Business Start-ups

Expenses incurred or paid before a business starts operations are considered capital expenses. In recent years up to $5,000 ($10,000 in 2010) of the first 60,000 were able to be elected to be expensed with the balance capitalized over 180 months. There are limitations if the total costs exceed a certain amount. $60,000 in 2010)

Although the 2012 federal minimum wage will remain unchanged at $7.25 per hour, six states have announced that their minimum wage will increase on January 1, 2012.
Arizona: announced a 30-cent per hour increase, from $7.35 to $7.65 per hour; an employer can pay a tipped employee a wage up to $3.00 per hour less than the minimum wage – $4.65 per hour.
Florida: announced a 36-cent per hour increase, from $7.31 to $7.67 per hour; tipped employees must be paid at least $4.65 per hour. The minimum wage was previously increased six cents per hour on June 1, 2011.
Montana: The announced a 30-cent per hour increase, from $7.35 to $7.65 per hour.
Ohio: announced a 30-cent per hour increase, from $7.40 to $7.70 per hour; the minimum wage for tipped employees increases 15 cents per hour, from $3.70 to $3.85 per hour. Additionally, employers can pay the federal minimum wage to minors ages 14 & 15-years old, and adults if the business’s gross revenue is $283,000 per year (previously $271,000).
Oregon: announced a 30-cent per hour increase, from $8.50 to $8.80 per hour.
Washington: announced a 37-cent per hour increase, from to $8.67 to $9.04 per hour.
Missouri: announced that the state minimum wage will remain unchanged at $7.25 per hour.
The rate increases are for the “regular” minimum wage. Under federal minimum wage law, states may permit employers to pay a lower hourly rate, sometimes referred to as a subminimum wage, based on certain factors; examples include age (minors), tips, commissions and employer gross revenue.

For information on worker classifications and other labor questions, contact the Department of Labor at their web site: http://www.dol.gov/dol

Federal law requires that certain notices for employee rights be placed in conspicuous locations where employees are likely to see them. The list of posters required are WH-1088, WH-1420, WH-1462, WH-1321 and WH-1313. Posters can be obtained free of charge by contacting the Dept. of Labor at http://www.dol.gov/dol/osbp/public/sbrefa/poster/main.htm or at the US Dept of Labor, Employment Standards, Administration Wage and Hour Division, Washington DC 20210. Speak to your local CPA about the required Department of the Labor sign and poster requirements.

The Small Business Administration (SBA) is a federal program set up to help small businesses obtain financing, usually through private sources. Speak to your local CPA about the feasibility of the SBA assisting your business. The SBA website is sba.gov.

Beginning 1/1/11 you must use electronic funds transfer to make all federal tax deposits for employment taxes, corporation taxes and excise taxes. Forms 8109- and 8109-B Federal Tax Deposit Coupons cannot be used after 12/31/10. Generally electronic funds transfer are made using the EFTPS system. If you do not use EFTPS you can arrange for a trusted third party to make deposits on your behalf such as a payroll service or financial institution. To enroll in EFTPS visit www.eftps.gov or call 1-800-555-4477 1-800-555-4477 1-800-555-4477 1-800-555-4477. Speak to your local CPA about assisting you in signing up to the Federal Tax Payment System.

The Federal Unemployment Tax (FUTA)is reported and filed separately from the Employer's Quarterly Federal Tax Return Form 941. Use the Employer's Annual Federal Unemployment Tax Return Form 940.

Simply stated, a S Corporation is taxed in the same manner as a partnership and is not taxed at the federal level. The income or losses and expenses flow through to the shareholders. A "C" Corporation pays tax on its profits, and if the owner shareholders take profits from the corporation, the distributions take the form of taxable dividends. In effect, this is a double taxation of profits. There are advantages and disadvantages to both S Corporations and Regular C Corporations. Speak to your local CPA about the tax strategies of selecting the type of entity for your business.

When starting a business, your choice of entity includes: operating as a SOLE PROPRIETORSHIP if you own it by yourself; forming a PARTNERSHIP if there are two or more owners; or being designated as a CORPORATION or a LIMITED LIABILITY COMPANY. Your choice to operate as a corporation involves tax and non-tax considerations which require in-depth analysis of your particular situation and can only be done with a CPA in person. However, generally speaking, a corporation provides protection against personal liability for business obligations and offers the greatest flexibility in terms of ownership and transferability. Most businesses for this reason are incorporated. Further discussions with a CPA are recommended before finalizing your decision.