Small Business

If you’ve made the determination that the person you’re paying is an independent contractor, the first step is to have the contractor complete Form W-9 (PDF), Request for Taxpayer Identification Number and Certification. This form can be used to request the correct name and Taxpayer Identification Number, or TIN, of the worker. A TIN may be either a Social Security Number (SSN), or an Employer Identification Number (EIN). The W-9 (PDF) should be kept in your files for four years for future reference in case of any questions from the worker or the IRS. A penalty can be levied against you, the employer for omission of this information on certain forms.

Some aspects to consider are licenses required, zoning laws and other regulations that vary from state to state and business to business. Depending on the type of business you are running, you may also need establishment linenses, liquor licenses, delivery and or transport licenses. Your local SBA office or chamber of commerce will provide you with general information. You must decide about your form of organization. You must choose to be a sole proprietorship, corporation s corporation or partnership. Speak to your local CPA for advice specific to your business and location.

The Internet has revolutionized the way the world does business on both a local and global level. From recruiting employees to gathering data on the competition, the ways businesses utilize the Internet are numerous, as are the benefits of the Internet to the business community. . Perhaps the most obvious benefit of the Internet is cost savings. Information at faster speeds saves time, which either saves or makes money. Many functions in the business process, i.e. bookkeeper, have been automated, which has helped to streamline processes and reduce the cost of labor. The Internet has been credited with providing a window into the global world. It allows anyone with a computer to think globally and has allowed the business world to forge international relationships with new vendors (to lower costs) and new customers (to increase sales). Today, communication is as easy as a mouse click, and much cheaper too. Anyone in the world can communicate with another person through text messages, emails, and even live video. For business, this means higher efficiency and quicker processing of sales

The importance of keeping adequate, legible, complete records cannot be stressed enough. Without records you cannot see how well your business is going and where it is going. All business transactions should be documented with checks or credit cards. Undocumented cash transactions should be avoided if possible. At a minimum, records are needed to substantiate your tax returns under federal and state laws, including income tax and social security and sales tax laws. It also is necessary to substantiate your request for credit from venders or loans from lending institutions. It also is necessary to substantiate your representations and claims about the business should yo wish to sell the business. Speak to your local CPA to set you up on a good bookkeeping system.

You must withold federal and state income taxes and contribute to unemployment and workers compensation funds. You must also match their social security contributions. You may want to also check into "key employees" life and disability insurance programs. Laws vary from state to state. Speak to your local CPA about the financial resposibilities in your jurisdiction and industry.

You must pay an employee minimum wage. The federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA). Many states also have minimum wage laws. In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages. The FLSA does not provide wage payment or collection procedures for an employee's usual or promised wages or commissions in excess of those required by the FLSA. However, some states do have laws under which such claims (sometimes including fringe benefits) may be filed. The Department of Labor’s Wage and Hour Division administers and enforces the federal minimum wage law. You may consult with your local CPA or trade associations to learn more about the current practices in your business field.

Generally, the deduction for business gifts is limited to $25 a year for each recipient, if the gift is made to an individual. There is no dollar limit on the deductibility of a business gift made to a corporation, partnership or business entity. Gifts to a corporation or other business entity intended for the eventual use or benefit of a owner, shareholder or employee is subject to the $25 limitation.

Generally, meal or entertainment expenses will be deductible with certain limitations as long as the meal or entertainment expenses are "directly related to" or "associated with" the active conduct of your trade or business and they are not extravagant or lavish under the circumstances. Deductions are generally limited to 50% of the cost. Detailed recordkeeping should be kept to verify the deductions. Entertainment includes activities such as entertainment at nightclubs, cocktail lounges, theaters, golf and athletic clubs, country clubs, sporting events.

The Education Jobs and Medicaid Assistance Act of 2010 signed into law August 10, 2010 repealed the Advance EITC. After December 31, 2010, workers cannot receive Advance EITC in their paychecks. Advance EITC is also known as AEITC or AEIC. Workers who received Advance EITC or AEITC on their paychecks need to file a tax return to report the amount received.