Unintentional Entrepreneur, Unintentional Bookkeeper?

Hopefully in the years to come, we will be able to look back on the current recession and say in our best Dickensian voices: “It was the best of times, it was the worst of times….”

 

The reasons for why it is the worst of times are obvious: massive lay-offs, skyrocketing unemployment rates, lost retirement nest eggs, etc. The reason for why it could be the best of times requires a little more imagination and a little more optimism.

 

Now we are at a point in our economy when entrepreneurship is not only a component, but a necessity for revival. The recession is paving the way for innovation, creativity, and even personal glory for those brave entrepreneurial pioneers setting off into the unknown to stake their claims. There are unlimited new streams of revenue, needs to fulfill with new services, and it is up to the entrepreneur to bravely go where no man (or woman) has gone before.

 

So now we have all these brilliant, hard-working, freshly laid-off men and women who are chomping at the bit to start that business they have always wanted to but never could: the Unintentional Entrepreneur. Unfortunately, these men and women are also being forced to become the Unintentional Bookkeeper.

 

For many would-be entrepreneurs, one of the greatest challenges that slows them down or holds them back is the thought of having to take on all the mind-numbing details of the bureaucracy and paperwork and bookkeeping involved in setting up and running a small new business. Entrepreneurs thrive on creative, big-picture thinking, and the last thing they want or need is to get bogged down by the technicalities of bookkeeping and tax prep and accounting, especially when they most likely lack the resources to hire people to do these tasks for them.

 

Unfortunately, these mundane details are crucial to success. In fact, one of the top pieces of advice from the IRS to entrepreneurs starting their own business is, “Good records will help you ensure successful operation of your new business.”

 

So what is to be done? Fortunately for the Unintentional Entrepreneur who does not want to become the Unintentional Bookkeeper, there are more services available than ever before to assist the financial and record-keeping operations of small businesses.

 

One of these services is Shoeboxed.com, the leader in online receipt and business card management. Our service allows users to mail in their receipts, business cards, and invoices in pre-paid envelopes to be scanned and uploaded into secure accounts for tax organization, budgeting, bookkeeping, etc. It takes all the grunt work out of financial upkeep and provides peace of mind for good record keeping.

 

One of Shoeboxed’s goals is to provide the resources necessary for entrepreneurs and small business owners to focus on what is important to them and important to the economy: growing their business.

Top Seven Tips for Taxpayers Starting a New Business

For those of you who took my sage advice last week and decided to start your own business, here are some great tax tips courtesy of the IRS Newswire:

Here are the top seven things the IRS wants you to know if you plan on opening a new business this year.

  1. First, you must decide what type of business entity you are going to establish. The type your business takes will determine which tax form you have to file. The most common types of business are the sole proprietorship, partnership, corporation and S corporation.
  2. The type of business you operate determines what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
  3. An Employer Identification Number is used to identify a business entity. Generally, businesses need an EIN. Visit IRS.gov for more information about whether you will need an EIN. You can also apply for an EIN online at IRS.gov.
  4. Good records will help you ensure successful operation of your new business. You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.
  5. Every business taxpayer must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used. 
  6. Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.
  7. Visit the Business section of IRS.gov for resources to assist entrepreneurs with starting and operating a new business.

Here at Shoeboxed, we are especially concerned with Tip #4. If you want to keep excellent records at your business, what could be easier than mailing in all your receipts for automatic storage, tracking, and tax categorization?

Is America Entrepreneurial Enough?

No. We aren’t.

 

There’s my two cents, but for the sake of making this post more interesting, let me elaborate.

 

In BusinessWeek’s Small Biz blog on July 1, John Tozzi explored whether entrepreneurship is on the decline using Scott Shane’s data from the New York Times that it is declining, and Steve King’s data from Small Business Labs that it is not declining.

 

I am sure both men used reliable sources and logic to reach these conclusions, and both could be arguably correct depending on their data. However, what frightened me the most was that even if entrepreneurship is not declining, it sure doesn’t seem to be on the rise. Here is one of the graphs Steve King uses to support his assertion that entrepreneurship is not declining:

 

graph

 

If these measly worms of graph are the best case scenario for the state of entrepreneurship in America, then we have a problem.

 

Everyone is debating the best way to “fix” the economy; what we need is not repair, but renewal. Trying to claw our way back to the way things used to be duirng more prosperous days is not going to help America into the coming years. What we need is innovation, creativity, and above all, entrepreneurship if we are to continue competing on a global stage. It is my sincere hope that over the next decade, graphs like the one above will show not only stability, but a rise in the rate of entrepreneurship.