Business entities are organizations formed to conduct business or engage in a trade. There are multiple business entity types, including corporations (C-Corporations and S-Corporations), limited liability companies (LLCs), partnerships (general partnerships, limited liability limited partnerships, and limited partnerships), and sole proprietorships.

Medical bills are tax-deductible if the taxpayer itemizes and does not elect to take the standard the deduction. In 2019, the IRS allowed all taxpayers to deduct the total qualified unreimbursed medical care expenses for the year that exceeds 7.5% of their adjusted gross income. Beginning in 2020, the threshold amount increases to 10% of Adjusted Gross Income (AGI).

Officers of corporations can receive payment in the form of a salary. Shareholders that are employees can also receive a salary for their work.

Like officers in C-Corps, the salary received must be reasonable and not disguised as other forms of assets or dividends. 

In either case, wages paid as a salary can’t exceed the amount that someone outside of the C-Corp will receive as a wage. If so, there can be problems that violate reasonable compensation.

If the IRS determines that you receive an excessive amount of income, it can administer a reasonable compensation test. This can result in the excess salary paid to officers and shareholders converted to dividends that will experience double taxation.

Accountants assist clients in the process of setting up the payroll with the respective states. Once completed, there are specific quarterly and yearly forms that need to be filed in order to stay compliant. The accountant will assess the client of any changes and timely file all required forms on a timely basis.

The need to make estimated tax payments is solely based on the taxpayer facts and circumstances. If your income is entirely comprised of wages, there will be withholding taxes taken out on your wages, so there should be no need to make quarterly estimated tax payments.

If there is material income from other sources and no withholding taxes are taken out, then the need to make estimated tax payments has arisen. Tax projections can be prepared to determine the level of estimated taxes that are necessary for you to make.

The quarterly estimated tax payment dates are April 15th, June 15th, September 15th and January 15th of the succeeding calendar year.

Insofar as the use of the term “declare my entity”, it is assumed you are referring to the filing of an S corporation election or, a C corporation election. Generally speaking, there is a seventy-five day rule that applies to each tax election.

If you want the S -election to be effective from the date the entity was formed (entities are formed at the state level either by filing LLC Articles of Organization and corporate Articles of Incorporation), then you have 75 days from the date of formation to file the appropriate Federal election form.

There is late filing relief available for both elections. There are IRS Revenue Procedures issued to cover the requirements for late filing relief. Revenue Proclamation 2013-30 and 2009-41 deal with the S-election and the C election respectively.

While it’s not a requirement to have a website for your business, you’ll benefit from having a website for several reasons. 

Small businesses with websites benefit from transparency. Having a website can allow you to add more information about your business, its history, and what you’re trying to advertise.  

If you’re willing to invest in SEO, your website could potentially reach a much wider audience than you would if you didn’t use one. 

A small business website will also help owners create another method of sales. If your small business would like for customers to contact you, having a website will help you. It will also facilitate advertising your small business products.

Invoicing can be done via email or, as an additional step, can also be mailed to the specific individual or company department responsible for the payment of all vendors. Of course, this will depend on the size of your client.

Some additional tips:

1. Call after you’ve sent your first bill.
2. Check they got your invoice and they understand what it’s for.
3. Send your invoice in an un-editable format. Frauds have intercepted emailed invoices and added their bank account to the payment details.

Take your billing completely online, as opposed to mailing invoices.

Whatever procedures one may employ, take into account that the goal is to timely bill customers or clients and collect the money due to your company certainly within 60-90 days.
Before sending an invoice, double-check all the information to ensure it’s correct and clear. Let your client know how to make a payment and the due date. Make sure you send out the invoice on time. If you mail the invoice, ensure that your client’s correct address is on file. If you email the invoice, include a hyperlink to the payment system. This makes the process as easy as possible.

You can calculate cash flow in three ways: 

• Free cash flow equals your net income plus amortization/depreciation minus changes in working capital minus your capital expenditure. 
• Operating cash flow is equal to your operating income plus depreciation minus taxes plus changes in your working capital. 
• Cash flow forecast is equal to your beginning cash plus projected inflows minus your projected outflows minus your ending cash.

Your net worth is the value of all your assets minus the value of all your liabilities. Assets (cars, homes, boats, cash, investments) are owned by a person or company. Liabilities (credit card debt, student loans) are what a person or company owes. To calculate your net worth, subtract your liabilities from your assets.

If you want to start your business at a state level, you’ll need a license and permit in many states. For more information about state licenses and permits, you’ll need to contact your city or county governments. 

The Secretary of State’s office typically oversees state licenses and permits. Depending on your industry, you may need a federal license or permit to operate your business.

In order to start a successful small business, you should first conduct market research. Your brilliant idea may already exist and therefore act as a barrier for you to enter the market. If you still feel you have a good opportunity after you do some research, you will need to create a business plan.  

Next, you will need to procure funding for the business. You can either provide funding yourself, obtain a small business loan, reach out to friends and family, or look into crowdfunding online. After funding is secured, you will need to decide on a location for your business. A home office in a garage or basement can help fulfill this function until you’re comfortable finding a separate office location.

You will also need to decide on the entity structure, i.e., corporation, limited liability company/partnership, etc. Last but not least, you will need to decide on a name for your business and register with the IRS and state authorities. 

To draft a valid check that will be accepted in the course of conducting business, certain information is required on the document. Assuming you are using the printed check provided by your bank, the check date is written in the top right corner of the check. The company or individual to whom the check is being paid should be entered on the payee line. The actual amount of the check should be written both in numbers and words, If course, the check must be signed by an authorized signer.

Gross profit is determined by subtracting the costs of sales or cost of goods sold from total revenues. The gross profit percentage is obtained by dividing the gross profit amount by total revenues. This is also called a Gross Margin.

“Net profit margin is the percentage of revenue left after all expenses have been deducted from sales. The measurement reveals the amount of profit that a business can extract from its total sales. The net sales part of the equation is gross sales minus all sales deductions, such as sales allowances. The formula is:

(Net profits ÷ Net sales) x 100 = Net profit margin

This basically should be viewed as a barometer as to how a business is functioning. Are business profit goals being met? Are there sufficient funds being earned to allow for business expansion or investment, along with the maintenance of operations? This is a basic starting point for analyzing how your business is doing.”

Unless you’re in a sole proprietorship, where the owner is the same individual that operates the business, you’ll choose a business entity that offers the most for your needs. There are a few things that you’ll consider, such as how many people will join your business, if the business will be incorporated, if there will be liability, if there will be taxes as a pass-through or double taxation, or if there are shareholders.

There are five steps to creating a balance sheet. The first step is to determine the reporting date and reporting period for your balance sheet. In most cases, the reporting period is a financial quarter, and the reporting date is the last day of a particular financial quarter. 

The second step is to identify your assets. You’ll do this line by line, starting with your current assets and then your noncurrent assets. 

Current assets include accounts receivable, cash and cash and cash equivalents, inventory, other existing assets, and short-term marketable securities. 

Noncurrent assets include goodwill, intangible assets, long-term marketable securities, other noncurrent assets, and property. After you subtotal these amounts, you’ll add them for a later step. 

The third step in creating a balance sheet is to arrange your liabilities. You’ll do this line by line, starting with your current liabilities and then your noncurrent liabilities.

Current liabilities include accounts payable, accrued expenses, the current portion of long-term debt, deferred revenue, and other current liabilities. 

Noncurrent liabilities include noncurrent deferred revenue, long-term debt, long-term lease obligations, and other noncurrent liabilities. After you subtotal these amounts, you add them for a later step.

The fourth step in creating a balance sheet is to calculate shareholder equity. This step can vary depending on the stock that your business issues. Typically, you’ll add either common stock, preferred stock, retained earnings, or treasury stock to this balance sheet area.

Finally, you’ll add your total liabilities to the total of shareholder equity. This is the number that you’ll compare to your assets. 

To create a chart of accounts, you’ll create three columns. 

The first column will have your accounts containing your account names. You’ll name this column Account. 

In the column to the right, you’ll have a column containing the name Type. This column will list the account name, which can either be an asset, cost of goods sold, equity, expense, income, or liability.

To the right of the Type column, you’ll create a third column with the name Description. This column will contain a description of the transaction that you’ll record. 

If you aren’t using a computer to create your accounts chart, you can implement a number system to keep track of your accounts. Asset accounts range from 1,000 to 1,999; liability accounts range from 2,000 to 2,999; equity accounts range from 3,000 to 3,999; cost of goods sold range from 4,000 to 4,999; and, expense accounts range from 5,000 to 6,999. 

Accounting software also uses this system, which will make it easy if your company plans to use accounting software at a later date.

First, it should be understood that the credit card charges are recorded on the books of the company. The charges are recorded as a Debit to the appropriate expense account or balance sheet account if buying fixed assets, as an example. A short term liability would be recorded to the Credit Card Payable account. When paid, there will be a posting of a Credit to the Operating account- Cash and a Debit to the Credit Card Payable account.

Everyone has their own way to approach starting a new business. However, everyone living in the U.S. is also obligated to align these procedures within the jurisdiction of the state the business is starting in. Business owners must follow federal, state, and local rules.

Some simple steps to follow include:

1. Do your research
2. Make a plan
3. Plan your finances
4. Speak to a professional to advise on your plan, business entity, tax election, and more
5. Choose a business structure
6. Pick and register your business name
7. Get licenses and permits
8. Set up the location of your business, or start your website, or both
9. Choose an accounting system
10. Promote your business

Invoices are billing statements sent to a business client for the billing of either services rendered or, for goods that are sold to a customer.. There are a considerable number of software programs available to generate invoices. Typically, accounting software will have this ability. Basically, an invoice will contain the following information:

How to create an invoice step by step:

• Draft your invoice
• Clearly mark your invoice.
• Add company name and information.
• Write a description of the goods or services you’re charging for.
• Don’t forget the dates.
• Add up the money owed.
• Mention payment terms.

Double-entry bookkeeping works during business transactions. You’ll write both the debits and credit  whenever a customer buys a product. Debits will appear on the left of the general ledger, and credits will appear on the right side. This will result in two equal amounts for the same transaction. Your goal is to have balanced books.

In accordance with the Fair Labor Standards Act (FLSA), payroll records should be maintained for no less than three years. Wage computation records such as time cards or timesheets should be retained for two years. The IRS has already gone on record to state that business records, in general, should be maintained up to seven years.

An accountant is in charge of leveraging the tax laws and regulations to keep businesses compliant and ensure it is efficiently operating. This is achieved by determining the best business and tax structure, creating a business plan, compiling, and analyzing financial statements. Most importantly, an accountant would assess the overall health and make recommendations and planning strategies to be more efficient by leveraging the tax laws and regulations.

The IRS will let you know if you are being audited by mail initially, and they may audit by mail or through an in-person interview. This letter would request for additional information about certain items on your tax return such as income, expenses, itemized deductions, etc. to substantiate the item in question. The IRS may also send out a questionnaire for you to complete as well.

In the letter that you receive from the IRS, the details of the letter will indicate what areas of the return that the IRS agent will be examining.
Then, it is a question of gathering the applicable documentation to support information that was reported on your tax return.

As an example, you may have itemized your deductions and claimed a material amount of un-reimbursed medical expenses. You would gather the documentation that supports your payment of the expenses claimed. The amount of charitable deductions claimed may have to be supported by canceled checks or letters from the charitable organizations that document the amount contributed.

These are examples of what might be asked and how they would be addressed on an audit exam.

Individual taxpayers must timely file Form 4868 and pay any tax balance due with the extension filing. The extension would need to have the taxpayers’ name and social security number(s) as well as their address. The extension would have to be timely filed on or before April 15th. The timely filing of the extension and payment would extend the due date for six months. The state rules vary and need to be reviewed upon filing the Federal extension.

Form 7004 is the form used to file for an automatic extension of time, also for six months, to file your business tax return for a partnership, an LLC filing as a Partnership, a regular corporation, and an S-Corporation. The extension would include the business name, address, and employer identification number. Any taxes due or estimated to be due must be paid by your tax return due date when the extension application is filed.

The due date for the extension would be on or before March 15th for the partnership and S-Corporations and April 15th for the C-Corporation filing on a calendar year basis. C-Corporation returns are due by the 15th day of the fourth month following the end of its fiscal year. Stats may have different rules-some states accept the Federal extension application and some, if a payment is due, will require the filing of a state extension application.

Form 2290 is a requirement for truck drivers whose trucks have a gross weight of 55,000 pounds or more. Truck drivers in this category will have to file and pay taxes. 

Truck drivers whose vehicles meet the weight limit but don’t drive their trucks for 5,000 miles (or 7,500 for agricultural vehicles) must file a return. However, they don’t have to pay taxes. 

If you file for 25 or more vehicles, you must e-file your Form 2290.

A balance sheet is a statement that reflects a company’s assets, liabilities, and capital at a specific point in time. This statement is typically used in the tax world for showing the book basis of company assets and liabilities, while also laying out the owner’s capital accounts. The snapshot of a Balance sheet can represent the financial status of a business. However, businesses that have gross receipts of under $250,000 are not required to file a balance sheet with their tax returns. 

A bank statement is a record of the balance in your bank account, which includes the amounts that have been deposited and withdrawn. They should also show your current balance. Bank statements are usually provided monthly and can be viewed electronically through apps. They can also be printed on paper and mailed to you or your company.

A business entity is an organization formed by at least one person. There are several types of business entities: corporations, limited liability companies (LLCs), limited liability partnerships, partnerships, and sole proprietorships. Each of these business entities offers benefits regarding ownership, potential liability, and taxation.

A business plan should be a realistic outlook of the potential for your company. It should include short- term and long-term objectives along with the framework that will be used to achieve these objectives.

A traditional business plan will include:

Company Description: Provide detailed information including the business organization, as well as the markets that your company plans to serve.

Market Analysis: you will have researched your industry and provided the details on reaching your target market.

Organization and Management: how your company will be structured and the individuals who will run the business. Also, describe the legal structure- will your business be formed as a corporation or an LLC. Describe whether any tax elections will be made regarding operating as an S corporation or partnership for tax purposes, as an example.

Service or Product Line: describe what you will be selling or what service you will be offering. If intellectual property is involved, describe the patent filings or copyrights. Discuss ongoing research and development.

Marketing: describe how you will attract and retain your customers.

Funding: if you are asking for funding, outline your requirements.

A business plan can take on two forms: the one for the owner (longer version) and the one submitted for official registration (shorter version). The shorter version must include a mission statement, the date the business began, names of the founders and their positions within the company, the number of employees, a description of facilities, any products manufactured/distributed, banking relationships, information regarding current investors, and a summary of future plans.

A business plan is a document that you’ll make to guide you through every stage of growing, managing, structuring your business. There are two types of business plans: a lean business plan and a traditional business plan. Lean plans aren’t as standard, but they highlight important elements within businesses. 

A lean business plan focuses on the following components: key partnerships, key activities, key resources, value proposition, customer relationships, customer segments, channels, cost structure, and revenue streams.

Traditional business plans are more common for new businesses and are useful if you plan to seek financing from lenders. 

Traditional business plans require either some or all of the following: 

• Executive summary
• Company description
• Market analysis 
• Organization and management 
• Service or product line 
• Marketing and sales 
• Funding requests
• Financial projections
• Appendix

A cash flow statement shows the cash that’s flowing into and out of the company. It helps owners and shareholders understand how cash is being spent and how much cash is still in circulation.

A chart of accounts, or COA, contains the financial listing of every account. Arranged into subcategories, a chart of accounts contains your general ledger accounts and every transaction your business makes. A COA typically includes assets, equity, expense, liability, and revenue accounts. 

The first area of your chart of accounts will have your balance sheet information. This will include your assets, liability, and equity. The second area of your chart of accounts will have your income statement information. This will consist of your expenses and revenue.

A CMS is a content management system. This software can be used to change, create, and manage digital content. You can use a CMS to help you index, retrieve, and search for your data in qualifiers such as keywords, name of the author, and publication date. 

A CMS can also help you format and upload documents and revise documents before publication. Finally, you can use a CMS to create templates as another way to change written content.

A commercial invoice is a document created between a company and a client that describes the products or services, costs, and precise denomination and quantity of products or goods, normally used for foreign transactions. An invoice would normally be used for all business transactions where there are services being provided for payment or, goods are being sold.

A Certified Public Accountant (CPA) is a well-respected strategic business advisor and decision-maker. They mainly act as consultants and advisors on many issues, including taxes and accounting. A CPA is a trusted financial advisor who helps individuals, businesses, and other organizations with

Financial statements are a collection of summary-level reports about an organization’s financial results, financial position, and cash flows. The statements would include a balance sheet, an income statement and a cash flow statement.

A general ledger contains your business transactions. These transactions are part of what you’ll have in even more detail in other parts of your accounting journal. 

General ledgers provide data needed to form balance sheets, cash flow calculations, income statements, and trial balances. Trial balances contain every general ledger account and its respective balance, which will facilitate spotting errors and correcting them quickly.

A partnership is a business agreement with two or more members. There are three partnership types: a general partnership, a limited liability partnership, and a limited partnership. You’ll find differences in the number of liability partners have and the partner types that each partnership has. 

All partnerships consist of a general partner and a limited partner. General partners are partners that operate as a manager (or managers) of a partnership. General partners also have unlimited liability, meaning that personal assets are at risk if the partnership experiences any legal trouble. 

Limited partners aren’t active in the partnership. Limited partners have no management role in a partnership. They also have limited liability, meaning that they are only liable to the amount that a limited partner invested in the partnership.

A point of sale system (POS) is where a customer makes a payment for products or services at your business.

A profit and loss statement includes the revenue and expenses generated by the company for a particular period of time. This statement is necessary to get a good picture of the business’s profitability at different levels. It helps creditors and investors determine the level of risk involved in extending capital to a business.

A sales funnel is a process used to convert potential customers into customers. A potential customer will go through four phases in the sales funnel process: awareness, interest, decision, and action. 

The awareness phase comprises a potential customer finding a product, service, or website that you’ve offered that catches their interest. At this stage, the potential customer will learn about the basics of your product, service, or website.

The interest phase comprises a more active role in discovery. At this stage, the potential customer will begin searching for a solution to their problem. It is also the stage where what you offer as a business can engage them to become an actual customer. 

The decision phase occurs when a potential customer decides to invest in your product. They can do so by browsing your website to purchase what you’re offering but not completing the purchase.

Finally, the action phase is the point in which a customer invests in your product, service, or website

A sole proprietorship would be considered the simplest form of business structure. It is an unincorporated business that is owned and run by one individual. Also, in this type of structure, there is no legal distinction between the owner and the business entity.
The exception to one owner would be where a married couple would be considered as the owner- this is a joint venture. A sole proprietor would report business income and deductions on their personal tax returns.

Accounting software is a term used to describe a type of application that logs and processes accounting transactions. Various reports can also be generated including aged accounts receivable, accounts payable schedule, and payroll summaries, as examples. Businesses can develop their own accounting software or buy a version from another company, depending on their needs.

Our online portal is an example of accounting software. It has organizational capabilities that help companies keep accounting data organized, including their overdue items, payable bills, accounting notes, contacts’ data, and standard accounting operations.

Accounting is the systematic process of recording financial transactions of a business. The accounting process includes recording, classifying, summarizing, interpreting, and communicating financial information. 

Accounting is extremely important because it is the language of business, and it is at the root of making informed business decisions. It helps to reveal profit or loss for a given period, and the value and nature of a firm’s assets, liabilities, and owners’ equity.

Accounts payable is a general ledger account where a company will record the amounts it owes to vendors or suppliers for goods or services received on credit. Companies sometimes have departments dedicated to accounts payable, where employees make payments owed by the company to suppliers and creditors. Accounts payable is usually categorized under “current liabilities” on a balance sheet because it’s a short-term debt.

Accounts receivable is money owed for goods or services purchased in the past. It can take some time for this money to arrive. On your balance sheet, accounts receivable is an asset in the current assets section. You can also find accounts receivable in the current assets area on your chart of accounts.

An income statement is a financial statement used to measure a company’s financial performance. You’ll also hear an income statement referred to as the profit-and-loss statement. 

By using an income statement, you’ll be able to see your company’s financial trajectory regarding its revenue, gains, expenses, and losses.

An invoice would be a request for payment, generated by an accounts receivable department or, a bookkeeper or owner in a small business setting. While typically sent to a customer or client after the completion of a transaction, invoices can also be sent for partial payments. This is common in the construction industry and related specialized trades, where you may do partial billings based on the percentage of completion on specific jobs.

A Limited Liability Company (LLC) is just one of several business structures available. The unique factors are simplicity, pass-through taxation, and the limited liability of a corporation. Unlike a corporation, LLCs are relatively easy to form and maintain with little paperwork. The second most appealing factor is the pass-through taxation. An LLC’s profits go directly to the LLC owners, who then report their share of the profits on their tax returns. As a result, it removed the double taxation found in corporations. The last and more important factor is the legal protection. Provided there is no fraud or criminal behavior, the owners of an LLC are not personally responsible for the LLC’s debts or lawsuits.

Working capital is calculated as current assets minus current liabilities. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.
A working capital ratio that is above one (1) means that your business current assets exceed the current liabilities. Generally speaking, the higher the ratio the better, as it gives a stronger indication that a business can fund both its operating costs and the cost of its debt service that is maturing in the short-term.

The right blog name should capture several goals that you have in mind. Consider the type of content your blog should cover and the demographics of your primary audience. A good blog name is concise, memorable, and easy to pronounce.

You may have to apply for state permits with your city government,  county government, or Secretary of State. 

Your business may need a federal permit to create, sell, or use a product regulated by a federal agency. This is applicable if your business deals with: 

• The Individual Income Tax Return (1040): April 15th of the following year. 
  • Extended Deadline- October 15th of the following year.
• C-Corporation income tax returns (1120)- April 15th of the following year
  • Extended Deadline- October 15th of the next year.
• Partnership Returns (1065)- March 15th of the following year.
  • Extended Deadline – September 15th of the following year.
• S-Corporation Return (Form 1120S)- March 15th of the following year.
  • Extended Deadline-September 15th of the next year. 
• Estates and Trust Income (1041)- April 15th of the following year. 
  • Extended Deadline: September 30th of the following year.
• Annual Exempt Organization Return- May 15th of the following year.

Estimated Income tax payment deadlines for the tax year 2020:

• 1st Payment: April 15th, 2020
• 2nd Payment: June 17th, 2020
• 3rd Payment: September 16th, 2020
• 4th Payment: January 15th, 2021

There are several differences between Form 1099 and Schedule C. 

Form 1099 is Form 1099-MISC or Miscellaneous Income. There are three copies of this form: one for use at the Internal Revenue Service Center, one for the State Tax Department, and one for the recipient. 

You’ll use this form to report miscellaneous income paid to others during a tax year. You’ll file Form 1099-MISC if you’ve paid at least $10 in broker payments or royalties, and at least $600 in: 

• Medical and health care payments
• Other income payments 
• Payments to an attorney
• Prizes and awards
• Rents

A Schedule C Form is either a Form 1040 or Form 1040-SR. You’ll use this form to report your profits or losses from your business. Sole proprietors use this form to determine their profits or losses in the current tax year. 

You’ll use a Schedule C to report tax-deductible business expenses. This can encompass many things, such as advertising costs, business supply costs (including home office costs), vehicle expenses, and more.

To complete a Schedule C, you’ll need information about your business expenses (insurance, supplies, wages), business income (including allowances and return), and costs of goods sold (inventory). 

Form 2290 serves multiple purposes for heavy highway vehicle users to figure and pay taxes.

First, you’ll use Form 2290 to figure and pay taxes on highway motor vehicles with a taxable gross weight of 55,000 pounds or more. 

Second, you’ll use Form 2290 to figure and pay taxes on the taxable gross weight that increased and is now in a new category. 

Third, you’ll use Form 2290 to claim suspension from a tax if you’ll use the vehicle for under 5,000 miles or 7,500 miles for agricultural vehicles. 

Fourth, you’ll use Form 2290 to claim a credit for taxes if your vehicle was destroyed, sold, stolen, or used for under 5,000 miles or 7,500 miles for agricultural vehicles. 

Fifth, you’ll use Form 2290 to report the acquisition of a used taxable vehicle that previously had suspended taxes. 

Finally, you’ll use Form 2290 to figure and pay taxes on a used taxable vehicle you’ve acquired and used during the period you’ll submit taxes.

Your Federal individual income tax return, the basic summary form being Form 1040, is due, along with any other required schedules or forms on April 15th of the year following the calendar year you are filing. If the 15th falls on a weekend, the due date is the next business day.

When a business hires employees and begins the process of paying salaries, that would be the commencement of the payroll process. This process involves:

• Registering the business as an employer and payor of wages at the Federal and state levels
• For certain types of businesses, primarily regular corporations, known as C-Corporations and tax-advantaged corporations, known as S-Corporations have certain requirements to pay the business owners a reasonable salary. Owners of businesses operating as Sole Proprietors or through a partnership, as these types of business entities the owners will take a draw or distributions and pay estimated taxes on the business earnings at the Federal and state level.

Product development consists of six steps, starting with ideation and ending with costing. Ideation for a new product occurs when we think of answers to current problems, most often with a modification to an existing product. Research is the next step. In this step, you’ll seek feedback from others via in-person and online communication about your idea or product. It’s essential to neither undervalue or overvalue feedback during this step.

The third step of product development is planning, which will further illustrate your product. A hand-drawn sketch will suffice in this step, with a plethora of details providing additional details about your product. Fourth, you’ll develop prototypes of your product until you have a satisfactory version. Fifth, you’ll source all of the materials needed to manufacture your product. The last step of product development is costing, or determining what your cost of goods sold (COGS) is to provide a gross margin and retail price.

Rental income is any payment you receive for the use or occupation of a property. You must report rental income for all your properties. In addition to the amounts you receive as regular rent payments, other amounts may be rental income and must be reported on your tax return.

A business retention rate or retention ration refers to the proportion of earnings kept in the business as retained earnings and reinvested for future growth. This would be as opposed to paying out earnings as dividends to the shareholders.

The retention formula is: Net Income – Dividends/Net Income.

For example:
If net income was $ 100,000 and $25,000 was paid out as dividends with the remainder retained for growth, the retention rate would be 75%.