All in Business Owners

How to start a sole-proprietorship business in San Luis Obispo — Quick Start Plan #SanLuisObispo #soleprop #businessownership

I work with a lot of business owners in San Luis Obispo, and being one myself, I thought I’d right a ‘quick start’ tutorial on how to set up the simplest kind of business — a sole proprietorship.

This article is meant to be a nuts-and-bolts, “what’s needed”, general information in order to create a formal sole-prop business in SLO.

  1. Fictitious Business Name Filing

If you are using a fictitious name, or a doing business as (DBA) name, you will first need to file for it with San Luis Obispo County. Here is the 4 step process outlined:

In short, you’ll need to make sure your fictitious business name isn’t taken then file for the name here:

Then, you need to publish the fictitious business name statement once a week for four weeks in a local newspaper like the tribune. 

Then the newspaper will provide you with proof of publication to the County of San Luis Obispo.

The fee for is about $52. Here’s the link to the county fees:

2. Acquiring the City Business License. 

You’ll need complete the business application:

You can mail it to: P.O. Box 8112, San Luis Obispo, CA 93403-8112 or drop it off at: 990 Palm Street, San Luis Obispo, CA 93401-3249 

If your business address is your home, you’ll need to complete this form and submit it along with your business application:

You as the home owner, or your land lord will need to sign it. The city will post a small sign in front of your home for a couple weeks that a business permit is pending. 

The total cost for the business license for a home-based business located within the city limits is $226.96

Here is the cities “How do I get a business license?” page with more info:

3. Setting up separate Business Checking, Savings accounts.

Next, I would go to either the current bank you use, or search for an online business bank to set-up separate business checking and savings accounts. You will need a copy of your business license for this. These accounts will further legitimize your business by keeping all your expenses and revenue separate from your personal bank accounts.

I also like the idea of starting a separate credit history for your business as soon as possible by applying for a separate business credit card with which you can make business expenses with. Disclaimer: if you are not “good” with credit cards, or have a history of not paying your credit card balance off every month, then it’s not a good idea to put yourself in a position to rack up credit card debt through your business. A credit card only makes sense if you pay off the balance every month so as to not subject yourself to any high interest fees. 

Disclaimer: this article is not meant to be specific advice nor recommendations for anybody, rather general information. 

Don't Live in Fear of an IRS Audit #financialplanning #tax

According to the IRS, the chances of you being audited are about 1 in 160.

You likely live in fear of a tax audit. Here ‘s how to protect yourself.

If the Internal Revenue Service suspects you underreported your gross income by 25% or more, it can challenge your return for up to six years. If the IRS suspects you filed a fraudulent return, no statute of limitations applies.

Guilty Until Proven Innocent

When the IRS challenges your return, the burden of evidence verifying your claims rests entirely with you.

If you haven’t been traumatized by an audit, you probably keep little of your financial documentation. If you have, you’re probably terrified to part with a single receipt. The IRS is one of the few courts where failure to produce proof of your claims results in the assumption that you stand guilty.

Here are ways to protect yourself:

·       Save all financial documents used to create your tax return.

·       Retain a paper copy or receipt of any tax-relevant financial exchange. Scan these documents and archive them electronically or acquire them in an electronic format.

·       If the purchase constituted a business or other deductible expense, record the expense and why it justifies the deduction. Store this information with the receipts.

Know Your Cost Basis

For a mutual fund with years of reinvested dividends, each dividend payment is part of the cost basis. As a result, sometimes you can compute the cost basis only if you access the complete transaction history.

Many custodians keep several years of electronic copies of brokerage statements and must send any known cost basis when you transfer to a new custodian. If your current custodian has the correct cost basis of your securities, you probably no longer need to keep brokerage statements. Better safe than sorry with the IRS, though.

Other Tips

Permanently keep records of nondeductible contributions to your individual retirement account. You may need the records every year in your retirement that you withdraw money to show that a portion of the withdrawal is not tax deductible. To avoid the hassle, consider clearing out nondeductible IRA contributions by converting your IRAs to Roth accounts.

Keep partnership documents, contracts and commission or royalty structures forever. This includes property records, deeds and titles, especially those relating to intellectual property. It also includes transfers of value for estate planning.

Save all your tax returns. After you file, save the paper or electronic copies, or both, with the rest of that year’s documents.

Once a year, scan and compile the records into PDFs and send them electronically to your financial advisor and the certified public accountant who does your taxes. Scanning the information gives you an electronic backup of the paper indefinitely.

Planning Continues Upon Retirement for Business Owners

As a business owner, you have invested a great deal of time and effort into building your company over the years. You know the amount of planning needed to maintain daily operations and grow your business. Now, you may be ready for retirement. But, the planning does not end. What you do next, and how you navigate potential tax issues and regulatory pitfalls, can make a big difference in the long-term success of your retirement.

Here are some of the more “taxing” concerns you may face associated with retirement:

Early retirement and early withdrawals.

If you take withdrawals from your qualified retirement plan before age 59½, you may be subject to a 10% Federal income tax penalty. There are certain instances in which early withdrawals may be taken without penalty, such as death, disability, or substantially equal periodic payments. Otherwise, at 10%, the penalty tax can be significant, so it is important to plan accordingly.

Waiting too long. You must begin taking required minimum distributions (RMDs) from your traditional Individual Retirement Account (IRA) by April 1 of the year after you reach age 70½. If you fail to do so or do not withdraw enough, you will be subject to a 50% penalty tax, which will be incurred on the difference between your RMD and the actual withdrawal amount. Your RMD amount is based on the previous December 31 balance, divided by your life expectancy (or the joint life expectancy of you and your spouse, if applicable).

Working while receiving Social Security.
If you receive Social Security and also continue to work, a portion of your benefits may be taxable. For more information, refer to Internal Revenue Service (IRS) Publication 915, Social Security and Equivalent Railroad Retirement Benefits, or consult with your tax professional.

You may be subject to the “give-back” if you are under full retirement age (based on the year of your birth), receive Social Security benefits, and earn income. The law requires a give-back of $1 for every $2 earned in excess of $17,040 in 2018 for those individuals between the ages of 62 and full retirement age who are receiving a reduced Social Security benefit.

For the year in which an individual attains full retirement age, the give-back is $1 for every $3 in excess of $45,360 for 2018. Starting in the month in which the individual attains full retirement age, the give-back is eliminated. If you are under full retirement age and thinking about taking Social Security benefits while still working, it is important to understand the potential tax consequences of doing so.

Where you live in retirement matters.
Each state has its own rules on income, estate, sales, and property taxation. Your tax and legal advisors can help you assess the potential tax advantages and disadvantages of your retirement destination.

Planning Continues through Retirement

Your personal retirement plan probably involved building a nest egg with regular savings over decades. Now that you are preparing for retirement, continue with your planning.

How Small Businesses Can Take Advantage of Tax Reform #TCJA

The Tax Cuts and Jobs Act (TCJA) of 2017

The Tax Cuts and Jobs Act (TCJA) of 2017 created substantial new tax breaks for companies of all sizes, but owners of smaller businesses in particular may still be reviewing how much their tax burden could change under the new legislation. The deductions individual business owners can take advantage of and the value of these tax breaks will vary considerably depending on the nature of their business activities, their income levels, and other factors that they may be able to adjust to maximize their tax benefits.