Your Home Business

Coming up with a name can be the easiest and most fun start to your home business. Testing out names on your family and friends and drafting logos are an exciting part of the creative process, but there are important steps to take before you settle on a name or establish a brand. Your name should identify your products/services, be memorable, and stand out. If it is too generic – Denver Jewelry – it may be difficult to register or trademark. If it is too narrow – Carla’s Breakfast Cupcakes – it may inhibit or restrict the growth of the business. The name should match the spirit and purpose of your business and inspire your logo and marketing. But first… make sure it is available. Before you do a national trademark search, check with the Colorado Secretary of State’s Office. You can register or reserve your trade name online on the Secretary of State’s website. The Denver Public Library also has resources, like trade name searches, for small business. It is also important to secure a domain name for your website. Your small business attorney will help with both the legal aspects of your home business name as well as your online marketing presence and, if needed, refer you to a trademark attorney to help secure your name.

2. Choosing A Legal Structure For Your Home Business

The structure of your business impacts many other decisions, affecting your liability, taxes, permits, and licenses. You might start doing business as a sole practitioner, but later decide to become a limited liability corporation (LLC) or an a corporation. Operating as a corporation can give you legitimacy that you may not have as “some guy who works out of his house.” With an LLC or Corp, you may be able to protect your personal assets from creditors, avoid paying both personal and corporate taxes, and deduct pre-tax expenses (e.g. travel, computers, phone bills, advertising, and health care premiums). Here are some pros and cons for LLC versus a corp.

Pro LLC

  • easy to set up
  • inexpensive to start
  • less red tape than forming an S corp

Con LLC

  • required to pay self-employment tax on income generated in the LLC
  • must operate the LLC distinctly and separately from personal affairs

Pro Corp

  • profits after payroll expenses, federal taxes, and FICA can be distributed to owner and are taxed at a lower rate than income if s-corp status is chosen

Con Corp

  • stricter tax code guidelines than LLCs
  • costs more to form a Corp
  • can have additional state taxes

Make sure you know the difference between the tax status and legal status of your entity though. For example, a LLC or a corporation can be an “s-corporation” as s-corporation just means you have elected to be taxed under subchapter s of the internal revenue code. If you are an LLC taxed as an s-corp, you may have many of the restrictions (and costs) of a corporation.

Because each state has its own rules, a small business attorney will help you choose both the best legal and tax structure for your home business and, with the help of a CPA, make sure you remain compliant with Colorado’s tax, licensing, and permit laws.

3.

Choosing An Address That Isn’t Your Home Address (And Why It Matters)

There are so many wonderful benefits of working from home – having clients or customers know where you live might not be one of them. For LLCs or Corps, a registered agent’s address can be substituted for your own. However, if you are not incorporating, you can get a P.O. Box or use a “Doing Business As (DBA)” mailing address. These are options if you would like your personal residence to remain private or if you live somewhere, like an apartment complex, you fear will come off as unprofessional. There are home address alternatives. A mail-receiving service can provide a street address and a suite number rather than your actual address or a P.O. Box. These mail service companies will also pack, ship, and track your packages. An email account will further reduce the volume of mail and phone calls you receive. Whichever address you choose for your home business, remember to respond to all inquiries promptly and establish an efficient system. This will keep your operations running smoothly and your customers satisfied.

Another issue relevant to your home address and your home business is how your address appears to listing services such as Google My Business. If you don’t want you home address with a map to your front door being displayed, make sure you double check and correct how your listing is shown.

If you need help setting up or keeping up your home business,
contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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Setting Up Your Home Business in Denver

Setting Up Your Home Business in Denver

A home business is characterized by its location, size, and number of employees. Typically, it is a small business operated out of a residence with one or very few employees who are often family members. You may work from a home office with an outside product or service, or you may have a designated space to showcase your product and accommodate clients. Regardless of your model or vision, running a home business takes a lot of time, patience, and research. There are federal, state, city, and even neighborhood guidelines to consider as well as specific tax rules. And, when you think you have a handle on the intricacies of operating a home business, there can be surprises or issues you never knew existed. A small business attorney will assess your home business structure and help you stay compliant with zoning and tax regulations, minimize your liability, and maintain a clear and competitive identity. This post will cover four major areas for small home business owners.

  1. Managing Operations From Your Home
  2. Regulations for Establishing a Home Business
  3. Taxes Rules and Deductions as a Home-based Business Owner
  4. Validate Your Home Business from the Start

1. Managing Operations From Your Home

Despite the many challenges and pitfalls of owning a home business, you are in very good company. According to the U.S. Small Business Administration, more than half of all U.S. businesses are based out of an owner’s home. Well-known brands like Apple, Hershey’s, Mary Kay, and Ford Motor Company all started out as home-based businesses. But, before you daydream about your empire or try to decipher all of the zoning and tax laws, you must consider some basics of running a home-based business. Can you see yourself managing your operations from your home? Do you have the right space? What will it cost to reconfigure the space? Is your family on board? Will work-life balance be a problem? It is important to have a designated area for your business operations so that your entire home does not become a constant reminder of work to be done. A small business attorney will help with your home business formation from R&D to optimizing your success and work-life balance.

2. Regulations for Establishing a Home Business

Once you have determined that a home setting will support your business, there are numerous legal guidelines you must follow. Denver has specific ordinances, limiting the type of business that can be operated from a home as well as the impact it has on surrounding residences. The permitting process for establishing a home business includes a zoning permit. Even if you are a one-person day care, if you are doing business from your home and use your home address as a business address, you need to obtain a zoning permit. These set the standards for size and location of structures and appropriate uses for your property. Be sure your intended business is in compliance with the Denver Zoning Code. In the event construction is required to convert your home work space, Denver requires inspection and permitting for building code standards to protect and ensure public welfare. This is conducted after zoning permits have been issued. Some home businesses may require additional permits, licenses, or inspections. Child care and food preparation businesses, for example, require a business license. Your attorney will keep you in compliance with local regulations, including home-owners association regulations, as well as ensure you have the right insurance coverage.

3. Taxes Rules and Deductions as a Home-based Business Owner

In addition to zoning requirements, you are subject to intricate tax rules and deductions as a home-based business owner. You are allowed to deduct part of your real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, and certain other expenses. These deductions only pertain to the portion of your home designated as a place of business. If you want to maximize your deductions, it is essential to maintain accurate records of how and where you conduct business in the home. A small business attorney will determine if you should change the way you do business in order to save money on your taxes and decrease your liability in the case of accidents.

4. Validate Your Home Business from the Start

There are many perks to having a home business. Working from home affords you more versatility and flexible schedules, which also helps to entice the right employee(s) if you are looking to expand your business. A home office can add thousands to the price point of your home – a great asset in Denver’s housing market. So, with all of the plans, permits, forms, insurance, and licenses in place, your home business will be up and running. How, then, do you instill confidence in your customers? There are a few easy ways to help validate your home business from the start. Use a physical street address instead of a P.O. Box; this will also increase your search engine rankings. Do not underestimate the impact of printed marketing materials. Something as simple as a business card can serve as a physical reminder of your business. Your online presence is, of course, extremely important. Engaging new and current customers via social media or blog post on your website will legitimize your business further. These are great tools for you and your customers to share success stories and great experiences. Finally, collaborate with the right people who may have expertise where you do not. A small business attorney will partner with you to create the best possible business formation and see you through the process and growth of your home business.

If you need help with your home business, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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