Many purchasers of businesses know very little about finances and records necessary for a business. If you do, you probably feel more comfortable; but a little knowledge is all you really have to know. It is important to select a business accountant and a business attorney to assist you with the business. How much you will desire their services will depend on your knowledge, your time, and the size of your business; but those relationships are important for the success of your business. You are probably more interested in developing your business than the record keeping of it.
As you prepare to purchase the business, you will write a business plan. As you go through this process, your knowledge of the entire business, including finances, will become familiar to you. You can transfer your knowledge of your home finances to your business finances. Sometimes you have a budget; and, if not, you keep records indicating how you are spending your money so you will be able to prepare or have prepared your taxes each year. An advantage of purchasing an on-going business is that you have the financial information for usually three years, which you can use to help you set up your record keeping system. You may want to have a business accountant assist you with this. Going over the financial statements will make you familiar with business terms as you analyze the financial condition of the business. You want to understand the finances when purchasing the business. You will find the money you spend for help from your attorney and accountant will be well worth it to have everything set up as it should be.
You purchase a business based on the financial history of the business, but you budget according to your projection of the future growth of the business. You will probably purchase a business that is performing well and that has growth potential, as you want to get a good return on your investment. There are some factors that affect every business’ financial situation. There is always uncertainty about the future, so you must have a plan to deal with changes. We love positive changes, like inflation, which is the rise in the price of goods and services, which can positively affect your business. When the economy is growing, people have more money to spend. Because the rate of growth has been around one percent for the past eight years, people have less money to spend. If the change president is elected, we will see growth in our economy, better wages, and more jobs. Businesses will grow and hire more employees. When the economy starts growing again at a three to four percent rate, you will see prosperity in everything, and your business will grow.
Another thing you cannot control that affects your business is taxes. As tax rates are raised, you pay more taxes and have less money. A tax cut for businesses will allow you to keep more of your profits for your personal life and grow your business. It also allows you to add more employees and pay better wages, which allows these employees to purchase more goods and services; and this grows our economy.
Taxes are an expense we all pay to the government. As mentioned above, the tax rate determines the amount we must pay. We are all familiar with income tax, but there are other taxes you pay for your business. Your accountant will guide you through the steps you need to take to be sure you are paying everything required for your business. When you set up your business, you will decide on the dates for your fiscal year to begin and end. As your income tax is paid on the calendar fiscal year of January 1 through December 31, many businesses have their fiscal year start and end in the middle of the year, like July 1 through June 30. That gives you some room to pay some things in the best way to adjust taxes from one time to another. Before you get too excited, this only delays taxes; and all of your taxes must be paid. By having different fiscal years, all of your income taxes are not due at the same time. One final note is that you always pay your taxes, but you don’t want to pay more than is required. There are deductions you can legally take, so it is smart to find out what they are and take them.
As I mentioned earlier, be smart and find a good business accountant and business attorney when you purchase your business. Their value is well worth the cost.
