Financial Education

Be Attentive to Employee and Worker Concerns

As part of our blog series on tax literacy, MBDA will highlight the latest tax-related news issued by the IRS for business owners.  The material presented in this website is not offered as legal or tax advice.  You are urged to seek the advice of your tax advisor, attorney, and/or financial planner for any issue related to tax obligations.

Payroll

Maintaining good payroll records is critical for both you and your employees. Keep all records of employment taxes for at least 4 years. They should be available for IRS review. The following is a list of some of the records you should keep:

Breakeven analysis is a tool used to determine when a business will be able to cover all its expenses and begin to make a profit. For the startup business, it is extremely important to know your startup costs, which provide you with the information you need to generate enough sales revenue to pay the ongoing expenses related to running your business.

A startup business owner must understand that $5,000 of product sales will not cover $5,000 in monthly overhead expenses. The cost of selling $5,000 in retail goods could easily be $3,000 at the wholesale price, so the $5,000 in sales revenue only provides $2,000 in gross profit. The breakeven point is reached when revenue equals all business costs.

Applying for a business loan and securing its approval can be a lengthy process. The actual approval time varies widely depending on the type of loan, its complexity, and the borrower’s timeliness providing the necessary information. This guide from SBA can help you gather the right paperwork, whether you’re applying for an SBA loan or a regular business loan.

But knowing exactly what you’re signing up for is just as important as rounding up the details and completing the paperwork accurately. If you’ve ever purchased a car and found yourself surprised when extra line items turn up on your monthly billing statement, then you’ll know the feeling. With loan agreements, there are devils in the details. That’s why it’s critical to pay attention to the fine print, often found in the promissory note or security interest section of the agreement.

Here are some tips for what to look for and how to avoid potentially costly mistakes:

Common Details Buried in the Fine Print

Some of the key terms that make up a loan agreement aren’t always as explicit as one might hope. The fine print, for example, can include detailed and complex technicalities, qualifications or restrictions of the agreement, and even vital information about the loan’s terms. Things to look out for include:

State and local economic-development agencies – and numerous nonprofit organizations – provide low-interest loans to small business owners who may not qualify for traditional commercial loans.

When it comes to applying for these loans, the good news is that most of these other lenders require the same kinds of information. Of course, each loan program has specific forms you need to fill out. But for the most part, you’ll need to submit the same types of documentation. So it’s a good idea to gather what you’ll need before you even start the application process.

Here are the typical items required for any small business loan application:

Loan Application Form

Forms vary by program and lending institution, but they all ask for the same information. You should be prepared to answer the following questions. It’s a good idea to have this information prepared before you fill out the application: