One of the principles I've learned from reading Tim Ferriss is that it should be okay to complain, provided you do it in the same breath as suggesting the next step to avoid the situation in the future. I complain a lot -- mostly as a way of thinking out loud, and sometimes it helps to relieve some stress and to work out a problem, particularly if through my complaining I can solicit feedback from others (yeah, that's mostly you Kev). But in general I think I could learn something from the principle that Ferriss has, and add a positive twist to my gripes.
So, for this first post on Codeslick, I'm beginning on a sour note, but I am doing so with a purpose. I want to articulate my next steps and also provide any caveats, advice, etc. to others who might be starting or running a small business.
Taxes.
Okay, now you know the "sour note" part was not an exaggeration. I just had a horrible weekend because I decided it was my weekend to do business taxes. Here is what I figured out:
- I've been recording my payroll incorrectly. Not surprising considering I've been 100% do-it-myself so far with my business.
- Running a business in the state of IL is bad enough before you start making money. It's worse after.
- My bookkeeping is really behind and not nearly as organized as it should be. Probably because I really dislike doing it and see the time much better spent programming and solving technical problems.
So, in the same breath, here are my own replies to my complaints:
1. I've completed my tax forms, but because of my questions about payroll recording, deduction and depreciation recording, and all-around general uncertainty about the whole thing, I think it is time to get an accountant. This week I am going to find an accountant to review my tax returns before filing them, and hopefully begin a professional relationship that will relieve what has amounted to a tremendous amount of stress for me.
My advice to small business owners: Get an accountant sooner than later. I started my company while working part-time tech gigs and going to graduate school, and looked in every corner for opportunities to cut costs. If I were to do it again, this is the one place I would choose to spend money. Don't want to spend money on having someone else file your articles and give you a shiny business binder for your biz plan? Fine, money well saved -- do it yourself. But, unless you have accounting skills already, I suggest you find someone who does to setup your books and to go to when you have questions or concerns. I have not yet established a relationship with an accountant. I will let you know how this works out when I do.
2. I run an S-corporation. Some people like LLCs, I chose S. The merits of either is probably a subject best left to be expounded by your accountant, your lawyer, or both. For purposes of federal taxes, S-corporations are nice. What do I owe Uncle Sam? $0. That is a zero. I didn't run the comparisons (which Turbo Tax does not really do easily by the way), but I would venture to say that I could eliminate virtually all of my expenses and depreciations, etc. and still owe $0. Again, that is a zero. Then there is state. The state of Illinois seems to have made an art out of the practice of obfuscation for business owners. There is no end to the pieces of mail I get from various departments who want a chunk of my business in terms of money and time. So it turns out I was supposed to be paying corporate taxes through the year. Not payroll taxes - I've been paying those of course. But even my pass-through S-corp which gets taxed a big fat nothing by Uncle Sam has to pay income tax to the state. Depressing and frustrating. I will probably also get slapped with a fine for not paying in advance. My next step: I plan to itemize every document that the state is expecting from me. Corporate annual reports, payroll income taxes, corporate taxes, unemployment insurance, etc. I will audit my payroll service to be sure they are doing the right forms. For the forms they do not handle, I will setup some sort of tickler or calendar system for myself.
My advice to anyone considering starting a business: When you read all that advice about starting your business in Delaware or Nevada, consider it seriously. I can't tell you what is right for your biz, but take into consideration the stress that will be incurred from the sheer amount of paperwork that your state will require. Try to get a handle ahead of time - before you incorporate - on what those requirements will be.
3. Of course, it is my own fault that my bookkeeping is behind. Part of my disorganization has been due to a move that has had me unpacking boxes for the past several months. But, part has been due to my compulsion to do it all myself. I spent months trying to come up with the perfect bookkeeping/accounting setup. As a Linux user, I searched hard for a solution that would work in my world. The short answer is that such a solution does not exist. After being fed up with using spreadsheets to manage everything, I tried GNU Cash, but found it to be frustrating, and I knew that when I did get an accountant, I would have a hard time finding someone willing to work with my accounting system. Even the web-based versions of QuickBooks and PeachTree require you to have Internet Explorer. It is a sad state of affairs, but that is the way it is. In the end, I've gone with QuickBooks Simple Start, which is a free version of QuickBooks and seems to have everything I need. I do my payroll through a service offered by my bank, so I don't need Intuit's help there thank you. I keep a $250 Compaq PC running with Vista (don't even get me started on that subject) for the sake of running QuickBooks. So, I guess you could say my accounting system cost me $250, but only after a lot of headache, thinking that I would find a solution that fit into my ideology. I am considering the possibility of going with QuickBooks Online. I have heard that it is slow and frustrating, but I would like to consider the possibility of outsourcing some of my bookkeeping, and I'm not sure yet how I will expose my system to a virtual assistant in a way that I am comfortable with.
My advice: The perfect solution for accounting and bookkeeping does not exist. Particularly for those of us with less mainstream taste in our choice of computing tools. Pick a solution that will make your relationship with your accountant as smooth as possible and go with it. Trust your accountant's knowledge and experience more than your principles and ideology on this one. Consider early in the development of your business how you will outsource bookkeeping and accounting tasks when you need to.
I hope someone wanting to start a small business can get something out of this post. My of my future posts will focus on more technical material, but I do hope to slip in some business related subjects occasionally. I've got a few new items on my to-do list now it seems, and so until next post, eyes on the code ... it can be slick sometimes.
sB
