Business Structures: The Difference Between a DBA, Sole Proprietor, Corporation and LLC

Posted by on Sep 23, 2013 in Accounting, Blog, Legal, Start-up, Xero Advisor | 0 comments

From Small Business Trends, by Nellie Akalp Comment: Good, concise article for start-ups! Suzy When you’re starting or running a small business, countless questions arise, particularly surrounding your business’ legal structure: Is my business legal? What kind of business structure means I’ll pay the least in taxes? What happens if my business gets sued? What business structure is best for me? Below is an introduction to some of the most common business structures to help you navigate this important decision. Common Business Structures The Sole Proprietorship The sole proprietorship is the simplest way to operate a business. If you’re self-employed or conducting any kind of business and haven’t picked a formal business structure, then by default, you’re operating as a sole proprietor. The biggest advantage of the sole proprietorship is that it’s simple to form and maintain. Since there’s no separation between the sole proprietorship and the owner, any income earned by the business is considered income earned by the owner. A sole proprietor owner just needs to keep track of all the business’ income and expenses and report it on a Schedule C with their personal tax return. However, the biggest drawback of the sole proprietorship is that the owner is personally liable for any debts of the business. So if your sole proprietorship business runs into financial trouble, creditors can come after your personal property and savings. Likewise, you’ll be personally liable for any lawsuits brought against the business. The DBA (Doing Business As) A DBA (also called a fictitious business name, assumed business name, or trade name) isn’t actually a legal structure. Rather it’s a way for sole proprietors to use a business name without having to create a formal legal entity (i.e. corporation or LLC). This is typically the simplest and least expensive way for a small business to legally conduct business under a different name. For example, if Jane Doe wants to open a sole proprietor floral business called “Petals by Jane,” she needs to file a DBA for “Petals by Jane.”  This is basically so there’s a public record to let everyone know what individual(s) are behind a business. The Corporation (C Corp) A corporation is considered a separate entity from its owners. This means that the corporation (and not the owners) is responsible for any of its debts and liabilities. This is often called the “corporate shield” as it protects the owner’s personal assets from the business. A corporation has a formal structure consisting of shareholders, directors, officers and employees. Every corporation must select at least one person to serve on its board of directors and officers are required to manage the day-to-day activities of the company. Corporations need to vote on...

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Eye on Xero: Cash Summary Report Review

Posted by on Sep 22, 2013 in Accounting, Blog, Bookkeeping, Cash Flow, Cloud Computing, Xero, Xero Advisor, Xero Consultant | 0 comments

By Suzy Payne Rabb   “How can my income statement show I made a profit, when I have no cash?” If I had a nickel for every time I’ve heard this question, I could fill a gallon jar. In the past, I would explain that cash can be used for many things other than the business expenses that show up on the income statement. Cash might be used to invest in assets, payoff of debt or may be distributed directly to the owner or partners in the form of a draw or distribution. These items don’t show up on the income statement, but definitely draw down the cash balance.   The Statement of Cash Flows The Statement of Cash Flows is a primary financial statement and available in most accounting software solutions. This statement shows how changes in the balance sheet accounts and income affect cash, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement presents the movement of cash in and out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet and should be the report to answer the question. The major problem I’ve seen is that not many business owners use or understand the format of the standard Statement of Cash Flows. While every owner or manager has an interest in where the cash is coming from and going, most find the standard layout difficult to follow and I get it. Here is an example of the standard layout.   Xero’s Cash Summary Report Xero provides a simple Cash Summary Report that is essentially a cash basis income statement, together with some additional sections to show all the other movements of cash by GL account. Simple, direct and far easier for most users to understand. Most small business accounting solutions do not offer such a report. Don’t get me wrong, I still want a Statement of Cash Flows. I just prefer Xero’s Cash Summary report to show the owner exactly where the cash is going. I give Xero’s Cash Summary Report an A++! Schedule a free consultation to learn more about Xero. Suzy Payne Rabb BBA/Accounting Xero Certified Advisor New Day Consulting Group suzy@newdayconsulting.biz 512.892.8990...

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What the Hell is… the Cloud?

Posted by on Sep 19, 2013 in Blog, Cloud Computing, Xero | 0 comments

From Linkedin by Bernard Marr, Best-Selling Author and Enterprise Performance Expert   The cloud, or cloud computing, is not new but it remains a major buzzword in the business and technology world. I would assume that most people know by now what we mean when we say things like: “Simply stick it in the cloud” or “Back up to the cloud”. However, I recently gave a presentation about Big Data (another one of these buzzwords) to a large business conference and in my discussions afterwards was surprised how many people were not really clear what cloud computing was. So, I promised to write a very short and clear outline of what it is. Here we go. Cloud computing basically refers to two things: Storing data outside your computer (or phone). Performing computing tasks using software and applications that are not installed on your computer (or phone). Instead of storing or computing things on your own machine, we use other computers that are connected to our computer via a network (such as the Internet). Let’s look at some examples to make this even clearer: If you back up your documents and photos over the Internet using services such as Dropbox or Google Drive then they will be stored in the cloud – meaning they are sent via a network to a server (which can be anywhere in the world) where your documents will be stored. If you are an iPhone user and have enabled iCloud, then your photos, apps, music etc. will be backed up to a computer managed by Apple. The data will be transferred to that outside computer using the Internet. If you are using services such as Gmail, Yahoo or Microsoft Exchange Online for your emails, then you are basically a cloud-computing user. These software applications are not installed on your computer but you are using them over the Internet. If you use Facebook, Twitter or LinkedIn, then you are also a cloud-computing user. These services are provided via the internet and your up-dates, photos, videos, etc. are stored on their computers. This means, cloud computing enables us to increase our storage capacity without the need to buy new hardware. And it enables us to use applications or access music, TV programmes, etc. on demand, via the Internet. The same applies to companies. If companies want to increase their storage, they can simply move their data to the cloud. This is often a more cost effective solution than buying and maintaining their own data storage facilities. When it comes to software, the same applies. Instead of purchasing software licences, companies can use SAAS providers. SAAS stands for ‘Software as a Service’ and in principle works in the...

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