Small business owners face unique challenges that set them apart from large corporations. Because circumstances may vary from year to year, month to month or even daily, owners need a reliable structure established for the desired success of their business.
The Marco Island Center for the Arts hosted the first of seven seminars cleverly titled, “Small Businesses – Big Issues,” sponsored by the Law Offices of William G. Morris. The first topic covered basic issues of concern for local business. Three established community professionals, including Mr. Morris himself, shared essential components to a thriving small business (and what to do when the business is not so successful).
Every financial decision a small business owner makes must be considered and reported correctly. Scot Shepard, who has been a CPA for 27 years, opened the seminar by sharing his expertise in all things tax related. Shepard clarified the different tax issues involved when choosing your business entity, explained what is classified as a “work expense” and other deductions, and pointed out the red flags to avoid an IRS audit.
Different types of corporations qualify for certain tax exceptions and requirements. It is imperative to know the guidelines of your business entity to avoid any financial missteps. Keeping good records is critical. A small business must know what it needs protected, and keep an ongoing business log of activity. It may be easy to forget to distinguish between work and personal expenses as a small business owner, so to avoid any confusion it is encouraged to maintain a clear record of both.
“If the IRS audits you,” Shepard mused, “be sure to have accurately logged documentation of your vehicles, miles, and all business expenses. If you don’t now, you certainly will after.”
A general rule is to keep tax return records for up to seven years, but the range can vary from three years to well over 15. And note, that there is no statute of limitations for an IRS audit if one doesn’t file a tax return.
Morris discussed the various small business entities. He explained the importance of carefully choosing between becoming a corporation or a limited liability company from the get go, since the tax and business implications differ. With finances in mind, Morris covered the legal aspects of business decisions, digging deeper into the different legal structures, and how it may affect a small business entering into contracts, the legal liabilities that may arise, and more.
Another point discussed was what can go wrong when it comes to business partnerships. Whether a new business establishes within the community or a new owner transitions into one that was already established, all legal decisions and obligations should be final at the time of closing the deal. The most common friction in a business start-up is directly related to money issues between partners.
“When you go into business, you have something to lose” Morris stated. “You ought to consider an agreement that allows for an exit strategy for any partners while everyone gets along, rather than after dissolution takes place.”
The final component of the seminar focused on business insurance. Vip Grover, of Advanced Insurance Underwriters, made an in-depth presentation on insurance liability, property damage, and business interruption.
Grover explained that when purchasing a policy, there is a distinction between price versus cost, with value being the deciding factor. While the price of an insurance plan is a set rate, the cost is what is being protected.
A business owner may wonder if their insurance offers full coverage of business activities. In the event of a claim, it is important to know that the cost of a situation will not outweigh your price when it comes to the overall coverage of your policy.
Grover also said to think of your business like a stool, which requires “three legs of professional support” in order to thrive. “The first one is your attorney, the second is your accountant, and the third is your insurance agent.”
Small business owners are encouraged to establish a good relationship with their insurance agent and ask what is and isn’t covered by their policy. “You want to know that your assets acquired in business are protected,” Grover said.
Want to learn more? Mark your calendar for the upcoming “Small Businesses – Big Issues” seminars:
September 19 – Business Operations
September 26 – Employees and Benefits
October 3 – Employees and Policies
October 17 – Marketing and Promotion
October 24 – Exit and Retirement.
Call the Law Offices of William G. Morris at 239-642-6020 for further information. While attendance is free, reservations are recommended. Be sure to visit the Marco Island Center for the Arts at 1010 Winterberry Drive.