Make it Easier: Tax & Legal Building Blocks for Entrepreneurs

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Live webinar took place on 05-20-2022 @ 02:00 PM ET
Shiloh Johnson, Speaker
Shivani Honwad, Speaker

Are you a brand new business? Or are you thinking of starting a new venture but are unsure where to start? Lost reading all of the tax and legal jargon surrounding making sure your business is in legal and tax compliance? Join us for a 1-hour panel with Shiloh Johnson & Shivani Honwad where they’ll give you the tips you need to make sure your new business is set up for success and can avoid potential penalties or litigation.

This event will take place virtually (via Zoom Webinar) as well as in-person if you’re local to Los Angeles! We want to create a community around small businesses, so at the end of the talk, we’ll open it up to live questions from attendees. Tell us about you, your business & what you want to know.

Shiloh Johnson is a long-time CPA and founder of ComplYant, a technology platform offering business owners and entrepreneurs a simple way to manage tax rules and requirements.

Shivani Honwad Esq. is an experienced attorney who focuses primarily on the legal needs of companies and entrepreneurs in the creative industries.

Note: This topic covers U.S. businesses only. Any information provided during this panel is not intended to be taken as advice or to be perceived as a specific position on any subject of law or tax law.

Q&A

What are some proper accounting and tax skills for an entrepreneur?

Shiloh Johnson:

Outside of what we already discussed. I would additionally encourage people, this might be a stretch for some, but I will encourage folks to learn how to do their own bookkeeping. Even if they don't actually do it, even if you still hire someone to maintain that for you, I would encourage you to learn how to do your own bookkeeping. As I mentioned earlier, it's really just the tracking of the ins and outs. And obviously, there is a lot more sort of extremities to that. You get into journal entries and asset tracking, obviously saving that for your accountant, but to basically understand how to categorize and how to check a reconciliation report is really important. And you can find those videos everywhere, no matter what software you use, fresh books, into it, zeros or hope books, they all have how to do videos. I would encourage you to at a bare minimum, learn how to categorize your transactions and how to check a reconciliation report.

Again, this is so that you can spot fraud and I don't just mean fraud by your service providers, but I mean fraud in your accounts. You're really the only person that knows that the transaction is accurate or not. So either way, your account is gonna default to you, does this look right? Because they don't know what you bought at Lows. Like that's you, right? So you're ultimately responsible for what's happening in these transactions if you're the only person with credit cards and especially understanding how to do it if you have staff that you've given cards to that are spending so that you can track their spending and be able to make sure you're getting receipts. So that's some basic tax accounting advice I would give is just learn how to do your bookkeeping. That matters because bookkeeping ultimately feeds into your tax returns. Those numbers are the numbers that are the basis for all the forms that'll get filled out, sales tax forms, annual reports, franchise tax forms, income tax forms, all of that is the basis. So if your bookkeeping isn't clean, your tax can't get that. So you just wanna make sure you at least have the bare minimum and have some clarity around that.

Shivani:

And with that also the way I do it, again, cause I'm not a bookkeeper or accountant and I have people that do help me with this. But I set 30 minutes every Friday for me to reconcile my books. And I do it every week. I used to do it once a month, but it would just be too long and I would miss things. Because I would have random fraudulent credit card charges that I would have to fight. And it takes longer when you're doing it 30 days later verses that week and you're like, no, decline. I don't know what this is, send me a new card. So it's 30 minutes once a week that I just look at what invoices were sent out, what money came in, what's missing, and what's being charged to my account. Like, okay, these are all subscription payments for Adobe, like whatever, these are fine. These charges are fine. Okay, great. Set a date with yourself like you set an appointment to meet a friend for lunch or to talk to your client. So for me, it's a standing time on my calendar that this is what I do.

Is it necessary to file taxes even if the business made no income in a particular year?

Shiloh Johnson:

Yes. So, here's the way that you should think about it. The minute that you register, incorporate, fill out a DPA, DBA, whatever type of entity structure you're gonna be, you're telling the government that you are a business. You cannot just do nothing. That's not the same as personal income. I know if you make under 12,000 a year, you don't have to file tax returns. That is not the case for business. Business is not that way. The second you become a business, or you create one, you are required to file forms and pay fees. It is just a requirement. Now, the form may result in a $0 or a negative dollar, but the form still has to get filed. If you do not do that, what happens is the statute of limitation stays open. And that means that the IRS or whatever government entity can come back and basically audit you for every single year, no matter how far back it is that you never filed.

When you do file, it closes it so then the look back period is only four years. So you wanna make sure, even if it's zero, file the forms. And oftentimes if you made no money, you probably have losses and you wanna file those and roll them forward so that when you do have income, you can get some of that loss back. So don't just think it's like worth nothing. Taking a loss is worth something to you, it will be in the future. So please, please, yes, file the forms. You're always gonna have to pay a business license, whether you made money or not, that doesn't matter. You're always gonna have to pay the secretary of state when you register. That doesn't matter if you made money or not. So just get in the thought process that it's never zero. Yes. You must.

Shivani:

And just like a random pop culture example for this is because it's all like "tax the billionaires". So how like Jeff Bezos or Trump or El Musk aren't paying $0 in taxes. Why is that? They're losses because they're entrepreneurs and like they're taking a lot of business losses because they're still filing stuff. So they're getting the benefit of that because they're claiming losses. So again, to highlight Shiloh's point of how can losses help you? Look at these billionaires

Shiloh Johnson:

Yeah. It's something called roll forward. This is way deeper in accounting than you ever wanna know. I'm so sorry. But I'll just explain it to you. There's something called roll forward. Just says that basically, if I took a hundred thousand dollars in losses on my tax return, I can roll that forward into the years where I do make money. So let's say two years from now, you have a slamming year, you're doing so good. You have some of that role forward you can claim that will lower your tax liability. That's all taxes, it's just understanding the rules and being able to work around them so that it benefits you the most. That's why the rich tend to benefit because they're paying people that know a crap ton about tax law.

Shivani:

And again, you don't need to know everything, you just need to understand what's coming in and out for you and work with competent professionals that can help you in navigating that plan for you. But file stuff, file. Always file. There's something you're gonna need to file for everything yearly, like maintaining your LLC or your C Corp or whatever it is. With the state you're incorporated in, you're going to need to do those things. So please do that. Even if you're like I'm losing so much money, still file