Summer Financial Checklist For Small Business Owners

From Small Business Trends

Now that summer is well under way, our focus is often on beaches and barbecues, not necessarily business finances. Yet the mid-way point is the perfect time to review the financial and tax health of your business.
Financial planning is an ongoing process for small business owners and taking actions now can help you lower your 2012 taxes and put you in a stronger financial position for the year ahead.

Here are seven steps to take once we’ve hit the midpoint:

1. Meet With a Tax Advisor

Too often small business owners wait until it’s time to file their returns to start thinking about taxes. Have you ever met with a CPA or tax preparer and been told you could have lowered your tax payments if only you had acted earlier?

Make a mid-year appointment when you’ll both have more time to discuss your financials. Most importantly, you’ll still have plenty of time to act on his or her suggestions within 2012. Or you can register for a free Small Business Tax Training webinar to get a handle on commonly missed deductions, available tax credits, and more.

2. Assess Your Estimated Tax Payments for 2012

Now that we’ve hit the midway point, review what your business has made year to date and your forecast for the rest of the year. Then assess your estimated tax payments to avoid underpayment penalties, as well as overpayments (you could be doing more with that money). Adjust your final two estimated tax payments for 2012 as needed.

3. Re-evaluate Your Business entity 

Many small businesses start out as sole proprietorships or partnerships, but then eventually transition to another entity. For example, if your business is not incorporated, you may want to consider incorporating (either as a C Corp, S Corp, or LLC) to shelter you from some financial risk and possibly save money on taxes. Sometimes an entity is formed with one income target in mind, and you might need to reconsider the entity for a different income level. Failing to adjust your business entity for your revenue can be a costly mistake. Discuss the different legal entities with your CPA, so you can determine the right entity for your situation and the right time to make the change.

4. If You Have an S Corporation, Review Your Salary and Distribution Requirements 

If your business is structured and taxed as an S Corporation, make sure your salary and distribution payments are at the optimal levels. Too often, S Corp owners don’t properly balance the amount the S Corporation pays them as salary vs. distribution. The result can be either higher taxes or an increased audit risk.

5. Take Charge of Your Recordkeeping

To make the most of your business tax deductions, you’ll need accurate, comprehensive records. If you haven’t been keeping track of your business expenses, get caught up now. If you find yourself struggling with this administrative task, look for a new solution ? whether it’s offloading the task to someone else, investing in a technology solution (like a receipt scanner or iPad app), or dedicating 30 minutes each week to expense tracking. You’ll be grateful come tax time.

6. Plan Equipment Purchases

Take advantage of a first-year expense write-off for equipment placed in service by the end of the year. Business owners and self-employed individuals are allowed a first-year depreciation deduction of 50% of the cost of qualifying property acquired and put in service in 2012. For 2012, the maximum amount that can be deducted under Section 179 is $139,000 (inflation adjusted). Based on current law, the limit is set to fall to $25,000 next year. While we can’t predict what will happen in the future, if you’re considering taking advantage of this tax deduction, you should do it in 2012.

7. Plan for Retirement

If you haven’t done so already, take time to set up a retirement plan or reassess your contributions. Contributing to an IRA, Keogh, simplified employee pension (SEP), or other retirement plan is an essential way to plan for your future and reduce your taxable income. The specific rules, contribution limits, and deadlines vary by plan. Make an appointment with your CPA to discuss the best retirement option for your business.

I know it seems like the ink has barely dried on your 2011 taxes, but remember that the best time to plan for your taxes and financial health is 365 days a year.
 
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Small Business Lending in the United States, 2010-2011

by Victoria Williams, U.S. Small Business Administration,
Office of Advocacy, Office of Economic Research, 2011,

The availability of credit is paramount to small business health, growth, and survival. Annually, the Office of Advocacy prepares the study of Small Business Lending in the United States that examines the lending environment of depository lending institutions. This report is intended to inform prospective lenders, policymakers, business owners, and lending institutions of developments in the small business loan markets.

The study relies on two types of data reported by depository institutions to their regulatory agencies and made available for analysis—The Call Report data and the Community Reinvestment Act (CRA) Reports. The lenders are ranked on their overall small business lending nationally and on a state-by-state basis.

The first section of Part One looks at the changes in the Call Report data; the second reviews developments based on the CRA database. Listings of the top small and micro business lenders in the 50 states, the District of Columbia, and some U.S. territories are found in Part Two of the report.

All small business lenders filing reports in the U.S. economy are examined. The data does not allow differentiation between SBA loans and all small business loans. This report includes cooperative banks in addition to savings banks, savings and loan associations, and commercial banks.

Overall Findings

Overall lending and borrowing by financial depository institutions and small businesses was weaker in 2011 than in the previous year, as borrowers and lenders continued to postpone new borrowing and lending in reaction to an uncertain economy.

Highlights

While business lending in amounts of more than $1 million turned upward, small business lending under $1 million remained restrained. Small business loans outstanding in June 2011 were valued at $606.9 billion, down 6.9 percent from $652.2 billion the previous year. The dollar volume of borrowing by large corporations in loan sizes over $1 million increased by 5.8 percent in 2011, com-pared with an 8.9 percent drop in 2010.

• Borrowing declined for both types of small business loans—commercial real estate (CRE) and commercial and industrial (C&I) loans under $1 million—but at a slower rate for CRE. The value of the smallest C&I business loans or micro loans (less than $100,000) declined by 12.7 percent, from $137.2 billion in June 2010 to $119.8 billion in June 2011. CRE and C&I micro loans combined were valued at $139.5 billion in 2011.

• Megabanks—those with $50 billion or more in assets—accounted for 38 percent of small business loans outstanding and for 51 percent of the total decline in small business loans.

• The number of multi-billion-dollar lenders with assets over $10 billion was down from 94 in June 2010 to 92 in June 2011. Their share of total assets, however, grew from 76.7 percent to 77.3 percent during the same period.

• The CRA data on small business lending mirror the results in the Call Report data. In 2010, 774 CRA-reporting institutions extended 4.3 million loans of less than $1 million, for a total of $178.8 billion in small business loans; this compares with a 2009 total of 6.2 million loans valued at $205.7 billion made by 799 depository lending institutions.

Scope and Methodology

The study uses two types of data to analyze the lending environment of depository financial institutions for the years 2010-2011. The Call Reports include information on the amount and number of outstanding loans as of June 2011, and the Community Reinvestment Act (CRA) data cover loans made in 2010. The reported data are available only by the size of the loan, not by the size of the business; thus, small business loans are defined as business loans under $1 million; macro business loans are defined as loans between $100,000 and $1 million; and micro business loans are defined as loans under $100,000. Several variables from the Call Reports are used to analyze developments in the lending activities of these institutions. Because of the changing number of lending institutions required to file CRA reports, year-to-year changes in these institutions’ activities are more difficult to interpret than they are for the Call Reports.

Depository lenders with total domestic assets of more than $10 billion are ranked and reported separately, on the assumption that they serve a national market. Lenders are ranked by state based on the designated headquarters of the reporting lending institution. Two ranking methods are used depending upon the availability of data.

For lending institutions for which information on total assets and total business loans are available (those filing Call Reports), four criteria are used as the basis for a lender’s performance ranking.For the analysis of state lending based on CRA data, lenders were listed in order of the dollar amount of small business loans made in each state in 2010 in descending order, so large institutions appear at the top. Simple rankings were used for multi-billion-dollar lending institutions because only a small number of lenders are involved.

This report was peer-reviewed consistent with Advocacy’s data quality guidelines. More information on this process can be obtained by contacting the director of economic research by email at advocacy@sba.gov or by phone at (202) 205-6533.

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Get the full report: http://www.sba.gov/sites/default/files/sbl_11study%20FINAL.pdf