The Most Common Seven Mistakes to Avoid in Business

The most common seven mistakes are:

(1) Mingling business and personal funds:

Many business owners keep a single account for their business and personal funds. If you business is a corporation or a limited liability company (LLC), having a single bank account is evidence you’re not treating the business as a separate entity. A creditor may be able to use that as evidence to disregard the entity and get at your personal assets.
Sole proprietorships or partnerships are not exempt from this critical rule. Keep separate bank accounts to know how well your business is doing. And mixing business and personal funds can create a nightmare when you prepare tax returns.

(2) Putting personal assets at risk:

Corporate entity and LLC limits your personal liability for business debts. But if you’re not careful, you may find that your personal assets are at risk anyhow. Try not to do the following:
(a) Guaranteeing business debts and contracts. Going along with personal guarantee request will put your personal assets at risk. I f no other choice try to see if the lender or landlord will put a cap on your personal liability
(b) Never put your house on the line. Resist putting a lien or a deed of trust on your house. If your business goes bad, you don’t want to sacrifice the roof over your head.
(c) Never let your spouse co-sign. Most creditors can only go after your own personal assets- not assets owned jointly with your spouse. Some creditors will require your spouse to join in guaranteeing the payment of a business obligation. Avoid this if possible.

(3) Extending credit:
Require customers to pay cash or use a credit card. Uncollected debts can hurt your bottom line. It is better to charge less and get paid than to extend credit and get nothing. For example in the dry cleaning business twenty to fourty percent abandon their clothes. Make less but get your money upfront and leave credit extending to the experts.

(4) Try to pay your rent on time. Late payment can be grounds for an eviction. You can also lose the advantage of a good lease, a top notch location or an extension option.

(5) A small business is a prime target for an IRS audit. Always use a certified accountant to do your taxes. You may spend more but it is worth every penny. Do not try to negotiate or deal directly with the IRS, you’ll lose. In fact, all request for documents or clarifications you get from the IRS should be given immediately to your accountant/lawyer for immediate attention. If you get an un-expected visit from an IRS agent, immediately call your accountant/lawyer and let it be known that all future request or contact must go through your accountant/lawyer. Keep your mouth shut and let the experts deal with them.

(6)You must withhold income, social security and medicare taxes from your employee’s paycheck. Use online services to save money. Pay all collected taxes to the government immediately. Forget your withholding period. I f the funds accumulate you might spend it. You can pay the taxes into the federal, state, and local government bank accounts as soon as you collect them.

(7) Finally, get adequate insurance for your business. You should have insurance to cover business assets; insurance for disabilities for employees and insurance for liability. You also need workers compensation insurance. To save money, increase the deductibles. Package deals can be cheaper than individual policies

By: dr love

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