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What is Beneficial Ownership Information

What is Beneficial Ownership Information – A Comprehensive FAQ

In today’s global economy, understanding beneficial ownership information report has become paramount in ensuring transparency, combating financial crimes, and fostering accountability. This article delves into aspects of beneficial ownership, shedding light on its significance, intricacies, and implications within various industries and regulatory frameworks.

This comprehensive FAQ aims to demystify the often complex and misunderstood concept of beneficial ownership Information reporting. From defining the core principles to navigating the legal landscape and exploring its practical applications, this article serves as a go-to resource for individuals, businesses, policymakers, and professionals seeking clarity in an evolving regulatory environment.

What is Beneficial Ownership Information Reporting

What is Beneficial Ownership Information Reporting?

Beneficial Ownership Information Reporting refers to the process of disclosing and documenting the individuals who ultimately own or control a legal entity, such as a company or trust. The concept is crucial for promoting transparency and preventing illicit financial activities, such as money laundering, tax evasion, corruption, human and drug trafficking, as well as fraudulent actions against employees, customers, and other businesses.

The Beneficial Ownership Information Reporting Rule entails a new obligation established by the Corporate Transparency Act and overseen by the Financial Crimes Enforcement Network (FinCEN), operating under the United States Department of the Treasury.

The reporting of beneficial ownership information aligns with the persistent endeavors of the U.S. government to discourage corporations from concealing their actions or deriving benefit from actions that inflict harm on others.

By providing this information through the beneficial ownership information report, companies aid authorities in maintaining the integrity of financial systems and preventing the misuse of corporate entities for illegal purposes.

What is Beneficial Ownership?

Beneficial ownership pertains to individuals who ultimately reap the advantages of possessing or directing a specific asset, property, or business, regardless of the legal ownership being held by another entity or individual. A beneficial owner could possess a substantial stake or vested interest in a company, thereby having authority or entitlement over its assets, profits, or decision-making, regardless of official ownership documentation.

As per the guidelines of the Corporate Transparency Act, a beneficial owner is an individual who, either directly or indirectly, satisfies one of the following criteria: (1) holds or supervises a minimum of 25% of the ownership interests within the company, or (2) exerts notable influence or control over the company’s operational aspects. Instances demonstrating significant control might include:

  • A key decision-maker within the reporting company
  • A high-ranking executive (like president, chief executive officer, chief financial officer, general counsel, chief operating officer, or individuals with comparable roles)
  • An individual possessing the authority to appoint or dismiss specific officers or a majority of the directors (or similar governing body) of the company

Why Must Companies Report Beneficial Ownership to the U.S. Department of the Treasury?

Companies are required to report beneficial ownership information to the U.S. Department of the Treasury for several crucial reasons primarily centered around transparency, compliance, and the prevention of financial crimes.

1. Transparency and Accountability

Reporting beneficial ownership information promotes transparency within corporate structures. It enables authorities to identify individuals who have substantial control or benefit from a company, ensuring transparency in ownership and decision-making processes.

2. Combating Financial Crimes

Mandating the disclosure of beneficial ownership information helps in the prevention and detection of financial crimes, such as money laundering, corruption, tax evasion, terrorist financing, and other illicit activities. By understanding who stands behind a company, authorities can track and prevent the misuse of corporate entities for unlawful purposes.

3. Enhanced Regulatory Oversight

Access to beneficial ownership details allows regulatory bodies to monitor and oversee businesses more effectively. It aids in ensuring compliance with laws and regulations related to corporate governance, financial integrity, and anti-money laundering measures.

4. National Security and Law Enforcement

Disclosure of beneficial ownership information assists in national security and law enforcement efforts. It enables authorities to investigate and address potential threats, illegal activities, or entities that might pose risks to national security or engage in criminal behavior.

5. International Standards and Collaboration

Reporting beneficial ownership information aligns with global standards aimed at combating financial crimes. Many countries are moving toward similar transparency requirements, and exchanging such information between countries can enhance collaboration in preventing cross-border illicit financial activities.

Who Can Access Beneficial Ownership Information

Who Can Access Beneficial Ownership Information?

Under the Corporate Transparency Act, access to beneficial ownership information is regulated and restricted to specific entities and officials with authorized purposes related to national security, intelligence, law enforcement, and certain financial institutions under specific circumstances.

Authorized entities that can access this information include federal, state, local, and tribal officials, as well as select foreign officials who must request access through a U.S. federal government agency. These entities can obtain beneficial ownership information when it’s necessary for activities associated with national security, intelligence operations, or law enforcement.

Financial institutions may access beneficial ownership information in certain situations but require the explicit consent of the reporting company. Additionally, the regulators of these financial institutions will have access to beneficial ownership information as part of their supervisory duties.

To ensure the protection and confidentiality of this sensitive information, FinCEN (Financial Crimes Enforcement Network) published regulations on December 22, 2023, governing the access to and safeguarding of beneficial ownership data. All reported beneficial ownership information will be securely stored in a non-public database, utilizing robust information security measures typical of those used by the federal government to protect sensitive yet unclassified systems at the highest security levels.

FinCEN will work closely with authorized entities permitted access to this information, emphasizing their responsibilities to use the reported data solely for authorized purposes. They will also be required to handle this information in a manner that upholds its security and confidentiality, ensuring its protection against unauthorized use or disclosure.

Which Companies are Required to Submit a Beneficial Ownership Report?

Companies that need to submit Beneficial Ownership Information Reports (BOIRs) include two categories of businesses:

  1. Domestic reporting companies – These encompass corporations, limited liability companies (LLCs), and other entities established by filing with a state’s secretary of state or a similar office, governed by the laws of a state or Indian tribe.
  2. Foreign reporting companies – These consist of corporations, LLCs, and other entities established under a foreign country’s laws that are registered to conduct business in any U.S. state or Tribal jurisdiction.

Consequently, the beneficial ownership rule covers the majority of businesses operating within the United States, excluding domestic sole proprietorships or general partnerships. However, specific exemptions to the reporting requirements of beneficial ownership have been outlined. These exemptions encompass certain categories such as banks, credit unions, investment companies, insurance companies, and regulated public utilities.

What Do Companies Have to Report?

Details regarding the company required to report.

  • Legal name
  • Trade names, e.g., d/b/a names
  • The present physical location of the primary business establishment within the U.S. (or, if abroad, the main site in the U.S. where business operations occur). Reporting entities are obliged to furnish a physical street address; submission of a P.O. box address is prohibited.
  • Jurisdiction of formation or registration
  • Taxpayer Identification Number (and, if issued by a foreign jurisdiction, the name of such jurisdiction).
  • Information about Beneficial Owners
    • For each individual Beneficial Owner
      • Individual’s name
      • Date of birth
      • Residential address
      • Identifying number from an image of an acceptable ID document, e.g., a passport or U.S. driver’s license, and name of issuing state or jurisdiction.
  • If the Reporting Company was formed after January 1, 2024, they will need to provide information about the Company Applicant
    • For each individual Company Applicant
      • Individual’s name
      • Date of birth
      • Address

A Reporting Company may report a parent company’s name in lieu of information about its Beneficial Owners if its Beneficial Owners only hold their ownership interest in the Reporting Company through the parent company and the parent company is an exempt entity.

If the Company Applicant is involved in corporate formation (e.g., as an attorney), the business address may be used; otherwise, the residential address is required.

The identification number, obtained from an acceptable ID document such as a passport or U.S. driver’s license, along with the issuing state or jurisdiction, must be provided.

The Reporting Company bears the responsibility of reporting all the aforementioned information to FinCEN. Furthermore, the Reporting Company must authenticate the information received from its Beneficial Owners and Company Applicants before submitting it to FinCEN.

What Are the Penalties for Not Filing

What Are the Penalties for Not Filing?

Failure to submit a Beneficial Ownership Information Report, which entails disclosing individuals controlling or owning the business, carries severe repercussions. A beneficial owner deliberately disregarding the reporting obligations or providing misleading information to the Financial Crimes Enforcement Network can face personal accountability. This includes both criminal and civil penalties under the Corporate Transparency Act.

Deliberate noncompliance may result in criminal repercussions such as imprisonment for a maximum of two years and/or fines reaching up to $10,000. Additionally, civil penalties of up to $500 per day can be imposed.

Even if a reporting company submits the report within the deadline, inaccuracies within the report may still result in penalties. Therefore, ensuring the accuracy of the filing is crucial. We offer assistance in simplifying the reporting and filing process to guarantee compliance with the law and accurate submissions.

What Is the Due Date for Submitting the Beneficial Ownership Information Report?

The implementation of the Beneficial Ownership Information Reporting Rule commenced on January 1, 2024. Thus, it’s crucial to familiarize yourself with the compliance prerequisites promptly. The filing deadline is contingent upon your business’s formation date.

In general, for business entities established before January 1, 2024, the deadline for filing is December 31, 2024. Those formed on or after January 1, 2024, are granted a 90-day window post-formation to file. Furthermore, entities that modify their formation documents on or after January 1, 2024, are required to submit a new report within 30 days.

Adhering to this requirement is crucial to avoid potential criminal and civil penalties for non-compliance. Penalties may include imprisonment for up to two years, a fine reaching $10,000, and/or a daily fine of up to $500.

Why Hire an Expert

Getting assistance from an expert for your Beneficial Ownership Information Report can be beneficial for several reasons:

  • Complexity of Regulations: The rules and regulations concerning beneficial ownership can be intricate and challenging to navigate. An expert can offer clarity and ensure that you understand the requirements accurately.
  • Accuracy and Compliance: Ensuring accuracy in reporting is vital to avoid penalties. Experts have the knowledge and experience to guide you through the process, minimizing errors and ensuring full compliance with the regulations.
  • Deadline Management: Experts can help you manage deadlines effectively. They can keep track of filing deadlines, providing timely reminders and assistance to ensure you submit your report on time.
  • Risk Mitigation: A professional’s guidance reduces the risk of non-compliance. They can help you avoid costly penalties, including fines or potential legal issues resulting from incorrect or late submissions.
  • Customized Guidance: Each business may have unique circumstances affecting its beneficial ownership reporting. Experts can offer tailored advice specific to your situation, ensuring you meet the reporting requirements according to your business’s needs.
  • Efficiency: Seeking help from experts streamlines the reporting process. They have the expertise to simplify complex procedures, making the entire reporting process more efficient and less time-consuming for you.
  • Updated Knowledge: Experts stay updated with the latest regulatory changes. They can provide insights into any amendments or updates to regulations, ensuring your compliance remains up-to-date.

Filing a BOI Report Yourself

Beneficial Ownership Information Reporting refers to the disclosure of individuals who ultimately control or benefit from a business, even if not the legal owners. Complying with this reporting is essential to ensure transparency in business operations, prevent financial crimes, and adhere to regulatory requirements.

You can file the report online at boiefiling.fincen.gov/fileboir. For more details about how to file a BOI Report yourself, explore our guide.

Business owners may encounter difficulties in understanding the criteria for beneficial ownership and accurately documenting this information. Managing filing deadlines, keeping up with regulatory changes, and avoiding errors in submissions can also pose significant obstacles. Our team can help you file your BOI Report, stay compliant, and avoid penalties.

Get Expert Assistance from Vyde for Beneficial Ownership Information Reporting

Get Expert Assistance from Vyde for Beneficial Ownership Information Reporting:

At Vyde, we understand the challenges businesses face in creating and managing their Beneficial Ownership Information Report. Our expert team is equipped to provide tailored guidance and streamline the reporting process for you. We ensure accuracy, compliance, and timely submissions, helping you navigate the complexities effortlessly. Don’t let the complexities of reporting burden you – reach out to Vyde for expert assistance in managing your Beneficial Ownership Information Report effectively.

Frequently Asked Questions: 

What is Beneficial Ownership Information Reporting?

Beneficial Ownership Information Reporting involves disclosing and documenting individuals who ultimately own or control a legal entity, such as a company or trust. This process is crucial for promoting transparency, preventing financial crimes, and is governed by the Corporate Transparency Act, overseen by the Financial Crimes Enforcement Network (FinCEN) under the United States Department of the Treasury.

What is Beneficial Ownership?

Beneficial ownership refers to individuals who, regardless of official ownership documentation, reap the advantages of owning or directing a specific asset, property, or business. As defined by the Corporate Transparency Act, a beneficial owner is an individual who holds at least 25% ownership interests in a company or exerts notable influence or control over its operational aspects.

 Why Must Companies Report Beneficial Ownership to the U.S. Department of the Treasury?

Companies are required to report beneficial ownership information to the U.S. Department of the Treasury to promote transparency, combat financial crimes, enhance regulatory oversight, ensure national security, and align with international standards. Reporting aids authorities in identifying individuals with substantial control over companies, preventing misuse for illegal purposes.

Who Can Access Beneficial Ownership Information?

Access to beneficial ownership information is regulated and restricted to authorized entities, including federal, state, local, and tribal officials, select foreign officials, and certain financial institutions under specific circumstances. Access is granted for purposes related to national security, intelligence, law enforcement, and requires authorization through a U.S. federal government agency.

What Are the Penalties for Not Filing a Beneficial Ownership Information Report?

Failure to submit a Beneficial Ownership Information Report can lead to severe criminal and civil penalties. Deliberate noncompliance may result in imprisonment for up to two years and fines up to $10,000. Even inaccuracies in a submitted report can incur civil penalties of up to $500 per day. It is crucial to ensure accurate filing to avoid legal consequences.

Getting More from Content Marketing

Doing Less and Getting More from Content Marketing

Content Marketing

These days, companies are increasingly allocating more time and money to content marketing. And the effort is not without good reason, as 67% of marketers suggest that content marketing generates demand and leads. But with a surplus of information and entertainment options available to consumers, is all content marketing worth the effort and resources?

Because we live in an information world, many businesses assume that more content and information is better, but the opposite can be true. Information overload can be overwhelming for consumers and lead to decision-making delays. So if you feel like you’re sending content into a void and nothing is happening, you’re probably right.

What Should I Do?

If marketing is not your expertise, your first hunch might be to throw out more content and see what sticks, but that option can be risky and highly impractical. You have to remember that consumers may, at quick glance, judge the credibility or the purpose of your business based solely on what you post on social media.

Moreover, as a small business owner, your time and resources are incredibly important, and the financial flexibility to hire a content creator is often unavailable. Keeping up with trends, keeping track of the output of your content, and making sure it aligns with your brand identity can become a difficult task to juggle, so let’s go over three straightforward steps to make your content creation manageable:

1. Creating a field comparison.

The good news is that you don’t have to reinvent the wheel! You can gain a lot of valuable insight based on what your competitors are doing and how it’s working for them. Start by choosing 4-5 companies in your field and creating a chart that allows you to compare their content data at a quick glance.

Include any information you might want to consider when creating content for your business. Maybe you want to know the total number of social media accounts each competing company uses and the number of followers on each account. This might help you determine which platform works best for your service or product and where most of your customers are spending their time scrolling or engaging.

Look into what types of content your competitors are creating and how they are relating it to consumers. Are they creating educational, promotional, or charismatic content? Are they allocating a lot of resources to podcasting or webinars? Are they spending any money creating printed content, such as flyers or magazines?

You’ll be surprised to see what other companies in your field are doing; it will also be an excellent opportunity to see where their strengths and weaknesses lie and give you an idea of your own brand positioning.

Building a content strategy

2. Building a content strategy.

Once you’ve gained a good understanding of how your competitors are managing their content and how it’s working for them, you’ll be ready to create a strategy of your own. Strategizing can seem tedious, but it’ll help you lay down a strong foundation and minimize stress and confusion in the future. Here’s how to start:

  1. Determine the why. What is the reason you are creating content? Do you want to raise awareness about your brand? Help others? Increase revenue? Be sure to prioritize your reason, as too many motives will muddle everything and not provide enough focus or direction. Put this into a short mission statement and refer to it often to make sure you are staying on track.

  1. Understand your clients. Determine who you want to target and build the persona of your ideal customer. This could be based on your current clients or ones you want to focus on in the future. Think about where and how they are consuming information, what needs or pain points they may be encountering, and how your content can solve those. Connect to your consumers by sending surveys, or calling and talking to them directly. You’ll be surprised about how much insight you can gain from this experience and how much easier it’ll make your content creation.

  1. Determine your own branding. This will dictate how your customers see you and what they should expect to see or hear from your content. This can include colors, typography, imagery, voice, tone, and personality. Is your business communicating professionally? Casually? Lightheartedly? Stick to these guidelines in every business interaction; it’ll help your customers feel like they are well-acquainted with your company and will set expectations about what your company is about.

  1. Create a calendar or plan. This is the part that turns your good intentions into action. Define what the goal, medium, and topic for each part of your content will be, and don’t forget to include important dates or small campaigns. If you have a team, determine who will be in charge of each piece and what the goal or call to action will be, as well as how to measure the success of the content. Perhaps you’ll decide to attach goals to certain pieces, like reaching a specific number of likes or subscribers in a specific time frame. Don’t be discouraged when things start out slow. Most content engagement requires time and consistency, which is why plans and calendars are crucial!

3. Simplifying your content while improving its impact.

If you’ve already been creating content, take an honest look at what you have done in the past and cut out what isn’t working. This will be a great opportunity to audit your processes and help you determine where you can be saving time and resources. If you are just starting out, choose one thing to focus on this quarter based on your priorities. Maybe you just want to gain visibility, or maybe you want more interaction with consumers. Whatever the focus is, once you start feeling comfortable and that you are getting good results, you can try adding something new into the mix. Remember not to try doing too many things too fast or you’ll have a bunch of disheveled, ineffective content.

Another way to simplify your content is to consider two things: Look for what performed well in the past. You may be able to refresh and use it again. As for content that didn’t perform as well as you thought, consider how you can re-title, repackage, or reformat it to help it be better.

The most important thing to remember is to keep trying. Don’t give up! If content marketing was simple, then it would be ineffective. You’ll realize that as you start taking these steps into consideration and practice, it’ll become easier and even fun to create content and measure its success!

Want more insight on doing less and getting more from your content marketing? Check out the webinar below and don’t forget to subscribe to our YouTube channel!

Accountant

What to Look for in an Accountant

Accounting and tax software have made it possible for small businesses to get along without having an in-house accountant. Depending on the business’s complexity and the owner’s appetite for accounting tasks, small businesses can thrive for years with just an occasional phone call with an accounting software’s customer support line.

However, as businesses grow, accounting issues get more complex, and tax filings become too cumbersome for owners to handle. That’s when you hire an accountant — either a firm or an employee — to take on the financial tasks that eat up your spare time.

Accountants can alleviate the administrative burden of running a business, leaving owners with more time to focus on doing what they love. But with so many options available for accounting services, how do you know what to look for in an accountant and what’s best for your business needs?

Follow these tips and get your small business accounting in order with the right accountant!

Overview: What Does a Small Business Accountant Do?

With all the help accountants can provide, it’s no wonder why accountants are a business owner’s best friend. A small business accountant can maintain the books, analyze financial results, file business taxes, and consult with owners to expand the business’s bottom line.

Small business accountants are best known for carrying out day-to-day bookkeeping. They track sales and expenses, and keep an eye on cash flow. Some small business accountants also run payroll.

At the end of the accounting period, accountants produce financial statements — balance sheets, income statements, and cash flow statements — to give you an overall picture of your company’s financial health. Experienced accountants use the financial data to prepare your business taxes, a task most business owners would be happy to get off their plate.

Aside from rote bookkeeping and tax filing, the most significant value-add from a small business accountant is financial analysis and teaching basic accounting concepts. Through financial ratio analysis, accountants pinpoint the areas where your business could improve efficiency, boosting your bottom line. Business owners lean on their accountants to suggest changes to the business model that can yield profits.

Budgeting also falls within a small business accountant’s wheelhouse. Integral to creating a realistic growth plan is a financial forecast to reel in your unwieldy dream sequence. A small business accountant tends to be a jack-of-all-trades able to answer most financial questions you have. However, you can find accountants who specialize in the areas that meet your business needs. For example, if you need someone to maintain your accounting software, you’ll want to hire an experienced bookkeeper. If you’ve decided you’re never filling out another tax document, find yourself a small business tax accountant.

4 Things to Consider When Looking for a Small Business Accountant

Ask yourself the following questions before starting your search.

1. What Accounting Services Are You Looking For?

Make a priority list for the tasks you’d like the accountant to take on. Searching for an accountant is easier when you have a job description for the role.

A small business accountant’s task list could include:

  • Audit preparation
  • Day-to-day bookkeeping
  • Accounts payable
  • Accounts receivable
  • Tax preparation
  • Payroll
  • Financial statement drafting
  • Financial planning and analysis
  • Budgeting

Consider not only your company’s current needs but also those in the near future. For example, don’t search for a bookkeeper when you think you’d eventually like to turn over payroll duties to someone else. You can likely combine these two tasks into an accounting clerk position.

2. Hiring a Firm or an Employee

You’ll want to determine whether you want an in-house accountant or a firm to manage your business’s accounting workload. Each has benefits and drawbacks, and it comes down to how much accounting help you need.

For example, hiring an in-house accountant, either part-time or full-time, ensures a certain dedication of your accountant’s time. However, small businesses that don’t have a constant need for accounting work might find that a firm can bring 360-degree service at a fraction of the cost. Hiring an employee can be costly when you add wages, employer payroll taxes, and other benefits.

If you’re unsure which route to take, put your feelers out to firms first. You can test-drive a firm by giving them just a portion of your total accounting workload before deciding whether to continue. Hiring an employee requires commitment.

3. Determining Your Budget

Knowing your budget might also help to answer my previous question. As you search for an accountant, consider how much you’d like to spend on accounting services.

Your budget should reflect the services and expertise your business requires, considering the complexity of its accounting issues. Where your business is located also influence the going rate for accounting services.

Research is the best way to build a budget for accounting help. If you’re looking to hire a firm, get some quotes. When looking for an in-house accountant, check out websites such as Glassdoor.com to see what accountants in similar companies earn. Another way of gaining information is asking a peer or other small business owners and gaining insight through them.

4. How Software Can Lighten Your Accounting Workload

If your business doesn’t already have accounting, payroll, and tax software, now might be a great time to introduce it. Software can take on most of the automated aspects of accounting.

It’s not a perfect solution: There will still be many aspects of your accounting you will have to manage yourself. It might be worth paying extra to have a professional handle your financial statements and taxes to ensure accuracy and save you the hassle.

How to Find an Accountant For Your Small Business

Like in all professions, reputation is paramount. Ask your trusted family, friends, and colleagues for accounting firm recommendations.

Make sure you’re talking to people who have hired these accountants to do similar work. For example, a great personal tax accountant might not have the specialty or interest in running your S corporation’s payroll.

Use the local society of CPAs directory.

If you’re looking for the expertise of a CPA, check out the website of your local society of CPAs. They commonly have directories of local individuals and firms with filters to help you find professionals with a specialization in your industry who can meet your accounting needs.

Search online.

Perhaps nobody you know has a recommendation. You can still find a great accountant for your business with an online search.

If you’re looking to hire an employee, create a recruitment plan and post your job description on a few online job boards.

When searching for an accounting firm, make sure to checkout clients’ online reviews before you call for a quote. But take online reviews with a grain of salt: People usually only find time to share glowing and hateful reviews, with little to nothing in between. But if you find a firm with nothing but bad reviews, consider striking it from your list.

3 Best Practices When Hiring a Small Business Accountant

Keep these tips in mind when hiring your accountant.

1. Look For Experience That Fits Your Needs Now and In The Future

Say you need a bookkeeper today, but you know that tax season is coming up. Hire an employee or accounting firm with the skill set to do both.

You want an accountant who can grow with you and help you tackle any accounting needs that may come your way. When you’re interviewing potential accountants, ask them about the type of accounting software they’re comfortable using and what they do to stay up to date with the latest accounting and tax laws.

Business owners who’ve aced Accounting 101 can ask targeted questions during an interview to assess whether the candidate is ready to take on all they’re looking for.

2. Shop Around

Interview at least three firms before choosing one. Accounting firms can differ greatly on price, and you don’t want to get into a situation where you realize only years later that you’ve been overpaying for services.

Likewise, interview multiple candidates before hiring an in-house accountant. Make sure you’re making the job posting widely available so people from different backgrounds can apply. A diverse pool of applicants is essential in any hiring process.

3. Conduct Background Checks and Check References

Accountants have access to your business’s most private information, from employee records to bank account information. You’ll want to run a background check and ask for references before turning your books over to someone new.

Get Back to Business By Hiring an Accountant

Not everyone is like us at Vyde and loves talking about and practicing accounting. That’s probably for the best. By hiring an accountant, or using accounting services, you’ll be able to get back to doing what you love and have more time to focus on growing your business. If you’re still unsure of where to start, here’s an easy option: try Vyde free for 30 days and see why hundreds of businesses choose our services everyday!


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Small Business Dreams a Reality

How to Make Your Small Business Big Dreams a Reality

Starting a business is a dream that many people have. The idea of creating something that is your own, being your own boss, and being able to turn your passion into a full-time job is compelling. In order to be successful and make your small business idea come to life, you have to take time to figure out all aspects of your business to see if it has potential. While starting a business can be challenging, watching your dream come to life is beyond rewarding. Below, we share some advice on how to get you on your way to making your small business dreams a reality.

Conduct Research

Conduct Research

When building a business, it’s important to do your research. Taking the time to figure out what you want your business to be and where it will fit into a competitive market is vital to the overall success of your business. When doing your research, you should look into the type of companies that currently exist in the market that you’re trying to enter to see if and why they have been successful. Is there so much competition you might struggle to gain your footing? How can you stand out from the competition? You should also look into potential consumers to see how your business can help them.

Take some time to gain more insight as to whether or not your business can make an impact within that industry. Understanding your potential market will allow you to better form your business plan. It can also help to fine-tune your business idea so that you are not starting a business around something that is already well-saturated within that market.

You should also consider your potential competitors.  It’s important to be able to diversify your business, so taking the time to research all aspects of your potential market and competitors will allow you to better understand where your business can fit in and how you can be successful in that space.

Create a Business Plan

A business plan is important because it outlines your overall goals and shows how you plan to achieve them. Creating this plan in the early stages will allow you to better visualize how you want your business to operate, allowing you the freedom to make any changes that you want before fully moving forward in this process.

When creating your business plan, be sure to consider all aspects of your business. A business plan should highlight:

  • Your goals and objectives
  • Your product or service
  • Market  and industry research
  • Competitor research and how you plan to stand out
  • Consumer research and how you plan to solve their pain points
  • Your marketing strategy
  • Your financial approach

It’s important to address all of the major components of your business so that when you are at the financing stage of the process, there will be a clear explanation of what your objectives are and what you plan to accomplish with your business.

A business plan will also help you stay organized throughout the entire startup process.

Determine Your Financial Strategy

Determine Your Financial Strategy

Figure out your finances early on so that you can ensure you get your business off the ground. Without proper financing, it will be difficult to start your business. It’s important to create an outline of what your expected expenses will be so that you can budget your money wisely. Starting a business is expensive and there are many unexpected costs that will come up. It’s just a reality of being a business owner. When making your business plan, you should budget for not only the expected costs but also the unexpected costs so you are not overwhelmed or scrambling when they come up. That will also give you more flexibility when new opportunities arise.

There are many different ways to fund your business. Some people prefer to look into reaching out to investors for assistance, while others may consider taking out a loan.  If you’re someone who is looking to go the route of working with investors, then it’s vital that you have a sound business plan to show potential investors.

If you are considering a loan instead, then it may be worth considering a small business loan. A small business loan is partially guaranteed by the government, eliminating some of the risks for the financial institution issuing the loan, but it can be difficult to acquire. Small business loans have specific requirements that have to be met in order to qualify, but if those requirements are met, then it may be a good option for your small business. If not, another long-term option to consider is looking into refinancing your home to a 30-year fixed mortgage, which will lower your monthly mortgage payment, allowing you to allocate the extra funds toward financing your new business.

Consider Your Accounting and Taxes

Once you figure out how you will finance your small business, you should also consider how to handle your small business accounting and taxes. Having a detailed understanding of your financial reports will help you make informed decisions for your business, and you want to ensure your company does not have any surprise tax bills or compliance problems with the IRS.

If the idea of doing your own accounting makes your blood pressure rise, consider looking into small business accounting options. There are affordable options for small businesses that will take care of your accounting, bookkeeping, financial reports, and taxes. In fact, at Vyde we often save our clients more in their taxes than our services cost for an entire year. Utilizing the help of an accountant or accounting service will save you stress and provide the security of knowing your taxes are done right.

It’s important that you take the time to finalize all aspects of your business idea before moving forward. Starting a small business takes time and is a big commitment. Making sure that you are well prepared with what to expect, can allow the process to run smoothly and your business to be successful.

Consider Your Accounting and Taxes

Vyde Wants to Help

Vyde helps small business startups like yours with all their accounting, bookkeeping, and taxes. Our business is helping you stay in business. We’ve helped over 10,000 small businesses already! Contact us today to see how we can help you.

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Save for Taxes

Tax Guide for Small Businesses: How Much Should You Save for Taxes?

Tax Guide for Small Businesses: How Much Should You Save for Taxes?

Running a small business has its pros and cons. It can be incredibly freeing to be your own boss, but doing your own taxes? That can be intimidating. 

All businesses need to pay annual taxes. If your small business expects to owe more than $1,000 in federal taxes, you’ll also need to pay quarterly taxes. There are several ways to calculate how much (and when) you need to pay. The type of business you are running and the state you live in will affect what you owe.

Let’s look at this in more detail. 

Which Taxes Do I Have to Pay? 

If you are self-employed, you are subject to the following taxes:

Self-Employment Tax

The federal government sets the self-employment tax at 15.3%. This applies to all profits made by self-employed individuals and businesses. 

Federal Income Tax

You will need to pay federal income tax in addition to the self-employment tax. The percentage you must pay in federal income tax depends on which income bracket you fall into. The percentages range from 10% to 37% and are determined by income and your filing status (whether you are a single filer, married and filing jointly, or the head of household). 

Rate Single Filers Married Filing Jointly Head of a Household
10% $0 – $10,275 $0 – $20,550 $0 – $14,650
12% $10,275 – $41,775 $20,550 – $83,550 $14,650 – $55,900
22% $41,775 – $89,075 $83,550 – $178,150 $55,900 – $89,050
24% $89,075 – $170,050 $178,150 – $340,100 $89,050 – $170,050
32% $170,050 – $215,950 $340,100 – $431,900 $170,050 – $215,950
35% $215,950 – $539,900 $431,900 – $647,850 $215,950 – $539,900
37% $539,900+ $647,850+ $539,900+

State Income Tax

Not all states have income tax, but the majority do. The amount varies from 3% in Pennsylvania to 13.3% in California. You’ll need to look up your state’s income tax laws.

State Sales Tax 

Every time your business sells a product, it is subject to state sales tax (for the 45 states that require it). When you charge your clients for the sale of products, you should collect sales tax. 

In most states, you do not need to collect sales tax for the sale of services, but check with your state’s specific laws to make sure you’re compliant. 

Other Taxes

A few other common taxes you may need to pay are: 

  • Property Taxes 
  • Franchise Taxes
  • Excise Taxes

The best way to know which taxes you will need to pay is to contact a tax professional. 

How Much Should a Small Business Save for Taxes?

A common question small business owners have is: How can I know exactly how much I’ll owe until I file at the end of the year? 

The truth is that you won’t know with full certainty.

However, you don’t need an exact number, only a good estimate. The federal government allows you to make estimated quarterly tax payments throughout the year, and at the end of the year, you settle up with your annual filing. 

A Good Rule of Thumb

So, how much should your small business save for taxes? About 30-40% of your net income. 

This is a reliable rule of thumb because, on average small business owners make $66,000 or less, putting them into the 22% tax bracket or below. Add that to the 15.3% federal self-employment tax, and you’re probably right in the middle of that range. 

This doesn’t account for everything you’ll have to pay, and you may want to pay more based on your particular financial situation, but it’s a good place to start. 

What If I Don’t Pay Enough Taxes? 

If at the end of the year you file your taxes and discover you’ve underpaid, don’t panic. 

The government’s Safe Harbor rule states that so long as you paid 90% of the taxes you owed for the current year or 110% of the taxes you owed based on the earnings you made in the previous year, you will not be fined for underpaying your estimated taxes. 

This is why the 30-40% rule of thumb can be a safe way to help small businesses decide how much to save for taxes. However, you will need to pay whatever amount you still owe at the end of the year. 

If you underpaid your taxes (less than 90% of what you owed), you might be subject to fines and penalties. 

What If I Pay Too Much in Taxes? 

There’s no fine for paying too much. If you overpay, you’ll get a tax refund at the end of the year for the amount you’re owed.

Of course, overpaying can hurt your business indirectly, as it ties up money you could otherwise use to run day-to-day operations or make investments. Hiring a reliable bookkeeper, however, can prevent this from occurring. 

Get Professional Tax Help

Taxes don’t have to be stressful. With the help of expert tax and accounting professionals, tax season will just be another date on the calendar. 

Don’t wait, contact Mazuma to assist you in all of your small business tax needs.

Interested in Learning More?

Schedule a free consultation with our team!

Financial Records

How Long to Keep Financial Records

Have you ever wondered how long to keep financial records such as receipts, bank statements, and credit card bills? You’re not alone! Rather than keep everything forever and let the stacks of paper reach the ceiling, develop an organized system of keeping receipts for the recommended amount of time.

Remember, the IRS recommends keeping tax-related documents for at least six years. An audit can be performed up to six years after filing if an error is suspected, and you’ll want proof of your purchases if that happens.

How Long to Keep Financial Records and Why

Determining how long to keep financial records depends on several factors, including the record type and whether it’s for personal or business documentation. Whether you’re keeping the record for one month or 10 years, record-keeping best practices dictate you should store documents electronically (go paperless when you can), and always backup your files by saving them in the cloud. At Vyde, our accounting experts help our clients save and organize important financial information in a secure online portal so the information never gets lost and is easily accessible.


Below is a detailed summary of how long to keep financial records, categorized from the least amount of time to the most.

KeepItFor-01

1 Month

The key to successful record retention is staying organized. Set up an efficient monthly system and you’ll be more likely to stick with it. For instance, write the type of expense on each receipt and put it in a dedicated file each month. You’ll want to keep utility payment receipts, bank withdrawals, and deposit slips until you receive your monthly statements. After you’ve had time to review your statements, you can dispose of the receipts.  

Keep the following documents for one month:

  • Receipts for non-deductible items
  • Deposits / ATM slips
  • Reconciled bank statements

1-3 Years

You will need proof of payments and any business financial activity in case of disputes, identity theft, or fraud. Therefore, create a file for all banking and investment records for both your personal and business accounts. 

Keep the following documents for one to three years:

  • Paystubs
  • Bank records
  • Insurance policies
  • Investment statements
  • Mortgage statements
  • Receipts for charitable contributors
  • All business-related documents

7+ Years

You might be wondering how long to keep bank statements. Err on the side of caution. This will be helpful if you claim a loss or a bad debt deduction. 

Keep the following documents for seven or more years:

  • Income tax returns (federal and state)
  • W-2s and 1099s
  • Medical bills
  • Contracts
  • Receipts for tax-deductible items
  • Mileage records
  • Canceled checks
  • Real estate tax forms
  • Credit cards statements that contain purchases used as tax deductions
  • Retirement plan contributions

Forever

Why should you keep some items permanently? Some documentation has no expiration date, such as birth certificates and social security cards. Plus, these documents can serve as proof of identity. For paperwork like auto titles, or other purchases, store the related documents for as long as you own those items. 

Keep the following documents permanently:

  • Birth certificates
  • Social security cards
  • Passports
  • Education records
  • Auto titles
  • Investment statements
  • Home improvement receipts*
  • Receipts from major purchases*
  • Wills
  • Current insurance policies
  • Medical records
  • Pension / retirement contracts
  • Property agreements
  • IRA contribution records
  • Mortgage documents
  • Life insurance policies
  • Safe deposit box inventory

*for insurance purposes

Where to Store Your Financial Records

Where to Store Your Financial Records for Safekeeping

Keep vital personal documents, like birth certificates, passports, marriage certificates, etc., in a secure place, such as a home safe, fire-safe container, or a bank’s safe deposit box. 

Documents such as tax returns, receipts, bank statements, or pay stubs can also be kept in a safe deposit box or simply a locked file at home. For electronic documents, store them in a password-protected folder on your desktop or another secure location.

At Vyde, we help our clients save and organize important financial information in our secure online accounting portal. We not only complete your bookkeeping and taxes, but we also provide easy access to tax returns and other important business documents.

Why You Should Shred Discarded Documents

You may be tempted to toss old financial records in the trash. But if any of those documents contain sensitive personal information, like your account or social security numbers, you’ll want to shred them first. This reduces the risk of identity theft. 

Shred any document that contains:

  • Social Security numbers
  • Account numbers
  • Personal signatures
  • Birthdates
  • Phone numbers
  • Email addresses
  • Confidential information (medical, financial, or legal)

The Benefits of Record Keeping

Knowing how long to keep financial records is important because it can help you stay organized. This is crucial if you’re a business owner, as you’ll want to have everything readily available should you be audited or need to go to court. Organizing your records can also help you prepare accurate financial statements and tax returns, stay compliant, access important reports, apply for loans, and plan for the future. 

Vyde Can Help!

Need help organizing your business financial records? At Vyde, we can help with your business accounting and taxes. We’ll handle your books throughout the year so we can keep you organized and maximize your tax savings, all for a minimal monthly fee. Contact us today!

1. How long should I keep financial records for utility payments and bank transactions?

Maintain utility payment receipts, bank withdrawals, and deposit slips for at least one month. Review your monthly statements and dispose of these receipts afterward.

2. What financial records should I retain for one to three years?

Preserve documents like paystubs, bank records, insurance policies, investment and mortgage statements, receipts for charitable contributions, and all business-related documents for one to three years.

3. Which documents should I retain for seven or more years?

Keep income tax returns, W-2s, 1099s, medical bills, contracts, receipts for tax-deductible items, mileage records, canceled checks, real estate tax forms, and credit card statements used for tax deductions for seven or more years.

4. What documents should I keep permanently?

Essential documents like birth certificates, social security cards, passports, education and medical records, auto titles, investment statements, wills, insurance policies, property agreements, and certain receipts should be kept permanently.

5. Where should I store financial records for safekeeping?

Keep vital personal documents in a secure place at home or in a bank’s safe deposit box. For electronic documents, store them in a password-protected folder or secure location. Vyde offers a secure online portal for organizing and storing financial information.

Quarterly Estimated Taxes

What You Need to Know About Quarterly Estimated Taxes

If you are self-employed or a contract worker and you are generating a profit, you may need to pay estimated quarterly taxes. This is the Internal Revenue Service’s (IRS) way of collecting taxes from people who don’t have them withheld from their paychecks through payroll.

Our guide on estimated quarterly taxes will help you understand who needs to pay them, how to calculate them, and how to pay your quarterly taxes.

If you have questions about estimated quarterly taxes or need help calculating how much you should pay, our team would love to help! Our clients can easily schedule a time to meet with us to discuss your unique situation.

Who Needs to Pay Estimated Quarterly Taxes

Most people pay their taxes throughout the year by having them withheld from their paychecks. When you are self-employed, however, you pay estimated quarterly taxes to cover those taxes.

Self-employed individuals, including contract workers, sole proprietors, LLC owners, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe $1,000 or more in taxes when their return is filed.

This means if your new business is not yet making a profit, you do not need to make estimated quarterly tax payments.

There are cases when you may have to pay estimated quarterly taxes even if you are employed and your employer is taking your taxes out for you. If you receive income from the following categories you may have to pay estimated quarterly taxes.

  • Interest
  • Dividends
  • Alimony
  • Capital Gains
  • Prizes or awards

Calculating Estimated Taxes

Quarterly estimated tax payments are based on estimations of what a business owner believes they will make in a quarter. Taxpayers estimate their income and their deductions in order to calculate the estimated quarterly taxes.

The IRS suggests using your previous year’s income and deductions to help calculate this year’s estimated taxes. They also provide an IRS’ Estimated Tax Worksheet on form 1040-ES to help you calculate your taxes.

The important thing to remember with quarterly estimated taxes is that they are estimates. If you over or under-estimate your taxes, you can file another form with the IRS to fix those taxes. If you make more or less income than you anticipated, you can also refigure your estimates for the next quarter so that you aren’t always over or under-estimating your taxes. Make sure you’re doing your best to make accurate estimates so you can avoid potential penalties.

Estimated Quarterly Tax Deadlines

For 2023, the Estimated Quarterly Tax due dates are:

  • 1st Quarter – April 18, 2023
  • 2nd Quarter – June 15, 2023
  • 3rd quarter – September 15, 2023
  • 4th Quarter – January 16, 2024

Be sure to save these dates in your calendar and set reminders so you don’t miss the deadlines. 

How to Submit Your Taxes

You can submit your taxes online through the IRS’ secure server. You’ll have multiple options to make your payments, including credit or debit card, cash, PayPal, money wire, and more. You can also access options to schedule future payments through the Electronic Federal Tax Payment System (EFTPS).

 

Estimated Quarterly Tax Penalties

If you do not make estimated quarterly tax payments or do not pay enough tax throughout the year, you may have to pay a penalty. Generally, if you owe less than $1,000 in tax or if you paid at least 90% of the tax for the current year, you can avoid any penalties. Again, quarterly estimated taxes are just that: estimates. Do your best and make adjustments as you go to avoid additional costs.

How Vyde Can Help

If you have questions about estimated quarterly taxes or need help calculating how much you should pay, our team at Vyde would love to help! Our clients can easily schedule a time to meet with an accountant and tax professional to discuss your unique situation. Simply reach out to our team through the Vyde Dash. We look forward to hearing from you!

21 Tax Benefits of Owning a Small Business

21 Tax Benefits of Owning a Small Business

21 Tax Benefits of Owning a Small Business

Many obvious perks come with owning your own business, including setting your own schedule, being your own boss, and having control over your career. But there are also many tax benefits business owners that can take advantage of to maximize their profits.
Here's a quick guide that covers important tax deductions for your business.

What Will a Deduction Save Me?

A deduction, or write-off, is a business expense that can help lower your taxes. For example, if your business made $75,000 last year but you invested $10,000 in new business equipment, you would deduct that $10,000 from your net income. That means when it comes time to pay your taxes, you would need to pay tax on only $65,000 instead of the full $75,000.

How much will that deduction actually save you on your taxes? It’s important to weigh out the costs versus tax savings when you’re making a business purchase. Sometimes the tax benefits of owning a business don’t outweigh the expenses involved with a deduction. Luckily, we have a simple formula that can help you see the value of these deductions:

Business Expense x Tax Rate = Money You Save on Taxes

For example, if you spent $2,000 on a new camera for your business and your tax rate is 25%, your savings would be $500:

$2,000 X .25 = $500

If you don’t know your tax rate, you can always visit IRS.gov to see the latest tax rates and brackets for the year. Keep in mind that if you are self-employed, you will also need to pay self-employment tax, which is a little over 15%.

Of course, you can’t write off every expense as a business expense. According to the IRS, you should write off expenses that are ordinary (i.e. common and accepted in your industry) or necessary (i.e. helpful and appropriate for your business). That doesn’t mean you can’t be creative regarding a tax deduction. Think broad. Just be sure you know and document the business purpose.

Common Business Expenses That Qualify For Tax Deductions

A great example of getting creative in maximizing your tax benefits for owning a business comes from a client I work with who wrote off her houseboat at Lake Powell. She is a photographer who takes senior graduation photos, and she also loves Lake Powell.

She came up with a promotional idea of taking a handful of her clients down to Lake Powell each year for an exclusive photo shoot. Because of these promotional trips, she decided to purchase a houseboat as a business expense. While she can still enjoy the houseboat throughout the year with her friends and family, the reason for purchasing the boat was to grow her business, which makes it a business expense. The chance to win a vacation to Lake Powell and the stunning photos that result from these trips help build her client base and generate more revenue. Overall, it’s a win-win!

This example illustrates that business owners should not feel limited in the deductions they take. Below, I have listed several common business expenses you should consider as tax deductions, but this is by no means a comprehensive list.

  1. Business Travel

  2. Business Meals

    • These include meals where you discuss business or meet with clients, partners, prospects, etc.

  3. Retirement Contributions

    • Business owners have more flexibility that allows them to strategize around their retirement contributions. At the end of the year, you can determine how much you want to contribute to your retirement to help lower your taxable income. If you have questions, reach out to our team to develop with the best game plan.

  4. Vehicles and Transportation

    • This can include purchases, leases, mileage, repairs, maintenance, insurance, etc. As we saw from the example above, it can even include houseboats!

  5. Phones

    • This can include the initial purchase, repairs, and monthly phone bills.

  6. Equipment

    • Some examples include tools, furniture, cameras, computers, monitors, printers, and machinery. Again, this can be broad depending on your business needs, so don’t limit yourself.

  7. Depreciation on Assets

    Depreciation on any capital under your name is fully deductible. Equipment, rentals, vehicles, and other depreciable items of contention are covered under a Section 179 deduction—up to $1,050,000 from new.

  8. Inventory

    One of the tax benefits of owning a business is that everything in your warehouse can be written off at the end of the year. This will be valid whether you’re producing these goods yourself or serving as a middleman.

  9. Supplies

    • Do you need office supplies or marketing materials like brochures, business cards, or posters? What about cleaning supplies or hardware like memory drives, routers, or servers? Keep track of all these expenses because they are all great tax deductions.

  10. Employee Expenses or Contract Labor

    • Whether you have employees or pay someone to help set up your office or website, you can count those payments as a deduction. In addition, any money you spend on business equipment, education, travel, meals, gifts, etc. for employees can be written off.

  11. Insurance

    • This includes health insurance as well as business-related insurance expenses, such as data breach insurance, liability insurance, property insurance, etc.

  12. Financing

    • If you finance expensive equipment, vehicles, or more for your business, you can write off the full purchase price of the asset using bonus depreciation in the year you financed it, even though it might take you years to pay off

  13. Website and Software

    • Are you paying to maintain your website or domain? Do you use editing software, subscriptions, or Microsoft products for your business? Make sure you write those expenses off!

  14. Education

    • Say there’s a seminar, class, or workshop that could help you gain important skills for your business. Take advantage of the learning opportunity and then take advantage of the tax deductions by writing off the expenses related to that education. That includes books, travel to and from seminars, meals purchased while attending a workshop, etc.

  15. Taxes

    • Since you are self-employed, you will need to pay self-employment tax, which covers Medicare and Social Security taxes and is roughly 15%. While there’s nothing fun about paying extra taxes, you can deduct half of the self-employment tax to lower your tax bill.

  16. Marketing and Advertising

    • This is another great area for thinking outside the box. You’ll likely have expenses related to ads, signs, logos, brochures, etc. but you could also sponsor community events, host a client retreat, or hold a promotional treasure hunt to build up your business.

  17. Home Office or Rent

    • Whether you rent an office space or work from home, you can take advantage of tax deductions. With rent, it’s easy to calculate your business expense because you have a monthly bill. For a home office, that can get a little trickier. Check out our guide for getting the most from your home office tax deduction.

  18. Utility Costs

    One of the significant tax benefits of owning a business: Every single one of the utilities required to keep you in operation is totally tax-deductible. The only limitation? Double services—if you have a dedicated phone line for your business on-site, you can’t also claim this same deduction for your home line.

  19. Interest

    Any interest accrued on a small business loan, credit cards, or other borrowed money your business depends on can also be written off. As long as you, the owner, are legally liable for the debt, you should be good to go, making this one of the best tax benefits of owning a business.

  20. Internet, Phone, and Other Bills

    • Water, heat, air conditioning, internet, phone, hotspots, monthly subscriptions for marketing tools or video conferencing—these could all be important for your business to function. Don’t forget to add those as tax write-offs.

  21. Professional Fees

    • Do you have to maintain a license for your job? Or do you need permits to operate? Those are additional tax deductions you’ll want to take advantage of.

owning a business

More Questions About Tax Benefits of Owning a Business?

Have additional questions about how to write off your business expenses and the tax benefits of owning a business? Reach out to our team for advice. At Vyde, we help small businesses save time, money, and stress by staying on top of their taxes and finances. We’d love to help you in any way we can.

Interested in Learning More?

Schedule a free consultation with our team!

Vyde is a licensed accounting firm (CPA) based in Provo, Utah, and members of the AICPA. We provide professional accounting services to businesses and individuals, with a focus on small business bookkeeping and taxes.

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