If you watched the presidential debate last night, picked up the newspaper today or turned on your favorite news channel (which I advised you not to do yesterday), you probably know about Joe the Plumber. He’s the guy who confronted Democratic Presidential Candidate Barack Obama in Ohio to ask about Obama’s tax plan. Joe said he was considering purchasing a plumbing business that made $250,000 to $280,000 a year and wanted to know why Senator Obama would tax him because he was successful.
Well, to begin with, Joe may be a little confused. If he was referring to a business that has gross sales of $250K per year, his income won’t be that much.
When you have a business, there are sales and then there are the expenses you incur while operating your business. Most businesses have liabilities and assets they have invested in that also impact the bottom line. And then of course the business structure — whether it’s a sole proprietor, S-Corp, C-Corp, Partnership or LLC — plays a role in what’s left over after all is said and done too.
There are plenty of things that can affect what you, as the business owner, make in income. If you’re smart, you’ll have a financial partner (accountant or CPA) that helps you with the financials in your business. You just can’t afford not to. The IRS rules and regulations for small business are so vast and varied, it would be easy to make a misstep. And that’s the last thing you want to do. If you don’t yet have a financial partner, put that at the top of your priority list.
Here’s a place to start. In my book, Small Business Cash Flow, I walk you through how to select just the right person for you and your business. A few things to consider:
- Do they specialize in business like yours? This question may seem unimportant, but it’s really one of the most critical. Retail businesses have different requirements than service businesses or manufacturing firms. You want to work with someone who is an expert on the tax issues relating to your business type.
- What have they done for others? If all this person has done is provide reports and complete tax returns, that may be less than what you are looking for. Make sure you ask what business results they’ve helped other clients produce.
- What’s it feel like? Do they seem to be genuinely interested in your business and in working with you to help it grow? Will you feel comfortable asking for advice as your business changes? Do they listen? Your relationship is a critical part of this business agreement, make sure it’s a good one.
This will get you started. And don’t forget, the IRS website has tons of good information for small business owners just like you. Take some time to visit and see how helpful it can be.
What do you think? Please share your thoughts by leaving a comment.