BUSINESS LAW 101 / Accounting

By Albert L. Kelley, Esq.

Every new business needs an attorney and an accountant. While many people prepare their own taxes, a good accountant can provide more than just tax preparations. They also provide tax advice, assist with payroll, can help set up your bookkeeping software. If the accountant is familiar with your type of business, they can advise you of the financial standards of your business: what should your labor cost be? How much should you pay for overhead? What is your Cost of Goods Sold? What is your profit margin? These are important numbers for running a successful business.

The first thing every business needs to do is open a bank account. In order to do this, you will need a copy of your Articles of Incorporation or Articles of Organization and your Employer Identification Number. If operating as a sole proprietorship or a single member LLC, you can use your social security number instead of the EIN. Some banks will also require a local occupational license. Investigate the banks to look into costs, convenience, and credibility. If you will be accepting credit cards, you will need to set up a credit card processing system with your bank (It can be a different bank than where you keep your business account). The bank will provide (often lease) you a machine to process the cards. As an alternative, you can use a system such as Square or PayPal.

Next, a business needs to have a bookkeeping system. While old school businesses continue to use a handwritten ledger, the more modern businesses use accounting software. With a good accounting software system, the computer can track all of your expenses and incomes and even sort them based on categories that are business specific. This is important when preparing your tax returns. Most computer accounting programs also can handle your payroll, and some can even print your tax forms (however, for both payroll and taxes, you will need to subscribe to a regular update system). If the idea of bookkeeping is troubling, many accountants offer bookkeeping services too.

Business owners need to start saving receipts. In the event of an audit, the receipts may be necessary to prove the legitimacy of expenses. It is beneficial to get a twelve-month divided folder to put the business receipts in.

The next phase is to set up payroll. Will you be hiring employees or independent contractors; paying weekly or bi-weekly; hourly or commission? If you choose not to use accounting software, it is recommended you hire a payroll service. All businesses are now required to file their payroll tax returns through the Electronic Federal Tax Payment System, requiring internet access.

The business should also register with the Social Security Administration Business Service Online. This is an internet-based service allowing businesses to communicate with the SSA as well as file their W-2 and W-4 forms.

Speaking of W-4, make sure each new employee completes the W-4 so that you can make the correct adjustments for dependents. With each paycheck, the employer is required to holdback a certain percentage of each check for federal income tax, social security tax and Medicaid. In addition, the employer must pay a matching amount. These percentages change on a regular basis, so the proper tax table must be downloaded routinely. All payroll tax records must be saved for at least four years.

Employers must file a quarterly employment tax return (Form 941), an annual unemployment tax return (Form 940), and a W-2 and W-3 in January of each year.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” “Basics of Florida’s Small Claims Court” and “Basics of Florida’s Landlord-Tenant Law” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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