Small Business

Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child.
If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21.
However, Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to federal unemployment (FUTA) tax. Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work.. Speak to your local CPA if there is a question of whether a worker is covered by Social Security.

MACRS is the abbreviation for Modified Accelerated Cost Recovery System. It is a statutory method of depreciation allowing accelerated rates for most types of property used in a business or income producing activities.

The cost of installing a safe for storing investments in your home is deductible on IRS Schedule A as miscellaneous deduction, subject to the 2% Adjusted Gross Income limitation.

A business plan serves as your business' resume. It precisely defines your business and identifies your goals. Its basic components include a current balance sheet, income statement and cash flow analysis. A business plan is a crucial part of any loan package. It illustrates to suppliers, personnel and other parties about your goals and operations.

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 licenses, liquor licenses, delivery and/or transport licenses. Your local SBA office or Chamber of Commerce will provide you with general information. The first decision is to decide about your form of organization. You can choose to be a sole proprietorship, corporation, s corporation or partnership. Speak to your local CPA for advice specific to your business and location.

You must withhold 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 responsibilities in your jurisdiction and industry.

The basic three questions a lender will ask you is: How much do you want to borrow?; How will you use the loan?; and How will you repay the loan?. You must be prepared to answer these questions. When you apply for the loan, you must be able to provide prior, current and projected financial statements and a business plan which includes the name of the business, location, production facilities, business goals and legal structure. A description of your business experiences and management capabilities, as well as the expertise of your key personnel will also be needed.

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.

The kind of record keeping system depends on your business and industry. Your local CPA can provide you with many options. When deciding what is necessary and what is not necessary the follwing questions should be asked: How will this record be used, how important is this information likely to be, is this information available elsewhere in an equally accessible form. A separate business checkbook is highly recommended for any operation. Too many people comingle their personal and business accounts. There are various "one write" or automated systems available to help simplfy the record keeping function.