Common Issues in Formation of Small Business Robert M. Baldwin CPA, PFS Baldwin & Associates, LLC Charleston, South Carolina

Employment  New Immigration Law South Carolina  Documents Required  Employee vs. Independent Contractor  Wage and Hour

New Immigration Law South Carolina

Documents Required  W-4  I-9  Other proof as required by SC Law

Employee vs. Independent Contractor  Control is the key.  Failure to withhold when required to do so is an expensive proposition.  Publication 15 (Circular E).  Don’t forget Workers Compensation Certificate for Independent Contractors.  Don’t forget reporting!

Wage and Hour  Don’t forget to advise the client to be mindful of the current minimum wage.  Educate the client about overtime and his or her obligations under the Federal Law.

Banking  One Bank or Two  Financing Tips  Online Issues

One Bank or Two  New Businesses need to establish a single strong banking relationship.  A long term relationship with a quality bank should be encouraged. However, go to two bank relationship when possible.  Banking includes managing cash, credit card processing, borrowing working capital and financing assets.

Financing Tips  Plan to build a quality banking relationship over time.  Expect to guarantee debt.  Try not to use credit cards for working capital.  Credit Cards are good for purchasing if paid off each month.  Be timely on all your debts.

Online Issues  A great tool!  A risky endeavor when used improperly.  Never, Never, Never give access and authority to the bookkeeper.  Use quality passwords.

Accounting  In House vs. Outsource  QuickBooks or What?

In House vs. Outsource  It is hard to find a good part time book keeper.  Expect to pay at least $15 an hour for quality in house person.  Expect to pay $50 an hour or more to outsource.

QuickBooks or What?  QuickBooks is the leader.  Microsoft Small Business Accounting Package.  Retail requires special attention. Point of Sales etc.  Use the package chosen by the majority of people in the business.

Information Systems  Credit Card Processing  Data Security  Check Processing.

Credit Card Processing  Expect to pay 1% to 5% for the use of credit cards.  Should be considered a definite tool by those parties with working capital needs.  The fee is a function of volume of dollars processed.  Most banks provide via outsource.

Data Security  Should be a priority at the business set up.  Loss of information systems can close a business.  Loss of client information to outside parties will destroy a business too!  Back Up, Back Up, Back Up!

Check Processing  Many Banks offer check scanning machines for immediate deposit.  Watch the obligations when handling client checks.  Well worth considering!

Business Licenses  Basis of Tax  Planning

Basis of Tax  It is a Gross Receipts Tax. Not measured by income.  Due at the start of business.  Estimate 1 st years revenues conservatively.  Usually a minimum fee for the first $2000 of receipts then dollars per thousand of additional receipts.

Planning  Choose your venue carefully.  Recognize that all revenues are taxable unless reported and taxed in other jurisdictions.  Interstate and International revenues are taxed.

Capitalization  How much money do you really need?  Generally three months expenses, so if you are going to have $120K annual expenses, you better start with 30K.

Entity Choice  Listen to next presenter but I like to start with Limited Liability company’s taxed as disregarded entities or partnerships.

Resources  Internet-     Library

Tax Issues  Sales Tax  Property Tax  Withholding Tax and Payroll Tax

Sales Tax  Collected on all sales of tangible personal property in South Carolina.  Use tax on goods purchased outside SC and bought into SC for use by the business.  Monthly reporting (can be electronic).

Property Tax  Business are required to report to either the County Assessor or SC Department of Revenue (PT-100).  Due by the end of the 4 th month following the close of the tax year.

Withholding Tax and Payroll Tax  Generally best to use a payroll service or CPA.  Don’t fail to deposit on time, most expensive form of borrowing.  IRS wants taxpayers to pay EFTS. (Electronic Funds Transfer System).  Returns due both quarterly and annually.  Personal Liability

Legal  Pay me Now or Pay me Later?  Need I say that competent counsel is always a must!

Insurance  Liability  Property  Health  Life

Liability Insurance  Very important as assets grows.  Get from quality insurance agent.  Don’t over insure.  Obviously, entity selection is important here.  Don’t leave to much excess cash in the entity (business).

Property Insurance  Use a competent agent.  Insure the IT systems.  Don’t over insure, but don’t forget to insure.

Health Insurance  Hard to do with less than 3 employees.  Use Benefits advisors.  Seek to use trade association group plans.  Don’t forget Health Care Savings Accounts.

Life Insurance  If business is owned by two or more you should consider insurance to fund buy outs at death.

Retirement Plans  Alphabet Soup  Profit Sharing  401K  IRA  SEP  Simples  Self?