Avoid These Startup Mistakes That Small Biz Owners Make

When you turn an idea into a real, living, breathing business, there is a lot of excitement. Starting a business is an incredible feat and the beginning of a journey, but it’s also a risk. So much goes into starting a business, and without the right support, startup mistakes are inevitable.

When you prepare to open your new small business, your focus is on the idea, or the skill you have to offer. Rarely is it about accounting, taxes or cash flow. Most new business owners understand that they need help from those with knowledge about these aspects of business, but put off building those relationships until after their business starts to operate.

But if you’re starting your own company, you need to know the risks you’re taking, the personal liabilities you’ll have as a business owner and how your initial decisions will impact your business moving forward. In addition, you must know what’s required of you by the IRS and other government agencies.

Let’s take a look at a real-world example of a new business owner who made common startup mistakes.

Failure To File, Subjected To Fees

An owner (who we’ll call Sam) had just opened his business and had little idea about what he needed to do from a tax perspective. He did not file his first-year corporate tax return, and months after it was due, he started receiving notices from the IRS.

Not long after receiving these letters, Sam reached out to a small business tax advisor for help.

Like most new businesses, Sam’s company wasn’t making a profit, and he didn’t owe any income tax. But because he had failed to prepare his financials and file a corporate tax return, the IRS had assessed tax penalties of over $1,200, which grew by the month.

Fixing The Costly And Deadly Startup Mistakes

Sam’s new tax advisor worked quickly to file an income tax return. However, since he had not filed a timely return, the IRS notified him that he owed a penalty of $1,200. His tax advisor advised him to file an abatement letter, which explained to the IRS that Sam was a new business owner who had not realized the reality of what he was responsible for, but was now working with a tax professional to ensure his timely filing in the future.

Thankful For Reaching Out To The Right Person

Thankfully for Sam, he did not have to pay for his startup mistake: The IRS responded to the letter his partner sent on his behalf and agreed to waive his penalty and fees, saving him $1,200.

Having learned his lesson, he continues to work with his tax professional to ensure his compliance, as well as other important aspects of his business. He is now in a much stronger place, with much less compliance risk and a helpful hand to advise him to make the best decisions for his business.

Do you have the support you need to manage your small business bookkeeping? Contact us to schedule an appointment to speak with a local small business advisor.