Accounting, Taxes & Consulting

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Accounting

Accounting streamlines the tax filing process. It is the process of recording financial transactions pertaining to a business. The statements used in accounting are a concise summary of financial transactions over an accounting period that summarize a company’s operations, financial position, and cash flows. These statements can be used to determine if a business is worth investing in or lending funds to. The different types of accounting are as follows:

corporate
accounting

Corporate accounting refers to a specific accounting branch that handles accounting for companies, prepares their accounts and any cash flow statements, analyzes and interprets the financial results for the business, and looks at any events such as absorption, amalgamation, and consolidated balance sheets.

public Accounting

Public accounting refers to a business that provides accounting services to other firms. Public accounting is important because it provides a range of services to protect the public interest. It includes everything from auditing corporate financials to helping individuals plan their financial futures. Public accountants provide accounting expertise and tax services to their clients. 

Government Accounting

Government accounting is the process of recording, analyzing, classifying, summarizing,  communicating, and interpreting financial information about government in terms of income and expenditures. This accounting reflects transactions and other economic events that include the receipt, spending, transfer, usability, and disposition of assets.

Forensic Accounting

Forensic accounting is the process of carrying out an investigation to analyze financial information for use in legal proceedings. It is used to determine whether firms engage in financial reporting misconduct. It is divided into 2 categories: litigation support and investigation and dispute resolution.

Business Plans

A business plan is essential to start and grow your for-profit or nonprofit organization. It helps organizations plan and execute on opportunities. All business plan consultation will include a number of sections such as an executive summary, organizational overview, and industry analysis. A business plan consultation can be a crucial tool for any organization, but is highly recommended for nonprofit organizations as they are often founded by members with mixed levels of business experience. On this page you’ll learn about the six critical factors required to develop a solid business plan:

  •         Executive Summary
  •         Organization Overview
  •         Products, Programs, And Services
  •         Industry Analysis
  •         Marketing Plan
  •         Financial Plan

EXECUTIVE SUMMARY

An executive summary provides an introduction to your business plan. The first page should describe your nonprofit’s mission and purpose, summarize your market analysis that proves an identifiable need, and explain how your nonprofit will meet the need. As well as this, a mission statement is particularly important for nonprofits. It helps to communicate your purpose, the community or group of people it benefits, and how you will help them. Every action or decision you make in your nonprofit should further your mission and relate to the statement.

ORGANIZATION OVERVIEW

In this section of your business plan, you should explain the type of business or nonprofit organization (NPO) you are or will be. 501 ©(3) is the most popular type. If you are a startup business or NPO, explain the history of your vision for starting the business or NPO and use this section of your plan to discuss the history . Examples of this are questions such as “When did you start the business or NPO?”, “What milestones have you reached?”, and past achievements.

PRODUCTS,  PROGRAMS,  AND SERVICES.

This section provides more detailed information on what your business or nonprofit organization does. What services do you offer? What programs do you provide? How does your business or nonprofit benefit the community/state? What need does your organization meet and what are your specific plans for meeting that need in the future? Document your offerings in this section of your plan. This could take 1-5 pages depending upon the scope of the services you offer. Provide details so the reader truly understands what you offer your constituents.

INDUSTRY ANALYSIS

This section of your plan discusses the industry in which you are operating. For example, if your nonprofit provides education to children, you should provide information on the education industry here. How big is the market? What segment of the market are you serving? Are there any industry trends that are changing the market? Document answers to these questions here. In documenting your answers, assure that you cite the sources of your statistics.

MARKETING PLAN

A nonprofit must have a strong marketing plan in order to reach its targeted customers. Base your marketing plan on the four P’s: Product, Price, Place and Promotion. Your product section includes every item, service, or program you provide. Price details the costs of everything you sell. Place is your physical location, web presence, and/or third-party distribution channels. Promotion is how you will get people to buy your products and services and donate to your cause. Document the promotional tactics you will use such as the following :

  • Email marketing
  • Social media posting
  • Distributing flyers
  • Partnerships with other organizations

FINANCIAL PLAN

Whether you are for profit or not, a financial plan is important as having sufficient funds to cover expenses is crucial to the success of any business. Delineate different sources of funding. Explain any existing loans or other debts. Present your future cash flow statements, balance sheets, and income statements. Describe your fundraising plans and identify gaps in your funding. Provide a clear explanation of how funds will be distributed among your various projects. Disclose any salaries that are drawn by members of the organization.

Incorporations

Incorporation is the process of constituting a company, city, or other organization as a legal corporation. The corporation may be a business, a nonprofit organization (501(c)(3)), sports club, or a government of a new city or town.

4 BENEFITS OF COMPANY INCORPORATION

  • Protect your personal assets from creditors
  • Tax benefits
  • Protect your personal assets from lawsuits
  • Easier to raise capital

 Protect Your Personal Assets From Creditors

Starting your own business can be exciting, but with that excitement comes the reality that accidents happen and not all businesses will succeed. By incorporating your business as a Limited Liability Company (LLC), or a C or S Corporation, you are protecting your personal assets from business debts. If your business struggles financially, your personal property is typically not at risk. For example, you will not lose your home because you failed to pay your business loan.

Tax Benefits

Another benefit of incorporating your business, and one of the most crucial to leverage, are the many tax deductions that are available to incorporated businesses. When you go from being a sole proprietor to a business structure such as an LLC, there are numerous deductions at your disposal that are not available to individuals. Specifically, you may see tax benefits such as:

  • The ability to spread out your losses over a larger period of time
  • The ability to deduct startup and operational expenses
  • The ability to deduct employee benefits

Protect Your Personal Assets From Lawsuits

Having the ability to protect personal assets is another benefit of incorporating a business. Without incorporating, your personal assets may be at risk to anyone filing a lawsuit against your business. For example, if a customer trips or slips in your store and takes you to court to collect damages, you may be  personally liable.

These individuals could try to collect on a judgment against you, for example, by taking possession of your home. Incorporation creates a barrier between your personal assets and legal claims against your business. If your business is sued, your personal and family possessions will generally not be at risk.

Easier To Raise Capital

Incorporating generally makes it easier for your business to raise capital or apply for a loan due to an added sense of legitimacy. When you incorporate, it also means you can open up a bank account and start building a line of credit, which is essential for a small business owner.

Income Statements

An income statement or profit and loss account is one of the financial statements of a company and shows the company’s revenue and expenses during a particular period. It indicates how the revenue is transformed into the net income or net profit. The three parts of income statements are:

Revenue

The revenue section is typically the simplest part of the income statement. Often, there is just a single number that represents all the money a company received during a specific time period, although big companies sometimes categorize revenue in ways that provide more information (e.g., segregated by geographic location or business segment). Revenue is also commonly known as sales.

Expenses

Although there are many types of expenses, the two most common are the cost of sales and SG&A (selling, general, and administrative) expenses. Cost of sales, which is also called cost of goods sold, is the expense most directly involved in creating revenue.

Profit

In its simplest form, profit is equal to total revenue minus total expenses. However, there are several commonly used profit subcategories investors should be aware of. Gross profit is calculated as revenues minus cost of sales. It shows how much money is remaining to pay for operating expenses and provide profit to stockholders after a sale is made.

Balance Sheets

A balance sheet is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as a government or not-for-profit entity. A company’s balance sheet provides insight into its solvency and dealings. Balance sheets consist of the following three sections:

Assets

An asset is any resource owned or controlled by a business or an economic entity. It is anything that can be used to produce positive economic value. Assets represent value of ownership that can be converted into cash.

Liabilities

A liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events.

Equity

Equity is the ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of assets. 

Cash Flow Statements

A cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. The cash flow statement has three parts:

Operating

Operating activities are what a company does to bring its products and services to market on an ongoing basis. Non-operating activities are one-time events that may affect revenue, expenses, or cash flow but fall outside of the company’s routine, core business.

Investing

An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent is not to consume the good but rather to use it in the future to create wealth.

Financing Activities

The financing activity in the cash flow statement focuses on how a firm raises capital and pays it back to investors through capital markets. These activities also include paying cash dividends, adding or changing loans, or issuing and selling more stock.  

Taxes

BUSINESS TAXES

As a business owner, it’s important to understand federal, state, and local tax requirements. This will help you file your taxes accurately and make payments on time. The business structure you choose when starting a business will determine what taxes you’ll pay and how you pay them. 

SALES TAX RETURNS

This is a return used to consolidate both sales and sellers use tax for reporting. In this case, the retailer would collect and remit sales tax because it is based in the state as well as the customer. Tax compliance requires proper documentation and communication with the taxing entity.

4 KEYS TO PREPARING A SALES TAX RETURN

  • Choosing The Right Form
  • Entering The Data In The Form
  • Meeting The Due Date
  • Filing The Return

CHOOSING THE RIGHT FORM

Although sales tax and sellers use tax are similar, there is one key difference. Sellers use tax is imposed on vendors located outside of the state, but are registered to collect tax in the state. For example, in a state such as Missouri, not only does the tax type change the form, but also the rate and the sourcing (which city/county gets the tax). Be aware of these potential issues ahead of time so you choose the correct return form.

ENTERING THE DATA IN THE FORM

Sales tax returns start with reporting gross sales. Determining what amount to put on the gross sales line of the return is based not only on what the state indicates but also what data is available to you.

MEETING THE DUE DATE

Once you are registered to collect or pay sales and use taxes in a jurisdiction, you must file tax returns on a timely basis. Upon registration, the jurisdiction will let you know how frequently you must file returns and what the due date is.

FILING THE RETURNS

Filing returns in paper format is still used by states for some level of taxpayers. Paper filing is typically accepted for taxpayers with low taxable sales and tax liabilities. Each state provides the forms that must be used for returns. Many states allow replicas of their forms to be used in the place of state-supplied returns. Please note that they allow this due to technology limitations. If this is the case, submitting a non-approved form could result in interest and penalties for late filing.

Corporate Tax Return

Corporate tax returns detail the company’s profits and expenses to determine the amount of tax the company owes to the government.

Information and Documents Necessary for Corporate Tax Returns

The information necessary to file corporate tax returns includes the name, address, employer ID number (EID), date of incorporation, and total assets. The corporate financial officer will need to supply details about the corporate income including:

  • Gross receipts
  • Cost of goods sold
  • Dividends
  • Interest
  • Rents
  • Royalties
  • Capital gains

Partnerships file an information return to report their income, gains, losses, deductions, credits, etc. A partnership does not pay tax on its income but “passes through” any profits or losses to its partners. Partners must include partnership items on their tax or information returns.

5 Steps to Filing Partnership Taxes

  • Prepare Form 1065, U.S. Return of Partnership Income
  • Prepare Schedule K-1
  • File Form 1065 and Copies of the K-1 Forms
  • File State Tax Returns
  • File Personal Tax Returns

Prepare Form 1065, U.S. Return of Partnership Income

Every partnership must prepare a federal partnership tax return on Internal Revenue Servicer Form 1065. On this form, you’ll be asked to provide the partnership’s total income or loss. You will list deductions such as salaries, guaranteed payments to partners, rent, repairs, taxes, depreciation and employee benefit programs. Your partnership’s total income, less its deductions, is its ordinary business income. You’ll also need to fill out several Form 1065 schedules. Schedule B includes a series of questions about your partnership—from the types of partners, to the ownership of corporate shares and the types of distributions made. Schedule K is a schedule of income and expenses that forms the basis for the K-1 forms you’ll issue to shareholders. Schedule L is a balance sheet. Some partnerships are also required to complete schedules M-1, M-2 and/or M-3.The return must be signed by a general partner.

Prepare Schedule K-1

Partnerships are also generally required to complete a federal Schedule K-1, Partner’s Share of Income, Deductions, Credits etc., for each person who was a partner at any point during the tax year.  The K-1 form lists the partner’s name, address and percentage share of profits, losses, capital and liabilities. It then lists the partner’s share of ordinary business income or loss, rental income or loss and interest income. It also includes the partner’s self-employment income, credits and distributions.

File Form 1065 and Copies of the K-1 Forms

Partnerships must file copies of the K-1 forms with their Form 1065. The filing deadline for Form 1065 is April 15th. Partnerships can file using electronic forms or via mail.

File State Tax Returns

Your state may require partnerships to file a state tax return. Depending on the state, partnerships may be required to pay franchise, excise or sales taxes. You can find the tax filing requirements for your state online at its department of revenue website.

File Personal Tax Returns

If you are a general or limited partner, you must report your share of the partnership income or loss on your federal income tax return. The Schedule K-1 you receive from the partnership contains the information required to do this. In addition, if you are a general partner, your partnership income will typically be considered self-employment income. You will report this on your personal tax forms and calculate self-employment tax using Form SE.

Franchise Tax Return

The term franchise tax refers to a tax paid by certain enterprises that want to do business in some states. Despite the name, a franchise tax is not a tax on franchises and is separate from federal and state income taxes that must be filed annually.

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