By: Matthew F. Penater, Esq.
As a Business Succession attorney, I have the opportunity to see into the internal operations of businesses, especially all the legal-related problems business owners encounter. The most common issues I see have to do with improper financial reporting and tax reporting. But, I see any number of additional issues — from employee management to personal problems between business partners. Although I can’t offer solutions to every problem today’s business owner faces, here are 5 preventative actions every business should employ:
- Have bank account dedicated exclusively to the business. Many sole proprietors tend to use their own personal bank accounts or they run personal expenses through a business account. Don’t do it! Have a business bank account and business credit card, which are only used for the business. Come tax time and financial reporting time, you don’t need to waste hours culling out personal transactions and risk losing in an audit if you missed some.
- Have a dedicated email account for the business with subfolders for particular items/accounts. Managing your email these days is an absolute must. How often have you had to search back through old emails (business and personal) for that one receipt or contract? Make sure all business emails flow through your business account. Clear out emails daily by moving them to the relevant subfolder for easy retrieval at a later date if needed. Examples of subfolders are “Billing”, “Orders”, “Personnel”, etc.
- Have your corporate records in place. If you are a corporation in the State of Maryland, you are required to have Bylaws in place, along with initial appointments of Directors and Officers. A corporation is also required to hold annual meetings. Ensure these documents are in place and annual meetings are properly documented. They might not seem important until you need them and don’t have them – for example when the corporation applies for a line of credit and the bank asks for the documentation.
- Have an employee handbook. This is self-explanatory. Ensure you and your employees understand their roles, rights, and responsibilities.
- Ensure your taxes are in order. Nothing and I mean nothing puts the breaks on a business like bad tax reporting. No one likes paying taxes, but that’s the cost of doing business. If you are out of your depth, hire an accountant so the taxes are correct. Better to pay a little more now to a good accountant than a lot more to the IRS later.
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