Perhaps the most significant tax issue small business owners face with regard to employees and taxes are the withholdings they are required to make from employee paychecks. Employers are required to withhold federal income taxes from their employees’ paychecks and pay these withholdings directly to the Internal Revenue Service.

The amount to withhold varies from employee to employee, with variables such as the employee’s salary amount, the number of exemptions claimed by employees and their marital status influencing the amount. To help employers calculate how much to withhold, employees are required to fill out W-4 forms to determine how much should be taken out of their checks for federal income taxes.

In addition to income taxes, employers are also required to withhold employee pay for Social Security and Medicare taxes. These taxes are a little easier to calculate, as they are levied at a flat rate of 6.2 percent for Social Security and 1.45 percent for Medicare. (The SS withholding rate was reduced to 4.2 percent for 2011 and extended by two months into 2012. Employers should keep a watch on the actions of the federal government to see what the rate will be moving forward into 2012.)

If you live in a state with an income tax, you will also be required to withhold state income taxes from your employees paychecks. Income tax rates vary from state to state, and your state’s department of revenue is the best place to find more information about how much tax you need to withhold.

In addition to the taxes you withhold from your employees’ checks, you’re also required to make an employer’s contribution to Social Security and Medicare. The employer’s contribution is currently at 6.2 percent for Medicare and 1.45 percent for Medicare. Businesses must also pay state and federal unemployment taxes. State rates vary, but the federal unemployment tax rate is 6.2 percent of the employees’ income. However, employers who pay their state and federal unemployment taxes on time can take a tax credit of up to 5.4 percent of employee pay, making their effective federal unemployment tax rate .8 percent.

Businesses that employ a large number of workers are required to deposit their FICA taxes by using the Electronic Federal Tax Payment System, an online transfer system. This greatly reduces hassles and paperwork for both you and the federal government.

Small businesses that provide health benefits for their employees should be aware of tax deductions they can take. Beginning in 2010, small businesses were permitted to take a tax credit of 35 percent of the premiums they paid to cover employees. The credit is available to businesses that employ 25 workers or fewer where the average wage is $50,000 or less (Deduction rates are smaller for companies with average annual wages of less than 25 percent). Also, to qualify for the credit, employers must pay at least half the premium for their employees’ coverage.

Employee tax cheatsheat

Here’s a quick rundown of the things you must do to comply with most state and federal tax law if you’re operating a business with employees:

- Once you hire employees, you’ll need to report your new hires to your state’s employment office within 20 days of your employees’ start date.

- Make sure your employees are citizens or foreign nationals approved to work in the U.S. by filling out U.S. Citizenship and Immigration Services Form I-9. You can find a copy of this report on the U.S. Citizenship and Immigration Services website.

- Withhold appropriate income and FICA taxes from your employees’ paychecks and submit the taxes to the IRS. IRS Publication 15 can show you how to submit withholdings and is available on the IRS website.

- Withhold state income taxes and deposit them with your state revenue agency.

- Pay the employer’s share of Social Security and Medicare taxes. Employers pay the same share as employees, currently 7.65 percent of wages up to $106,800 and 1.45 percent of wages above that amount.

- Pay unemployment taxes to the IRS. Employers must pay unemployment taxes if they paid more than $1,500 in wages in a calendar year. Also, don’t forget to pay your state unemployment taxes.

- Make sure that you report your employees wages and your withholdings to the Internal Revenue Service by using IRS form W-2.

By making sure that you comply with government regulations regarding employee tax withholdings and other employee tax issues, you can save yourself considerable headaches and your business money in the form of non-compliance penalties.

There are things that small business owners can do to help their businesses survive and thrive in hard times like these. The key factor is finding new efficiencies in your small business operations and optimizing your current operations. The following is a list of hard times tips for small business owners looking for a way to prosper in a difficult economy.

1. Form alliances with other businesses – You can save a lot of money by partnering with other businesses to share resources and cut costs. For example, if your business is great at website design but not so great at distribution, by providing website maintenance services work for a business that provides you distribution services, you can reduce your costs and take advantage of another business’ existing strength in an area instead of having to try and develop your own.

You can also share customer databases with partnering businesses, allowing you to generate leads more easily. This can be an invaluable source of new customers for your business.

When choosing businesses to partner with, you likely won’t want to partner with local competitors, as a competitor could unfairly take advantage of the arrangement to pilfer customer lists or take proprietary information from your business, such as manufacturing or service secrets. For distribution partnerships, working with local competitors may be acceptable, so long as the terms of the partnership are very explicit and put in writing. When choosing businesses to partner with, you should be careful to have non-compete agreements to keep your partner from shifting tactics to move in on your niche.

2. Reconnect with former customers – Go through your customer database and track down customers you haven’t heard from in a while. Inform them of new products and promotions by your business, and offer them a discount if they’ll stop by. If your customers haven’t shopped with you for a while because they were displeased with your business’ performance or service, address their concerns and bring them back into the fold. Taking care of their concerns will get them back in your customer base and head off any bad word of mouth displeased customers may be spreading concerning your business. Connecting with old customers may be easier and more cost effective than trying to find new ones.

3. Location – Some parts of the country are hit harder than others by the recession. California and Mississippi have some of the highest small business failure rates in the country, while other areas, such as North Dakota, Wyoming and Iowa have some of the smallest failure rates in the nation. If you’re starting a small business and have a variety of state location options, consider looking at the stats for your state before putting out your shingle there. If you’re able to locate in a more prosperous area, you may want to do this to boost your small business’ chances in the current difficult economy.

4. Boost your public profile – Get involved in your local Chamber of Commerce and local civic leagues. Host events at your business and contact your local newspaper or television or radio station for coverage. Any mention your charitable work may receive is free positive publicity for your and your business. Also try to get speaking engagements and make public presentations, as this will allow you to meet and network with other small business owners who can provide you with invaluable advice.

5. Sit down with the books – Go over your financials with a fine-toothed comb. Look for ways to cut your variable costs and also consider whether refinancing existing debt may help your business. Interest rates are at all-time lows, and while credit is hard to come by in the current market, a refinance loan can dramatically reduce your monthly debt payments, allowing your business more breathing space. By rooting out unnecessary costs and reducing your debt burden, you can make your business more competitive.

6. Aggressively market your business – Even if you have a shoestring budget for marketing, getting the word out about your business is important, especially in hard times. Consider unconventional guerrilla marketing strategies such as publicity stunts, walking billboards, t-shirts or other low-cost, high-impact methods of marketing. Get on Facebook and Twitter and leave a few reminders about specials and deals at your business. Social media sites are the most trafficked sites on the Internet, and you’d be surprised at how much a simple reminder of an event or bargain at your business can result in increased customer visits.

7. Make personal connections with your customers – One advantage small businesses have over their larger competitors is the ability to offer highly personalized service. Leverage that advantage as much as you can by reaching out to your customers personally. Take the time to send Christmas and birthday cards and also greet and chat with customers when they visit your site. Establishing a positive rapport with your customers can help keep them loyal and coming back to your business.

8. Purge your product or service line – Examine each product and service you offer and find the ones whose profitability is negligible or are unprofitable. If eliminating these offerings doesn’t interfere with your other business, you may want to cut them. Whittling down your product or service offerings allows you to refocus your resources to concentrate on better-performing products and services. If you’re not quite ready to give up the ghost on certain products or services, consider packaging them with more popular products or services. This allows you to get them out of your inventory, and can also help you capitalize on the popularity of another product to promote the less popular product.

9. Workforce reduction – Layoffs are something most businesses don’t want to consider, but cutting a few jobs is better than cutting everyone’s job if your small business goes under. If your volume of business doesn’t justify your current staffing levels, and recovery does not seem imminent, you may need to adjust your labor force to reflect the reality. When reducing your workforce, you’ll want to carefully review your workforce to determine which job cuts would have the least impact on your business. Be sure to follow all state and federal laws with regard to terminations, and also be sure to follow all terms imposed by contracts or collective bargaining agreements.

By taking the necessary tips to ensure your small business’ health in hard times, you can weather the storm caused by the financial meltdown of 2008 which the country is still recovering from and avoid becoming part of the small business failure rate. While workforce reductions and refinancing debt can be tough decisions to make, when your business emerges leaner and more competitive, you’ll know you made the right call.

Typically CRM is used for sales activities. But there are also great applications for customer service, technical support, and for the companies marketing efforts. Any company that wants to find, entice, and get new clients, then cultivate and retain those clients, should consider a CRM software system for a small business. And if you have former clients who are unsatisfied or just drifted away, a CRM system will help you come up with a plan to bring them back through the doors.

Small businesses today are utilizing customer relationship management software as the visible face of their company-wide business strategy. Owners will implement CRM as a critical part of their overall approach. CRM will also allow all departments within the organization to log their experiences and plans to interface with the customer or potential customer.

What Can CRM Software Do For Your Business?

Basically CRM software is used to gather and organize information. It will allow your business and all the employees to view all customer interactions and the results of those actions. If problems arise, for instance, customer service will see all the customer’s product orders and any communication concerning those orders. This allows the service rep to respond faster, and in a knowledgeable manner. The same with technical support, the tech would know what the customer bought, would see if there had been any earlier complaints or attempts at solution, so they wouldn’t have to cover old ground.

The sales staff would know if there had been any shipping or service issues before they attempted to make another sale. This would allow them to ask first if the issue had been resolved successfully and to clear up any concerns before they asked for more business. Hopefully preventing an upset customer that the sales person didn’t even know they’d had a problem. The sales person would know the customer’s history, and be better able to know what the client might need and the approach to take with the sale.

The CRM software will also provide data to be analyzed, flagging specific opportunities and warnings. For instance if all eighty percent of the customers who bought widget A, came back to buy attachment C, then you should be calling the twenty percent of widget A purchasers who hadn’t yet purchased attachment C. You might also consider bundling widget A with attachment C for the next promotion.

Owners will be able to see what marketing strategies are working, and which should be discarded. They can offer more training to unproductive employees, and warn departments when they might be receiving more calls about a common service issue.

CRM Software and Small Businesses

Often small businesses make the mistake of thinking they aren’t big enough for Customer Relationship Management Software, when this is the perfect time to implement and start using it. Small businesses need every customer the can get and keep. There is CRM software perfect for small businesses, in fact small businesses can often better utilize this software as the information input into the system and the resulting analysis is less complex than it would be for a larger company.

In a small business CRM software is typically easier to implement throughout the organization, instead of just concentrating on the sales group. There are even online CRM options that would allow very small companies to take advantage of the software’s insights, even if you work at home. Some simple contact managements systems are offered free, or free for a specified trial period. Contact Management software is like a light version of Customer Relationship Management Software.

Summary

Customer Relationship Management Software or CRM can help not only your sales force, but the rest of your business, in focusing their efforts on the customer. Small business owners can device a company-wide strategy that will allow all departments to focus their efforts on understanding the customer, knowing the history of sales and contacts before they try to help, and in treating the customer as if he is your company’s number one priority.

The sales force can prepare for each call, knowing that if the customer had had service or technical issues it would be in the CRM system, and he could call to check to see if the issues were resolved before he tried to sell the customer something else. The CRM software will also allow owners to gather information that could result in more sales or help the companies marketing efforts.

Hiring employees is a big step for any business, as taking on personnel means taking on responsibilities such as payroll procedures, compliance with labor laws, creating policies on employee conduct and responsibility, etc. Before deciding to hire employees, think about the overall goals of your business and determine how employees can help further your ambitions.

Small businesses cannot afford to have unproductive employees on staff, so it’s important to have very specific aims for your staff and to hire people who are dependable and have a good work ethic.

When considering adding staff, the first thing you should do is create a job description for your new employee or employees. Sit down and draw up a job analysis for the new position, detailing the:

- Physical and mental tasks involved with the job, and the physical ability or educational and experience level required to adequately do the job.

- The goal of the position. What the employee will do to further the success of your company, and how the employee will work with you and other employees.

- Pay scales and possibilities for raises or promotions. Understanding how much the position will cost you in salary and benefits is important to evaluating whether the position is worthwhile.

- Metrics for performance. How will you evaluate whether the new employee is meeting your goals? Is there a sales or production number you hope to hit? Will you conduct annual performance reviews for the employee.

Contracting Out

Before committing to creating a new position, consider whether you can contract the services out to an outside firm or employment agency. There are considerable paperwork and managerial benefits that come from outsourcing work, but quality and your ability to supervise may impacted by the decision.

When deciding whether to contract work out, consider the work you need done. If it requires very specific training, it may not be advantageous to contract the work out. However, if it is a more generalized task, or one that the outside contractor has expertise in, contracting the work out may be the better solution.

There are certain tax advantages businesses can derive from hiring contract employees, such as freedom from the responsibility to make tax withholdings and pay employer FICA and unemployment taxes. However, there are laws that govern which employees may be classified as independent contractors and misclassifying employees can result in substantial penalties. It’s wise to consult with your financial advisor or information available from the Internal Revenue Service before classifying employees as independent contractors.

Hiring practices

When you prepare to make hires, be aware of federal laws regarding employment opportunities. Equal Employment Opportunity Commission guidelines forbid employers, in most cases, from asking about age, sex, creed, race, disability, marital status, or type of military discharge the applicant may have received.

When making hires, it’s typically verboten to make inquiries about a candidate’s race, religion, marital status, sexual orientation, family status and other questions of this nature.

Also, the Americans with Disabilities Act forbids employers with 15 or more workers from refusing to hire people with disabilities, if by making reasonable accommodations the employer could create an environment where the worker could do the job.

If you’re not sure whether the job description you’ve written is simpatico with the law, you may want to give the EEOC a call to determine whether your job description is in the clear.

Drug Testing

In some states, employers may be allowed to require their employees to submit to drug testing before they are hired. Drug tests can help to head off potential problems, allowing you to identify employees who, because of their drug use, could pose significant performance, legal and other hazards to your business. Some businesses may even be required by their insurers to use pre-employment drug screening because of the risk for loss that employees who abuse drugs pose.

If you’re thinking about instituting a drug testing policy for new hires, consult with your state’s employment or civil rights authority to make sure testing is allowed, and under what circumstances. Typically, businesses will contract with medical service providers to conduct drug testing.

Help Wanted

Once you’ve completed the job analysis and determined that you need to make a hire, write the job description. List the job’s responsibilities and duties, the work hours and the skills or professional certifications or degrees necessary to perform the work required. Be thorough and be sure to spell out exactly what you want your new hire to do at your business.

When you’ve written the job description you’ll want to advertise the position to draw applicants. You may want to take out a classified ad in a newspaper or trade publication, list a job opening on Monster or other job websites.

Criminal background checks

When you hire new employees, you’re taking a leap of faith by trusting the person you hire with a portion of your livelihood. That’s why you may want to inquire about new hires’ criminal history. Also, in some industries, such as child care, there may be regulations requiring criminal background checks.

Prior to making the final decision on a new hire, run the potential hire’s name through Google to see what you find. Local news reports about crime often make it online, and taking a few seconds with Google could help you spot a red flag. Remember that there is more than one John Smith in the world, and probably in your town, so be sure to confirm identities before making further inquiries or final decisions.

If you need a more thorough background check, contact your local police department. They may be able to conduct a background check for a price or point you to a reputable search firm that can help you. If you’re doing a state mandated background check (for example, 45 states require background checks for child care workers) be sure to use a recognized and approved background search firm.

Hiring Family

If you have a member of your immediate family you can put to work, this may be a good employment solution. By hiring your children or spouse, you may be able to move your family income into a lower tax bracket. Hiring your children is particularly attractive, as it allows you to transfer money to your children without butting into federal gift or estate taxes.

If your business is unincorporated, wages paid to children under the age of 18 are not subject to Social Security or FICA taxes. Older children may be able to make tax-deductible contributions to an IRA, giving them a jump on their retirement plans.

If you do hire family, particularly if you hire children, be sure to pay them a salary that is standard for the type of work that they’re doing, so as not to lead the IRS to believe that you are only employing family to unfairly take advantage of the tax benefits.

One caveat about hiring family – it’s tough to fire them. When hiring family members, be sure to honestly and objectively assess their capability to contribute constructively to your business and the likelihood that they’ll take advantage of their familial relationship to underperform or engage in objectionable behaviors. If they have a likelihood of being a problem, it’s a lot easier not to hire them than to endure the family turmoil likely to occur if you must fire them later.

Small businesses are a major creator of job growth in the U.S. By hiring employees, even on a temporary basis, you’ve helped the overall economy and the individuals you’ve hired. By having a precise idea of why you’re hiring, and making sure to hire the people who will do the most good for your company, the overall good you’ve done for the economy by hiring will also be good for your small business.

In order to select the best small business phone system for you organization you need to consider and evaluate several items.

What You Need

Spend a few minutes to determine what functionality your users require. You want the phone system to make them more efficient, walking the line between technology and confusion. Small business phone systems can offer video and audio conferencing tools, the ability to use a computer as a phone (sometimes called mobile soft phones), automated attendants, paging, intercom, wireless IP phones, integration with customer relationship management, and the ability to notify employees by phone, text, or email.

There are even options like presence technology, which would allow users of the business telephone system to see who is available, and the best way to reach them.

Change and Training

Whatever type of small business system you get, you need to understand how to use it. Typically the users of any new telephone system will use about 10% of its capability unless they are trained and encouraged to use its functions. Most will learn how to dial, put a call on hold, transfer a call, and maybe program a few speed dial numbers.

With consistent training and encouragement to learn the system, users will become more efficient and the small business system will be a true asset to your company. It can change the way you do business. For instance an IP system with a wireless phone will allow sales staff to check warehouse stock from anywhere on the premise.

You can hold meetings with clients, who are in different states, with the use of video conferencing. Or hold weekly training meetings with the voice conference feature. There are many features in the small business telephone systems that are typically seen in larger, more expensive systems.

Small Business Phone System Features

Telephone systems for small businesses will have caller ID with the capability of at least four business telephone lines. You can place calls on hold, transfer calls to a mobile phone, home office, or remote location. There may be additional or optional features such as:

• Paging
• Music on hold
• Cordless handsets
• Cordless headsets
• Automated Attendant
• Voice Mailboxes
• Audio/Video Conferencing
• And More

Selection of the Best Small Business Phone System

The systems listed below are some of the best small business phone systems. They cost between $500 and $3000. Most can be installed by simply plugging them in. All the systems listed offer complete mobility with wireless solutions for handsets and headsets. These phone systems also offer standard features that include call forwarding, transferring, intercom, conferencing, paging, voice mail, and music-on-hold.

The Panasonic KX-TG4500B can handle up to four business lines, a desk phone, and eight cordless extensions. Once the phone lines are installed you can just plug the main base or desk unit into the lines and an electrical outlet. The cordless bases can then be set wherever you want, plugged into an electrical outlet for charging.

The AT&T SynJ also offers four lines. You can mix and match a total of ten cordless handsets or desk phones. This small business phone system is recommended for retail outlets, restaurants, schools and daycares, small offices, locations with warehouses, and large home office applications.

The AT&T Synapse will provide up to thirty-nine business lines, with a capacity of hundred desk extensions and five cordless phones. The system self-configures once it is plugged into the phone lines and an Ethernet data network.

One of the largest of the best small business phone systems, the Panasonic KX-TDA50G or KX-NCP500 can be configures with as many as 128 lines. It will handle a total of 156 desk sets and 64 cordless sets. The systems are typically installed in law or medical offices, technology companies, and even for hotels or motels.

Summary

The best small business phone system is one that meets your company’s needs. It is important for any small business to figure out how the phone system can be used to allow staff to be more efficient in dealing with customers and clients. These small systems come in all sizes from just four lines through over a hundred. Some can be configured to work with Internet Protocol. Some small business phone systems also have voice mail, email, and paging capabilities. Check the list of what is standard on the phone system and what comes at an optional cost.

Your business’ solvency is essentially its ability to pay its bills and meet its obligations. Understanding solvency ratios can help you determine the overall short and long term financial health of your business. Here’s a quick look at the major solvency ratios used by businesses.

Current ratio: Your current ratio is essentially all of your current assets divided by all of your current liabilities. Most businesses will want a ratio of greater than one to one. Your current ratio is most commonly used as a measurement of whether your company is able to pay its debts as they come due. Lenders look at your current ratio to determine whether you’re a good risk to extend credit to on a short-term basis.

Debt to equity ratio: This can be determined by looking at your balance sheet and seeing what the total liabilities are compared to the stockholders equity. This amount represents the total amount of money invested by the owners of the company and the total profit of the business. Businesses with high debt to equity ratios may need to put off capital purchases and focus on lowering their debt.

Debt to assets ratio: The debt to assets ratio assesses what percent of a business’ assets are funded by debt. This number is reached by using the business’ balance sheet. To calculate the ratio, add up all current liabilities and long term debts, then do the same for all of your business’ current assets and net fixed assets. Once that’s done, divide the debt by the assets. The result will be the debt to assets ratio. For example, if your business’ total debt is $200,000, and it’s total assets are $400,000, the business debt to assets ratio is 50 percent, meaning half the company is financed through debt, and the other half is financed through investment or equity.

Quick ratio:  Also known as the “acid test” ratio, this ratio takes the total current assets of your company and subtracts your current inventory and other current assets, such as deposits or prepaid expenses) and then divides the result by the total liabilities. If your quick ratio is less than 1.0, you may be a little too dependent on inventory and deposits and prepaid expenses for short term liquidity.

Day sales outstanding in trade accounts receivable: Basically, this number represents how long it takes for your company to collect on money owed to it by customers. To come up with this figure, divide your trade receivables (money due your business from sales you’ve billed for) by your average daily sales, then multiply that figure by 30. A low number in this calculation is considered good because it means your company is not burning too much capital.

Days costs of good sold outstanding in inventory: This calculation represents how long it takes your company to turn inventory into sales. This figure is reached by dividing your company’s inventory by the average monthly cost of goods sold by your company, and then multiplying the result by 30. Low numbers are good, as they represent that it doesn’t take long for your company to turn inventory into profit.

If you’re concerned about your solvency, there are a number of things you can do to improve the numbers. Obviously, you should try to sell more products or services to reduce some of these ratios, but you should also work to control costs by keeping your inventory closely aligned with your sales. Reducing debt is also important to maintaining solvency.

Key to understanding the solvency of your company is being able to decipher your balance sheet. If you’re not sure how to compile or read a balance sheet, talk to your accountant or a business mentor from your local chamber of commerce or other small business support group. They can quickly give you the tools you need to read and understand balance sheets and use the data in your decision making process.

Solvency measurements are an important tool to help you judge the health of your business, but only offer part of the picture concerning the financial health of your business. To get a fuller picture, you’ll also need to learn about liquidity measurements.

The first step is to make a detailed list of what you need the accounting software to do. Start with the most important function, and move down the list for the one that is least important for your accounting needs. Make sure you understand your hardware, for instance that you know how much memory you have available and what operating system you run.

Know What You Need

If you have some specific requirements, say for a type of report, it is better to find a business account software package that does the needed report as a standard item, as customizing will typically cost more. If there are accounting software programs specifically tailored for your industry, they may provide the best fit. While industry-specific software may be more expensive than generic options in the beginning, this type of small business software may save you time and money in the long run.

Once you have created your list of needed functions, you can use it to compare the accounting software that you are interested in buying. Make sure you also compare the cost of training, maintenance and upgrades, as well as if there is a charge for customer support. Once you’ve compared pricing you will know how much to budget for the first year based on what you can afford.

At the low end of the scale will be the generic small business accounting packages like QuickBooks  or Peachtree. At the mid range you will find small business accounting packages such as Microsoft Dynamics GP (formerly Great Plains) which also offers some business management options.

Often the small business accounting package that you need will be dictated by how many employees that you have. Some of the programs will handle tax reporting, payroll, supply chain management, project management, and more.

The more functionality the small business accounting program has, the more it will cost. But if it handles 90% of the items on your list versus 50%, it may be worth buying one that you don’t have to customize or that will force you to do many of the reports or activities by hand.

Some software has to be downloaded to your computer, and some accounting programs are available in online versions, that you need use of the internet to access. Think how this might affect the business in either way. The online version can be accessed at home, while one loaded on a computer requires access to that one machine or the network. But the online variety means you need an internet connection to get to it.

Online Comparisons

Compare small business accounting software online. Check out reviews on accounting society websites or industry specific professional associations. If you have questions about the software you can also post those in these locations.

There are also websites like PC Magazine or CNet that will also have comparisons. Check several websites to make sure you have an unbiased overview.

Typically accounting software will offer a free trial of their online program for a month or more. This will give you a chance to compare and play with several programs that you are interested in. You can check out how easy the accounting program is to use, and count and compare the steps to perform each function on different programs. Pay the bills and get samples of reports during your trial period to see if this software works for you.

Tips for Selecting the Best Small Business Accounting Software

Invariably you will have questions, so buy something well known and from a reputable, known firm. Otherwise you may not be able to find help when the time comes. It will also make it easier to find a bookkeeper or accountant who already knows the program.

You may want to hire an accountant for the first month or so to set up your business accounting system. Or set it up yourself and have an accountant review what you’ve done.

Learn to Use the Accounting Software

Once you’ve made the choice, make sure you learn how the program works and all its capabilities. Make sure you take the time to get trained, taking an online class, going to a training held by the store you bought it from, or see if the community college has a class you can take. The more you know, the more the best small business accounting software will do for your business.

It’s also a good idea to join an online or local users group that will give you an opportunity to ask questions and learn new applications and different ways of doing things.

Types of Backups Available

There are many types of backup systems available, in addition to the online backup system. It is a good idea to start out by looking at each of these before deciding on the online backup system.

The first thing that should be understood is that backing up data should be done often, in fact, daily is a good idea. Some businesses have backup plans that run throughout the day backing up data in increments such as on every hour. This may be more robust than a small business needs or it could be exactly what is needed, depending on the type of business and the data being stored.

Hard Drive Backups

Hard drives have become very small in size with a very large storage capacity and portability that makes them an excellent back up source for small business. Portable, external hard drives are available today that can hold a 1T or more of data. This size external hard drive can usually suffice for a small business to hold the necessary data that needs to be backed up. Hard drive backup systems are relatively inexpensive and simple to operate. However, there are some down sides to this back up that need to be considered.

First, the hard drive back up must be set up on a rotating schedule so that there is always one copy of the backup offsite. This also means that there has to be a reminder or calendar that alerts the person in charge of the backup to rotate the hard drives. Secondly, hard drives do fail, they are made up of moving parts and so they are not without compromise. Should the hard drive fail, the business owner is left with no backup data unless they are using the secondary backup rotation plan.

Network Backups

Many small businesses have an IT company come in and initially set up a network backup system where the main data is backed up to another location on the network, such as a virtual server or even a separate computer. However, should the main network become compromised or damaged due to power shortages or other failures, the network backup becomes useless and the business is caught without a backup to restore operations.

DVD or Flash Drive

DVD and flash drives are not good ideas for backing up large amounts of data. These are great options for transporting a few files or perhaps banking information from the office to home; however, these are not feasible means of backing up large amounts of data. First, it would take a long time to copy all of the company’s data onto discs or flash drives and secondly, the probability of discs or flash drive becoming damaged or corrupt is high. These two options should only be used for copying small amounts of data.

Online Storage

Online data storage or cloud storage as it is being called is the newest and most robust method of ensuring that data is backed up and readily available when needed. The cost of online storage is very inexpensive. Small business owners don’t have to use an IT company in order to implement online back up and it can be set up to backup whenever the business wants.

Restoring data from an online storage company is as simple as the backup process and can be done from any computer with Internet access. These online companies guarantee security and the availability of the data anytime.

The most important thing to consider when researching online storage companies is their reputation and how the secure the data. Check references and speak to actual people who have used the company. It is important to know that the date being stored won’t be compromised and accessed by people who should not have access to it. It is just as important that the data be available at anytime, not just during business hours.

There are many different backup methods that are available for small business owners to choose from; however, choosing one that will be easy to use, inexpensive, and secure takes time and research. Online storage is quickly becoming the most used method for backing up data in both small and large businesses and should be considered one of the best options.

Because small business is a major engine for job creation, creating two out of every three net jobs over the past 15 years, according to the SBA, it’s little wonder that the government provides substantial tax breaks for entrepreneurs. However, because of the complex and convoluted nature of the U.S. tax code, many small business owners may not be aware of the tax benefits they may be eligible to receive.

The following is a list of some of the most widely available tax credits to small business owners:

New equipment – Purchasing new equipment can create a big tax deduction for your business. Businesses can deduct up to $500,000 in new equipment purchases from their tax bill. Business owners can also take advantage of big depreciation deductions in the first two years after they purchase the equipment.

Automobile expense – Personal automobiles used for business, or business-owned vehicles can provide deductions for the costs of keeping it operational and fueling it.

In general, you can deduct two types of automobile-related expenses, a standard mileage rate or actual expenses. Under the mileage system, you can deduct 51 cents per mile for every mile driven and also deduct tolls and parking costs. With the actual expense method, you can claim deprecation in value and also bills for actual business-related automobile expenses. With either system, it’s important to keep good records of mileage and expenses in case you’re audited.

Start up costs – New business owners can deduct up to $10,000 in capital costs when they start up their business. This deduction can be spread out over five years if it is advantageous to the business owner.

Legal and professional fees – Money you pay to attorneys or accountants can be deducted in the year which they occur. Business owners can also deduct the cost of certain books, such as those that can help you with certain business issues, such as accounting or law.

Interest expenses – If you take out a loan or use a credit card to help finance your business, you can deduct the interest expense from your businesses taxes. Again, it is important to keep financial records and documentation if you intend to use this tax deduction.

Business travel – Trips made for business purposes can have tax deductible expenses. When traveling on business, you can deduct plane fare, hotel accommodations, meals, laundry, communications and some other expenses from your taxes. You can only deduct your expenses or those of employees, however.

Unpaid debts – If a customer does not pay for goods you sold him or her, you can deduct the cost of the product from your taxes. You cannot deduct the cost of services to clients who do not pay their debt to your business, however.

Entertainment – Small business owners can deduct up to half the cost of entertaining business clients or contacts. Business owners should be careful to keep receipts and document who they have with them when they’re entertaining, however. Also be wary of the line between personal and business entertainment expenses, as getting a little careless of the expenses you claim could trigger an audit.

Taxes – There are a number of taxes you can deduct from you federal tax bill. Business owners can deduct sales taxes paid on supplies or equipment, real estate taxes and excise and fuel taxes. Some states allow business owners to deduct their federal tax liability from state income taxes.

Software – Business owners can deduct 100 percent of the cost of new software in the first year after it’s bought, and gradually declining amounts over five years. Because software can be a frequent cost to businesses, as programs are often updated and re-released, taking advantage of this tax break can be a big benefit for small businesses.

As you can see, there are a number of ways you can reduce your tax bill by taking advantage of tax exemptions offered by the government. Keeping accurate, organized records of all your business expenses is key to taking advantage of these deductions, however.

If you’re not confident of your ability to identify these deductions, consult with a professional accountant. They can help find the deductions you’ve earned and greatly reduce your overall tax burden. Remember that tax rules change frequently – sometimes from year to year – so check IRS news and others sources of tax information frequently to see if there are any new opportunities for your business to save tax dollars or any changes that my throw a kink into your operations.

In addition to paying federal income tax, your business will also likely have to pay state income taxes. The type of state income tax your business pays varies according to the legal structure of your business. For example, in many states, sole proprietor and partnership business owners pay individual income taxes on their business’ profits. In businesses with LLC or corporate status, corporate or business tax rates apply, and the owners may also have to pay individual income tax.

For most home-based and small business owners, only the individual income tax rate will apply. These rates are lower than federal income tax rates, and after deductions, may only apply to a very small amount of your small business income.

The following is a list of states and their individual and corporate income tax rates.

State                                                   Individual rates               Corporate rates

Alabama                                                 2 to 5 percent                               6.5 percent

Alaska                                                     None                                              1 to 9.4 percent

Arizona                                                   2.59 to 5.94 percent                   6.968 percent

Arkansas                                                1 to 7 percent                                1 to 6.5 percent

California                                               1 to 9.3 percent                            8.84 percent

Colorado                                                 4.63 percent                                4.63 percent

Connecticut                                            3 to 6.5 percent                          7.5 percent

Delaware                                                2.2 to 6.95 percent                     8.7 percent

Florida                                                    None                                             5.5 percent

Georgia                                                   1 to 6 percent                              6 percent

Hawaii                                                    1 to 11 percent                             4.4 to 6.4 percent

Idaho                                                      1.6 to 7.8 percent                        7.6 percent

Illinois                                                    5 percent                                      9 percent

Indiana                                                   3.4 percent                                  8.5 percent

Iowa                                                        0.36 to 8.98 percent                 6 to 12 percent

Kansas                                                    3.5 to 6.45  percent                   4 percent

Kentucky                                                2 to 6 percent                            4 to 6 percent

Louisiana                                                2 to 6 percent                           4 to 8 percent

Maine                                                      2 to 8.5 percent                        3.5 to 8.93 percent

Maryland                                                2 to 5.5 percent                        8.25 percent

Massachusetts                                       5.3 percent                                8.25 percent

Michigan                                                 4.35 percent                              4.95 percent

Minnesota                                              5.35 to 7.85 percent                 9.8 percent

Mississippi                                             3 to 5 percent                            3 to 5 percent

Missouri                                              1.5 to 6 percent                            6.25 percent

Montana                                             1 to 6.9 percent                              6.75 percent

Nebraska                                            2.56 to 6.84 percent                     5.58 to 7.81 percent

Nevada                                               None                                                 None

New Hampshire                               None*                                               8.5 percent

New Jersey                                        1.4 to 8.97 percent                       9 percent

New Mexico                                     1.7 to 4.9 percent                           4.8 to 7. 6 percent

New York                                         4 to 8.97 percent                            7.1 percent

North Carolina                                6 to 7.75 percent                           6.9 percent

North Dakota                                  1.84 to 4.86 percent                     2.1 to 6.4 percent

Ohio                                                 0.587 to 5.925 percent **            None **

Oklahoma                                       0.5 to 5.50 percent                        6 percent

Oregon                                            5 to 11 percent                                 6.6 to 7.6 percent

Pennsylvania                                 3.07 percent                                    9.99 percent

Rhode Island                                 3.75 to 5.99 percent                       9 percent

South Carolina                              0 to 7 percent                                  5 percent

South Dakota                                None                                                 None

Tennessee                                      6 percent***                                    6.5 percent

Texas                                              None                                                 None ****

Utah                                               5 percent                                          5 percent

Vermont                                        3.55 to 8.95 percent                       6 to 8.5 percent

Virginia                                          2 to 5.75 percent                             6.5 percent

Washington                                   None                                                 None

Washington D.C.                         4 to 8.5 percent                               9.9975 percent

West Virginia                               3 to 6.5 percent                               8.5 percent

Wisconsin                                     4.6 to 7.75 percent                         7.9 percent

Wyoming                                       None                                                None

* New Hampshire levies an 8.5 percent tax on businesses with gross income over $50,000.

** Ohio levies a commercial activity tax on certain businesses.

*** Tennesssee’s tax is on dividends and interest income only.

**** Texas imposes a franchise tax on businesses with revenues of $1 million or greater.

Pay as You Go

Remember that income taxes for small businesses are paid quarterly, and that waiting until the end of the year could leave you with a large tax bill, including penalties. When starting your small business, or when you begin making enough money to garner the attention of tax authorities, get a tax identification number and begin making quarterly tax payments to comply with the law.

Use taxes

In addition to income taxes, many states charge use taxes on items purchased from outside the state. Online purchases have become a huge sticking point with states, as the proliferation of e-commerce and

sales tax free selling has depleted states of revenue. While individuals can get away with ducking the use tax, businesses can’t. Businesses who purchase items (office supplies, furniture, etc.) online should be sure to pay the use tax, as failure to do so may trigger an audit.

Hire a professional

Most  small business owners don’t have the time or the know-how to negotiate the morass of state and federal income tax rules on their own, at least not when they first get started. For your first year of operations, seek the help of a tax professional, but insist on seeing the forms he or she used to file your taxes and ask plenty of questions about the process. If you’re running a small, home-based business, you’ll probably be able to handle taxes on your own, but in the beginning it helps to have a pro guide you through what’s necessary to comply with the law and what deductions are available to you. Larger businesses may want to continue using a tax professional, particularly ones with many potential deductions.