The Business Owners Financial Checklist

business owners financial checklist

You may feel like April 15, 2015 is light-years away. It’s not. Start preparing for your tax bill and take stock of your business’s financial situation now. Small actions now could prevent the need for bigger, costlier actions later. Here are 10 simple steps business owners can use to improve a business’s tax and financial readiness.


1. Re-evaluate your business entity

Many small businesses start out as sole proprietorships or partnerships, but eventually transition to another entity. For example, if your business is not incorporated, you may want to consider incorporating (either as a C Corp, S Corp, or LLC) to shelter you from some financial risk and possibly save money on taxes.  You may have built your business with one revenue target in mind and might need to reconsider your legal entity status to better reach a different revenue level. Discuss the different legal entities with your CPA, so you can determine the right entity for your situation and the right time to make the change.


2. Keep good records

This is simple, but crucial. As a business owner, you should already be keeping close tabs on your income, deposits and expenses. Yet many small business owners guesstimate or keep records in their heads. Have a separate checking account for your business, rather than using your personal account. If your business is small, your records can be as simple as an Excel spreadsheet or software such as QuickBooks. Good recordkeeping can save you money by accounting for all of your legitimate deductions.


3. Look ahead

Once you have a solid record of your profits and losses to date in 2014, compare these numbers to last year’s. Is your business performing better, worse or about the same? Check out to estimate how much you’ll pay in taxes. Once you know approximately how much you’ll owe, you can send in estimated payments. Doing so may keep you from having to pay penalties later on.


4. If you have an S Corporation, review your salary and distribution requirements

If your business is an S Corporation, make sure your salary and distribution payments are at the optimal levels. Too often, S Corp owners don’t properly balance the amount the S Corporation pays them as salary vs. distribution. The result can be either higher taxes or an increased audit risk.


5. Review your personal expenses

If you run a sole proprietorship, partnership, LLC or S corporation, financial actions outside of work—such as buying or selling a home—could affect your taxes. For example, you could save money if you bought a home since you can claim deductions for your mortgage interest and property tax.


6. Plan your equipment purchases

Take advantage of a first-year expense write-off for business equipment placed in service by the end of the year. As of this writing, the IRS grants business owners and self-employed individuals a first-year depreciation deduction of 50% of the cost of qualifying property acquired and put in service this year.


7. Don’t forget the little things

Consider the gas you use on business trips. It’s a small expense but you can get a tax deduction  of 50 cents per mile. Keep a notebook in your car to record the date, odometer readings and total miles driven on each business trip. There are also a multitude of affordable mileage tracker apps.


8. Make estimated payments

Nearly all business owners, unless they make less than a few hundred dollars a year, should be making quarterly estimated payments. The previous year’s tax bill is a good rule of thumb. If you estimate 100 percent of the previous year’s tax bill or 90 percent of the tax to be shown on your 2014 tax return, you won’t get hit with penalties or interest if you owe a little bit when you file your return.


9. Hire a pro

Consider hiring a bookkeeper or accountant. These professionals can be hired on an hourly basis to give you and your business as little or as much help as you need. They’re experts at spotting areas where you may qualify for tax deductions. Plus, if you’re free from doing less financial accounting work, you gain more time to focus on what you do best.


10. Plan for retirement

Be careful to avoid one of the biggest mistakes many small business owners make: basing your retirement plan on maximizing your business value. That’s not a plan. It’s a gamble.

If you don’t have employees, an IRA (Roth or traditional) might work best for you, if you can only contribute up to the max for those ($5,500 in 2014 plus $1,000 if you’re age 50 or older). If you can contribute more than $5,500, consider opening up a SEP (Simplified Employee Pension) IRA because it allows you to save more.

Do you have employees? Then you have more options including payroll deduction IRAs, traditional 401 (k)s, and profit sharing. To be thorough and make the best decision for you, your business, and any employees, talk to a retirement planning expert.


If you haven’t download our free eWorkbook by clicking here. It will help you plan better for the future, and living your retirement dream.

 Gene Offredi, CFP, RFC, Summit Investor Coach, Guilford, CT. Call 203.453.1017 or visit