The New Year is coming, and it is time once again to make those resolutions. If you own a business, this is the perfect time to do some planning and housekeeping to get it ready for 2017.
Your Company's Business Plan
Review your business structure to determine if it is the right one for the company you have as opposed to the company you had. If you have been a sole proprietor or in a general partnership, it may be time to consider becoming a limited liability company or LLC. You can get the protection of a corporation without making your taxes difficult.
If you are already an LLC, you should check out incorporation to see if it would be more advantageous if you want to begin taking on shareholders. Carefully review the requirements of an S corporation and a C corporation; you will need to have an annual meeting and prepare an annual report, and your income tax situation will change. Meeting minutes and bylaws must be created and updated throughout the year.
If you can incorporate on January 1, you can simplify the next year’s taxes since you won’t need to file two forms, one for your unincorporated business and one with the new business structure. Remember to file changes with the state using the Articles of Amendment if you have lost or gained a board member, changed the address of the company, or changed your business name.
Organize your office
Clean out and organize your desktop, both physical and computerized. Shred unneeded papers. Organize your computer files by date to speed up access. Locate all your tax records and keep them accessible.
Also, while nobody ever wants to think about it, you need to make your will and, if needed, set up a trust. If you should die, what happens to your dependent children? What happens to your business? If you do not have a will or trust, the state will decide these questions.
Planning ahead can save thousands in legal fees for your family and business partners.
If you have an inactive business, close it officially by dissolving the company structure and terminating reseller licenses and other permits. You will save on annual dues if you close down a company that is no longer extant.
Classify Your Employees
If you have employees or are in the process of hiring, make sure to classify them properly. Employee misclassification is one of the most common red flags for the IRS to decide to audit.
If you are thinking about classifying anyone as an independent contractor rather than an employee, pay strict attention to the regulations that define each position.
Do your due diligence when hiring. Perform an in-depth interview and a background check. Once you have employees or partners, be careful who you give signatory authority to since you will be responsible for unpaid taxes and penalties if taxes are not paid.
Prepare Your Taxes and Review Your Contracts
Now is also the time of year when you must get those W-2s and 1099s together. They are due by the end of January. Update your contractor W-9s if you paid more than $600 to a single contractor; you are required to report it to the IRS.
Review or implement signed contracts for vendors, clients, employees, and others. If it isn’t written down, it cannot be enforced by law. Spell out the nature of your business relationships and get the resulting contracts signed.
Speaking of contracts, do not forget about protecting your intellectual property. If you have trade secrets, employees and partners should sign non-disclosure and non-compete agreements to safeguard the things that make your business successful.
Plan Your Taxes and Finances
Time again for taxes. The end of the year could be a good time to make some large purchases for your business; you can increase your write-off amounts. Make sure to place anything your purchase into use by the end of the year and watch for the limits to how much can be written off.
Look at this year’s numbers to help you set your budget for next year. Review your bookkeeping records and plan ahead for tax payments and other major expenses. Estimate your monthly income to see if you need to change your business model.
For the coming year, track your expenses carefully and be prepared to see costs rise.
Reviewing and improving these three areas strengthens the legal aspects of your business. Ensuring you have the right structure for your business, classifying your employees, and getting your finances together will put you on track for a successful new year in which you have time to grow your business.