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Small Business Compliance 101

June 27, 2010

Paperwork. Receipts. Tax returns. Book keeping. Accounting.  Ahhh, the joys of business.  If your profession is related to compliance—that is, if you are an accountant, book keeper, tax preparer or in a comparable profession, maybe you actually enjoy compliance.  Most entrepreneurs do not, though.  It’s all about fun and flying by the seat of your pants to those super big profits you have in your mind when you launch that great idea.  Then reality—and perhaps a notice or two—sets in and you realize, as an optimistic entrepreneur, that compliance is part of the critical infrastructure of your business.

Get it right from day one and business building is a lot more fun in the long run because there is nothing to come back and bite you in the butt.  Get it wrong, or ignore it, and you will eventually have to deal with it and compliance is SO much more of a headache, and a pain in the place where the sun doesn’t shine, when you skip it.

Nevertheless, here’s a quick list of compliance items you should address immediately if you have been ignoring them, or from the jump, if you are just getting started:

  1. Book Keeping – This does not have to be complicated.  You can use online book keeping/accounting software or create an Excel sheet to track Income/Expenses and Assets/Liabilities of your business.  Scan or save receipts in envelopes or digital folders labeled by the month.
  2. Tax Strategy, Records and Preparation – Find a reliable, knowledgeable accountant who can tell you when to make big purchases and how to keep proper records to maximize your tax deductions.
  3. Business Licensing – If you run a brick and mortar business there may be municipal business licenses you need in order to avoid fines and be in full compliance with local laws.  Check in with your county or Secretary of State to find out if this applies.
  4. Business Insurance – Proper risk management includes making sure you are operating with the right legal entity for your business.  Most businesses are fine setting up as a Limited Liability Company, or LLC.  The other part of proper risk management, particularly if you run a bricks and mortar business, is adequate insurance.  If you are leasing, your building’s property manager may insist on this.  Whether they do or not, don’t leave yourself open to risk, proactively check into whether it is legally necessary—and financially wise—to protect yourself and your business with insurance.
  5. Business Financing – As famed comedian Bob Hope once said: A bank is a financial institution that lends you money only once they are convinced that you don’t need it.  You may never need, or want, financing for your business but keep your books and operate your business as though you will need a loan tomorrow.  This will keep you operating meticulously and tracking your revenues, profits and profit margins regularly, which you should do for yourself anyway.
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