Should You Outsource Your Small Business AccountingPosted on June 26th, 2019
Owning and operating a small business is a lot of work. Smaller companies often don’t have the space or budget for specialized departments, leaving many varied but equally important tasks to be handled solely by the owner. Too many responsibilities for the owner can lead to inconsistencies in the work as it piles up and potential burnout for the entrepreneur.
Your business’ accounting functions are no different. However, while you may not have the room or resources for a dedicated accounting department, you can still get the professional financial assistance you need through an independent CPA. Let’s break down the advantages of outsourced accounting services.
Save Time and Money
Sure, hiring an independent accountant to outsource your financial needs does cost money, but only a fraction of the cost that a full-time department will. Furthermore, an expert knows how best to organize your ledger and accounting functions for maximum efficiency and identify areas of waste.
This also frees you up to focus on the aspects of your business that require your attention, such as production and growth.
Chances are, you didn’t start a business because you love running numbers. You opened up shop because you had a passion for something, and the financial aspect is simply a necessary function.
A professional CPA, however, provides their services because their passion and expertise lie in those numbers. You may not be a bookkeeping whiz, which can lead to errors that end up being more costly down the road. An outsourced professional knows how to avoid these mistakes and ensure the level of detail and accuracy you need for a thriving business.
Gain the Benefit of an Outside Perspective
As an entrepreneur, opening a business requires an enormous investment – not just of your money, but also of your time and no small part of your sanity. This level of personal investment can make it difficult to step back and look at the company as a whole to identify what it needs most.
An outsourced accountant has no such emotional proximity to your business, granting them a unique point of view you need as they analyze your financial situation and develop unbiased plans and suggestions to help you achieve success.
Armen G. Derderian, CPA, provides expert accounting services to small businesses in Methuen and the surrounding communities. To take your venture to the next level, call today to schedule a consultation.
How the New Tax Laws Affect Small BusinessesPosted on March 29th, 2019
Taxes can be a complex and daunting subject for many, but for business owners, they can often be significantly more challenging. This is especially true since the 2018 changes to tax law.
Every year, tax laws are updated to reflect the needs of an ever-changing society, but this year’s adjustments are greater and more sweeping than we’ve seen in some time. This has left many CEOs and small business owners seeking answers to their many questions.
Let’s take a look at some of the most significant changes to come under the 2018 Tax Cuts and Jobs Act.
Deductions for Pass-Through Entities
Good news for LLCs, S-corporations, and other pass-through entities! The new Qualified Business Deduction offers bigger savings for qualified businesses.
If your income is less than $157,000 (or $315,000 for married couples filing a joint return), you qualify for a 20-percent deduction. However, if your income exceeds this threshold, the deduction may be limited based on wages.
Lower Corporate Tax Rate
Prior to the enactment of the Tax Cuts and Jobs Act, the rate of taxation for corporate income was 35-percent. However, under the new laws, that figure has been drastically reduced to just 21-percent.
As it is, C-corporation are subject to “double taxation.” This structure requires that income of the corporation itself is taxed before being distributed to stock and shareholders, where it is taxed again on personal tax returns. At the end of the day, this means more money for corporate investors and shareholders.
No More Entertainment Write-Offs
Not too long ago – just last year, in fact – businesses had the ability to write off “entertainment expenses.” This was usually in the form of business dinners, sporting events, and games of golf, during which a business representative and a client could meet in a casual setting to discuss business.
However, with the new laws, these are no longer deductible expenses, even if business is conducted.
Armen G. Derderian, CPA, is a tax and accounting expert in Methuen, MA. Call today to schedule a consultation and find out more about how the new tax laws impact the way you do business.
Which Business Structure is Right for My Company?Posted on November 30th, 2018
Starting a business, especially for the first time, can be as exciting as it is stressful. There are miles of red tape and mountains of paperwork to traverse, but it’s all worth it in the pursuit of your dreams.
As an entrepreneur, you have quite a few decisions ahead of you regarding your new venture, and not just the location and interior decorations. One of the most important choices you make for your business is what kind of entity it files as. This affects how your business is legally defined and how it will be taxed.
Let’s take a look at the various structures available to companies and how they tie into your operations.
Sole Proprietors and Partnerships
A sole proprietor or partnership is a business that is not legally distinct from its owner or owners. These are considered “pass-through” entities, as the business’s profits are passed directly to the owners and taxed on their personal tax returns.
These are relatively simple structures and work well for individuals who go into business as a provider of specific services, such as landscaping, wedding planning, accounting, etc. It should be noted that these entities provide no liability protections.
Limited Liability Companies and S-Corporations
Like Sole Proprietors and Partnerships, LLCs and S-corps are considered pass-through entities. The major difference is in the liability protection they afford.
LLCs and S-corporations are taxed the same as the former but offer liability protection from debts incurred by the business. This means, for instance, that if your LLC goes under and must declare bankruptcy, clients and vendors cannot come after you, the owner, for unsettled debts. A sole proprietor or partnership would have no such luxury.
Unlike the other types of businesses on this list, big businesses such as C-corporations are legally considered to be their own entities. They pay their own taxes, while distributions made to stockholders and income paid to shareholders are taxed again on the individual’s personal tax return.
Non-profits are unique. In the service of public or private interests, these do not have the goal of generating profit. So long as a non-profit corporation meets the legal criteria for the status, they are exempt from federal income, property, and sales tax. However, like all other businesses, they are still subject to employee taxes.
Armen G. Derderian, CPA, is an accounting and tax expert in Methuen, MA. For business consultation and new business formation, contact Armen today and find out how best to set up your new venture to put yourself in the best possible tax situation.