Small business is generally defined as a corporation, sole proprietorship, partnership, or LLC that has less than 5 employees and less than $500 annual revenue; however, the definition of “small” differs by industry and country. In many cases, a business can be described as small even if it has several employees. Small business owners usually have fewer choices in their business structure than larger businesses. However, there are several options available to small business owners seeking to start a business.
A few small business owners prefer to form what is called a C-Corporation. A C-Corporation is not a separate entity from its owner, but rather is an entirely separate legal entity from its owners. An individual shareholder in a C-Corporation is entitled only to his dividends and is not liable for corporate debts. Although most C-Corporations have limited liability, some may use their assets to allow their officers to personally benefit from company stock.
A few small business owners choose to form sole proprietorships. Although this gives employees greater liability protection, it also means business owners are responsible for the actions of all employees. Although sole proprietors are subject to U.S. tax laws, they usually pay lower taxes because they usually carry their own payroll taxes.
Many business owners also elect to use a standard business credit card. Most credit cards have a universal need column that allows business owners to compare their costs with their income. With this information, the business owner determines how much of their income can be used for general expenses, which are not tax deductible, and how much can be used for revenue enhancement projects. Every business should determine its universal need, so that it is well-prepared for the future.
The third major key takeaway for small business owners is time management. Proper management of time ensures that business owners remain productive and on schedule to meet their revenue goals. Time management also prevents small business owners from doing things in haste, such as making impulsive buying decisions or being unaware of the impact of customer service calls on profits. All three keys take part in time management, but it is important for small business owners to understand how each affects the other.
The fourth key takeaway for small businesses is whether a business needs to acquire an insurance policy to protect assets, including goodwill. Insurances provide protection for a business against lawsuits and claims that occur in the course of normal business operations. Although all small businesses face various risks, insurance coverage varies according to a business’s risk factors. When purchasing insurance, business owners should consider what specific risks they face, the amount of coverage required, the cost of premiums, and any exemptions that the policy may have. Businesses should always seek an insurance provider that will allow them to customize the benefits provided.
The fifth and final key takeaway for small business owners is whether their business should maintain separate accounting departments and personnel. Some business owners believe that a single bookkeeper performs all functions necessary for a business. Others think that separate accounting personnel and accounts will enable business owners to better monitor the profitability of their business. Separate personnel and accounts can help small businesses reduce paperwork, which is a great time saver. However, separating the finances of a business is not without a downside.
Small business accounting services are usually tailored to suit a particular business, so there is a lot of flexibility in the type of firm that would be best suited for a particular business. Small businesses may benefit from small bookkeeping services, as well as limited accounting services. Business owners should keep in mind that they need to have a high degree of patience when shopping around for accounting services. Small business owners should not let time get away from them.