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Set up your financial systems (New Business Checklist)

By buying QuickBooks, you've started off on the right foot. Make sure you set up the program to accurately track your business. If your business is complicated, it is advisable to have a QuickBooks Professional Advisor or an accountant help you decide what should appear on your chart of accounts. To find a QuickBooks Professional Advisor near you, search the Go online QuickBooks Professional Advisors Referral Database.

To simplify tax preparation, consider purchasing TurboTax Business. TurboTax Business is designed specifically for Corporations, S-Corporations, Partnerships (up to 100 partners), LLCs, and Estates and Trusts. The program seamlessly imports multiple QuickBooks data files so you don't have to re-enter all the information by hand. For more information, visit Go online www.turbotax.com.

Open a bank account

No matter how simple your business, it's smart to set up a separate business checking account. In fact, depending on what type of business you form, you may be required by law to establish a separate account. Unless you're a sole proprietorship that doesn't plan on hiring employees, make sure you obtain your federal tax identification number, also known as an Employer Identification Number, or EIN, before you go to the bank. You'll need the number to open the account. You can apply for an EIN by phone, online, or by mail. (The online application is not available for all types of businesses.) Applying by phone or online is recommended as the IRS has a policy of providing the number immediately.

For information about applying for an EIN number, see Go online Employer ID Numbers (EIN)—How to Apply on the IRS's Web site.

Depending on local requirements, you may need to establish your fictitious name before opening the bank account.

Select a financial institution carefully

You will have a very close relationship with the institution you choose, so make sure you like and trust them. Some things to consider:

  • What are the various fees and charges?

  • What are the minimum deposits?

  • Does the financial institution offer small business loans?

  • What kind of packages does it offer?

Follow basic, good-sense accounting guidelines

  • Don't mingle your money: Keep separate personal and business checking accounts. This not only protects you from troubles with the IRS, but it makes it easier for you to keep track of how your business is actually doing.

  • Treat yourself like an employee: Instead of taking money out of your account on a haphazard basis, pay yourself on a regular basis. Sure, you may have to forego a paycheck every now and then, or reduce the amount you take when the account is low, but in general you'll even out your accounting by following a more regimented process.

  • Set aside money for income tax, sales tax, retirement, and so on: Determine your income tax rate, the amount you owe in sales tax, your retirement needs, and any other money you'd like to set aside and regularly deposit that money in separate accounts. By regularly setting the money aside, you'll insure the money is there when you need it.

  • Understand how your books are kept: Whether or not you actually do the accounting, as the owner of the business you should understand how your books are kept.

  • Review your books regularly: By reviewing your books, you'll increase the likelihood of catching unintentional errors and you'll decrease the likelihood that an unscrupulous employee or accountant will attempt anything questionable with your money.

  • Organize your records: Organize all of your financial information in clearly labeled binders or files and keep them in a place where they're easily accessible. Record keeping doesn't have to be tedious and time-consuming. By doing a little bit every day, you can keep the task manageable. In terms of what to keep and for how long, conventional wisdom says to save copies of your income and expenditure receipts for seven years. When it comes to income tax returns, keep copies indefinitely. The reason: If the IRS suspects fraud, there is no limit on the number of years it can go back for examination. For more information on what to save, see IRS Publication 583 that is available from: Go online Forms and Publications on the IRS website.

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