Change Offers Opportunity

Change is frightening to most people. But sometimes it’s the best medicine for us.

For over a dozen years I worked in a large corporation with great benefits. Raises were an annual tradition, and I was making over four times the salary I started with. In most respects I was happy. But my job was getting old and becoming a drudgery.

The thought of leaving my comfortable environment was, to say the least, frightening. So, I decided to take it in stages. I began by starting a bookkeeping service from my home.

Challenges Faced and Overcome Together

Since I worked during normal business hours I faced two challenges: How to meet prospective clients, and how to get the work done during the few free hours I had in the evening. The first challenge was easily solved by prospecting among friends and relatives. These are people I already had a relationship with and that I saw after business hours anyway. My first four clients came through these associations.

The second challenge was also easily solved. My wife, Sheri, was a homemaker and three of our four children were in school. With just a few simple instructions I was able to train her to do the data entry which she enjoyed doing. In the morning, before I left for work, I would set out the client’s material, and when I arrived home, the data would be entered flawlessly. I would spend a couple hours reviewing the results, making any needed adjustments, and printing out the reports.

After a short time of building my practice the decision to leave my full-time employer was a natural and lucrative one. It was just what “the doctor ordered.”

-Allen Bostrom
President of Universal Accounting

Improve YOUR Future

This is just one of thousands of testimonials that we receive from our graduates (in this case also the President of the company), confirming the principles taught in the Professional Bookkeeper program. The marketing techniques that you will learn in the Professional Bookkeeper program are not lofty theory or stuffy book learning. You will learn the “down in the trenches” practical guidance that you need to succeed with you own successful Accounting service.

Learn How To Start Your Profitable Business and Achieve Your Dreams!

Enjoy a More Flexible Schedule and Be A Successful Business Owner

Are You an Entrepreneur or a Propreneur?

What is a “propreneur”? Many very successful small business owners don’t fit the classic entrepreneurial mold. They’re not so much into the “business of business.” They are more interested in finding meaning in their careers and creating a lifestyle that will allow them to spend time doing those things that are most important to them.

If this describes you, you’re a propreneur. And with the right business, you will be very successful.

Aren’t All Business Owners Very “Driven”?

If by “driven” you mean someone who thinks of nothing but work, no. Many people who are happy and successful in their own businesses aren’t what you would consider “driven.” In fact, the key to succeeding as a propreneur lies in managing your business in such a way that you can perform those functions you do best.

The Following 4 Things Will Make You a Successful Propreneur

Authors and career coaches Paul and Sarah Edwards describe 4 things that you will need to do to be a successful propreneur. In a previous newsletter, we discussed what Paul and Sarah had to say about what is the best home-based business. (Click HERE to read about what Paul and Sarah say is the “Best of the Best Home-Based Business.”)

1. Have a Professional Attitude. Treat your business like a real business. Take the legal steps to form your business entity (proprietorship, corporation, LLC, etc…), open a business banking account, launch a website, and so on.
2. Get Business Coming to You. Learn to attract new business in ways that are the most comfortable to you. Do the things that come the most naturally, but remember, “Nothing happens until you make a sale.” You may have to step out of your comfort zone a little, but finding and keeping customers doesn’t have to be an uncomfortable thing to do.
3. Have a Good Relationship with Money. Don’t be afraid to talk to your clients about what you expect to get paid for the services you provide. Bookkeeping and accounting are highly specialized fields that require the skills of a trained professional. You must feel comfortable talking openly about money issues with your clients. Never feel you have to apologize for charging a fee for saving them a lot of time, headache and money.
4. Set Up a Support Network. Line up a network of professionals you can turn to for advice and assistance. For 6 months after your graduation, Universal Accounting Center will be there to offer you free advice, motivation and guidance as you begin your professional bookkeeping and accounting practice.

There is a Lot of Opportunity in Small Business Bookkeeping and Accounting

85% of the opportunity for bookkeepers is in small businesses. Small business owners need the services you can provide, and what’s more, it’s required by the government. Every business must do accounting and keep accounting records; qualified small business accounting professionals are in high demand.

The Professional Bookkeeper Program will teach you everything you need to know to do bookkeeping for any small business. We’ve been teaching small business bookkeeping and accounting since 1979. That’s 25 years of teaching people just like you and me the ins-and-outs of bookkeeping for small businesses. In fact, we’ve been called the Small Business Accounting Experts.

You don’t have to take my word for it. With thousands of successful graduates across the country, I’m confident that you will find the same level of personal and professional satisfaction that they have found. See for yourself what a few of our graduates are saying about the Professional Bookkeeper Program.

Your Professional Bookkeeping and Accounting Practice Will Earn a Better Income

The accounting profession has been around for a long time. Over 500 years to be exact. And you should know that the need for accounting and bookkeeping professionals is at an all-time high. Every year 500,000 new businesses are created, and all of them need the advice and expertise of a trained bookkeeper. As this trend continues, the need for your skills will continue to increase as well.

According to Robert Half/Accountemps, the nation’s largest placement firm for accounting professionals, the demand for skilled professionals in the accounting field is so large right now that bookkeepers and accountants are able to demand better incomes. There’s never been a better time to own a bookkeeping and accounting practice than right now.

Earn $30 to $60 per Hour and Save Your Clients Money

The average freelance bookkeeper can expect to charge $30 to $60 per hour for services that have the ability to save small business owners time and money. With the right training you can charge those kinds of rates for your services too. If you’d like to increase your income, create a better lifestyle for yourself and your family while becoming a propreneur, order our DVD “Start Today & Have Your Own Bookkeeping Business.” For less than $10 you can be on your way to a more flexible schedule, a more lucrative lifestyle, and the opportunity to earn money doing what you enjoy.

Will They Remember You?

Picking the Right Business Name

Your business name should give those you come in contact with a clear picture of what you do. Your business name should represent your specialty, values, and competitive edge. It also helps in developing that brand that all good businesses need. That’s a lot to cover in just a few words, so you should take a little time to create a business name that evokes the right feelings from your target market. Here are a few things you can do to find the perfect name for your business.

Brainstorm
To brainstorm, all you need is a pen, notebook, and all the creativity you can muster. At this point you’re looking for words that might work in a business name, regardless of how they might sound at this point. Don’t cross anything out or censor yourself; anything goes when you brainstorm.

Make Connections
For this activity, all you need is a thesaurus. Your objective at this point is to increase your options by expanding your brainstorm list. Add any words that relate to your profession and values. Look those words up in the thesaurus and add even more that might work. What words might communicate your competitive edge? Are you interested in localizing your business name? Are there any variations of your own name that could be used? Don’t make any judgments at this point—you’re still brainstorming, giving every idea that comes to mind a chance to make this long list.

String Some Words Together
Review your list and consider which words you’re most drawn to. Which resonate and best describe your objectives? Now string some together to create tentative business names. Make as many as possible; in fact, shoot for 20-30 that might work.

Don’t Get Too Quirky
Although you can get into the creative side of things with your business name, there can be a tendency to get too cute with your name. Names like “Numbers n’ Cents”, or “Counting Teddy Bears Accounting” are not going to give the right impression to those business owners who are looking to entrust you with their financial world. Leave the Quirky to the catchphrase, but try and refrain from naming your practice something that can’t be taken seriously.

Narrow Your List
Now’s the time to create a short list of business names. Which appeal to you the most? Go with your gut and pick those business names that sound best to you. Try to narrow your list somewhere between 5 and 10 names.

Check with Your Competitors
Before picking your own business name it’s good to do a little research and see what your competitors are calling themselves. First make a list of local bookkeepers and accountants. Then hit the internet and see what bookkeepers and accountants out of your area call themselves. This will help you see how your names measure up. Do they adequately represent your services while still being unique enough to stand out? Or are some so unique that members of your target market just might scratch their heads when they hear them?

Test-Drive Your Selections
Say them all out loud. Sometimes it’s only when you pronounce a business name that you recognize its flaws. Consider the following:

• Is it easy to pronounce?
• Is it memorable?
• Is it easy to spell?
• Will it appeal to your target market?
• Does say something about your business?
• Is it too limiting? (geographically or otherwise? You want something that can expand as your business does.)
• Does it stand out?
• Is it too similar to a competitor’s business name?

Next, run your selections by family and friends. What are their thoughts and opinions? Ask what comes to mind when they hear each name? It would also be good to run your names by members of your target market. Narrow your list as you feel appropriate.

Pick a Winner
Now that you’ve brainstormed, researched, and gotten feedback, it’s time to pick the name that you feel best about. If it’s a name you can get excited about, chances are it’s the business name for you.

Register Your Business Name
The best way to save the name for yourself is to register it. If you plan to incorporate, file the proper paperwork. Regardless whether or not you register the name, you can begin to use the trademark symbol. Picking a business name can be a great way to build momentum in getting that business of yours started. When you’ve found a name that’s a perfect match to your objectives, you’ll feel the excitement begin to grow, and hopefully, your business will follow suit.

Are you ready to take the next step in the process you have started in the accounting field? Are you tired of coming across those times when you know you could have done better if you just had the training in this or that aspect of the accounting, bookkeeping process? If only you had a way to learn how to market your accounting practice from an accountant who has been successful?

Be the Profit Expert Professional for Small Business! Don’t hesitate another day in getting the Accounting and Marketing Training that makes the difference. Click here to get more information on what you need to know about becoming the Profit Center Expert for small business accounting and tax!

To Incorporate or Not to Incorporate:

The Pros and Cons of Different Business Entities (Part II of II)

It’s important to take the time to consider which business entity best matches your particular business situation. Last week we talked about the importance of looking at limited liability entities when considering your liability, your creditors’ access to your assets, and your tax obligations. We looked specifically at C and S-Corporations and how they might benefit you and your business. This week we’ll look at limited partnerships (LP’s), family limited partnerships (FLP’s) and limited liability companies (LLC’s).

Limited Partnership (LP or FLP)

Apartnership is a business organization in which two or more persons together own the assets of the organization and share in the organization’s profits. Maybe you and your brothers own the business, or perhpas you’ve decided to partner with two or more good friends who also do accounting and bookkeeping. In a general partnership, all partners are equally and personally liable for all business debts and liabilities. In a limited partnership, however, limited partners are not liable for business debts. A limited partnership is a partnership comprised of at least on general partner and one or more limited partners.

A limited partnership with family members as partners is often call a “Family Limited Partnership” or FLP. The general partner is liable for all business debts. The general partner of a limited partnership generally owns a very small percentage (let’s say 1%) of the partnership assets, but has complete control of the activities of the limited partnership. As you can see, while a limited partnership provides limited liability for the limited partners, the general partner will always have unlimited personal liability.

• Pros -
  • Limited liability for limited partners.
  • The partnership is not taxed; profits and losses “flow through” to the partners, and each must report their income on Form K-1.
  • Flexible asset protection.
• Cons -
  • Filing an FLP is more expensive than filing a general partnership.
  • Limited partners are not allowed to participate in the management of the limited partnership.
  • The general partner remains personally liable for the obligations of the limited partnership.

Limited Liability Company (LLC)

An LLC has some of the characteristics of a corporation (enjoying limited liability) and some of the characteristics of a partnership (pass-through taxation). One or more persons form and own the LLC, becoming its “members.” They can either manage the LLC themselves, or hire managers to oversee day-to-day operations. One person can create an LLC, although it will be taxed as a sole proprietorship. However, you can still enjoy the benefits of a limited liability.

• Pros -
  • Limited liability.
  • Fewer formailities are required.
  • The partnership is not taxed; profits and losses “flow through” to the partners and each must report their income from Form K-1 on their IRS Form 1040.
  • Depending on the state, an LLC can be formed by one member.
• Cons -
  • Possible dissolution of company due to a partner’s death, retirement or bankruptcy.
  • It’s more expensive to file an LLC than a general partnership.

Any of these business entities are fairly easy to establish, but requirements vary state to state; visit your local state website (Department of Commerce) to see what you need to do. The most important part of the process is determining which entity is best for you. After that, the rest is business as usual.

If you are considering taking the next step in the process of your bookkeeping or accounting business you have found the source that you need to have to not only gain the training crucial to accounting success, but also the training that will help you find how to grow your business. Don’t leave anything to chance by going anywhere else than Universal.

For over 25 years, Universal Accounting Center has helped people like you start their own accounting and tax practices. We recognize that 85% of the accounting opportunities are with small business so our curriculum is designed to help you learn small business accounting. Think back to our recommendation to increase your income by performing new services for new clients. When you learn small business accoutning you suddenly make yourself available to new clients whil increasing the number of services you can perform.

Become a Professional Bookkeeper today.

Part Two of a Two-Part Series on The Right Professional Investment

We’ve examined the wonderful opportunity that exists in the business of small business bookkeeping and accounting and how most small business owners don’t have a complete understanding of the accounting function in their business. Wow! What a great opportunity to earn a very profitable income and create a wonderful lifestyle for you and your family.

When you first heard this, you were probably a little skeptical. I think that’s a fairly understandable reaction. But as you’ve looked closer at what’s involved in starting your own business, the type of education you might need, the marketing methods you might employ to grow your business and how others like you have already achieved success, you might be thinking to yourself, “I can do this.”

You CAN Do This

If there’s nothing else you gain from our conversations together, know this: I know you can do this. In fact you don’t even have to take my word for it. As we talk to graduates of the Professional Bookkeeper program, and ask them about the success of their practices, they tell us that they are charging $30 to $60 per hour for their services. (And that’s the average, some charge even more.)

Unlike many programs available, of 100 graduates of our program that we interviewed this year, 12 months after their graduation, 74% were working in the accounting field, had been promoted to a management position, or owned their own bookkeeping or accounting practice. The best news is this can be you, and you can create a wonderful lifestyle for yourself.

“Great success is commoner than great abilities.” -Luc de Clapiers de Vauvenargues

You might be asking, “What does this have to do with me?” Most people will agree that hard work, determination and integrity are what it takes to find success in America. It’s not great ability that makes successful people; it’s doing just what you’re doing right now - setting a goal, finding out what it will take to reach that goal and then taking action.

Only Invest in the “Right” Education

With the need for qualified professional bookkeepers increasing every year, the opportunity is greater today than it has ever been. And as the opportunity increases, the need to obtain the best possible education available has become more important than ever before.

Last week I shared with you what I felt the “right” education must include. Let’s take a minute and review the list.

5 Things You Should Look For in a Small Business Bookkeeping Education

1. Flexibility
2. Complete education
3. Hands-on training
4. A qualified professional to answer questions
5. A guarantee

Click Here to refer back to our previous discussion on what must be in the “right” education.

Universal Accounting Center offers the most complete small business bookkeeping curriculum that can be found anywhere-including the universities or franchises. Period.

There are many courses that provide you with the training to get a data-entry type positions making $8 or $9 per hour, but they won’t provide the education that will create financial security and the type of lifestyle you and your family deserve.

Hands-on Training

Universal is “hands-on” learning. It’s been that way since 1979. Unlike other training programs available, Universal provides hands-on experience doing the books for different businesses. This will provide you with experience that allows you to demonstrate to potential clients and employers that you can save them money, experience that will build confidence in yourself and your ability to handle any type of small business accounting questions that you might face.

Get the Tools Necessary to Be Prepared for ANY Accounting Challenge

There are no filler classes here. You’ll learn small business bookkeeping, not 10-key or data entry. You shouldn’t be satisfied with learning only enough to be somebody’s clerk. Don’t limit yourself. When you’re finished with our course, you’ll be a qualified small business bookkeeping professional; and if you complete the course material and evaluation with a 90% or better, you’ll earn the exclusive designation of Professional Bookkeeper (PB). Universal will show you the best way to be successful in the least amount of time possible.

We’ll Help You Start the “Perfect” Business Once You’ve Had the “Right” Education

Look at the tools that ensure your success:

• If you have questions, you can speak with a live voice on the other end of the phone for six months after you’ve completed your course. You can have confidence in your ability to help your clients because of your “support team” that is always ready to help you.
• By learning proper client interview techniques, you’ll learn how to ask the questions that will allow you to properly evaluate what you can offer your clients and what to charge for your services. You’ll be able to address all of your client’s needs because you’ll know not only what to ask, but how to ask it.
• The exclusive PB (Professional Bookkeeper) designation demonstrates to your clients and peers that you are a trained and qualified bookkeeping professional. Earning the PB designation allows you to enjoy a level of professionalism that demonstrates your commitment to both your clients and your profession.

Any bookkeeping and accounting course that doesn’t offer you the tools to either find a great job or start your own business is incomplete.

The Good News? This is Good for You!

The education you receive from Universal Accounting will make you a valuable asset to your clients. You’ll know everything you’ll need to know to provide the type of service to your clients that will help them save money.

Affordable Student Financing is Also Available

You can get started with a student loan; there’s no credit check and you’re pre-approved if you have a major credit card. Once your financing is arranged (which takes about 5 minutes online when you click the “Finance” button), you’ll get the entire set of course materials delivered to your door. No waiting.

Universal’s Ironclad Money-Back Guarantee Removes All Risk

If, after completing the course materials, you feel the course didn’t live up to your expectation, simply return the materials to Universal, for a 100% refund of any monies paid.

Do colleges and universities offer that type of guarantee? What about the franchises? (And unlike franchises, it won’t cost you up to $80,000 to get started.)

If It’s About Accounting, It’s Universal

Universal Accounting Center provides finest education in small business bookkeeping anywhere, with no hidden costs for books, tests, etc. I think you’ll agree that now is the time and Universal is the place.

Enrolling in the Professional Bookkeeper Program is the “right” choice for you. And when you order today, you will receive an additional 6 months of free coaching following your completion of the course. That means you can call us with a question at anytime for an entire year after you complete the program materials! Don’t wait another day to take advantage of the best investment you can make-in yourself! It’s the perfect start to the New Year. Enroll now.

If It’s Accounting, It’s Universal

The Low Down From Universal

All you need to know about accounting, bookkeeping and tax preparation in one place

	Start Today DVD Start Today and Have Your Own Successful Accounting and Bookkeeping Service. FREE video teaches you how to make more than $80,000 per year with your own bookkeeping service!
	Professional Bookkeeper DVD Become a Professional Bookkeeper Earn the Money you Deserve. FREE video shows you how to make more in the accounting profession.
	Professional Tax Preparer DVD Become a Professional Tax Preparer. FREE Video teaches you how to make more than $100 per hour with your own tax service!
	Art & Science DVD Learn the Art and Science of Getting Accounting Clients. FREE video shows you how to build your accounting practice by $30,000 to $125,000 per year!

Universal is committed togetting to you the right information so that you can benefit from it in your professional career. We are dedicated to assisting those like-minded individuals to becoming successful in Accounting, Bookkeeping and Tax Preparation. Let’s get to answering that ever-important question of how can the Professional Bookkeeper’s training help you to get to that level of income that you are searching for in your accounting/bookkeeping career.

Ensuring Employee Retention

Hiring a support staff to help grow your business and better manage your workload is a defining moment in the life of an accounting practice. To help you work through this process, we’ve developed a three-part series on Hiring a Support Staff. The first week of this series we ran a quiz to help you determine whether or not you are ready to hire an employee to help with your workload. Last week we gave you guidelines in finding the perfect applicant for your business’s needs. This week we’re talking about how to avoid high employee-turnover in efforts to retain valuable employees.

1. Offer Health Benefits
This is an appealing draw for highly-qualified applicants. Many will not even consider an opening that doesn’t offer health coverage. Depending on the size of your business you should look into this and see if it’s a possibility. Click here to read more about your health care options.

2. Award special titles
If you can’t award insurance benefits you should look at other, more creative ways, of rewarding employees for their work. One way to do this is in rewarding deserving employees with a new title: payroll manager, office assistant, marketing specialist, etc. Not only does this provide your employees with a sense of achievement, but it gives them the opportunity to strengthen their resumes. Avoid creating meaningless or arbitrary titles; that will do more harm than good.

3. Reward employees with new and challenging projects
Like awarding titles, giving trustworthy employees new and challenging projects can provide them with a sense of achievement while also giving them the opportunity to strengthen their resumes. Nothing feels better than knowing your boss trusts you to manage a significant responsibility.

4. Give employees their own parking spaces
Depending on your situation, consider awarding employees their own parking spaces. If your office has a designated set of spaces, give choice employees a spot they can call their own. Or award one employee-of-th- month curbside parking.

5. Allow employees to earn paid time-off
Most large corporations provide employees with the benefits of paid time-off. This can be a great incentive that will not only retain employees, but motivate them to do their best work. For example, you can give four hours of paid time-off to the employee who shows consistent and error-free management of Client X’s account. If this motivates all employees to exhibit exemplary behavior, it will save you a lot more in the end than a few hours of paid leave. But Set high expectations so this doesn’t become an arbitrary reward that drains your budget.

6. Offer flexible work schedules
There are many qualified job candidates who would find your job offer more appealing if it came with a flexible work schedule. Whether the employee is able to enjoy more time at home with their children, go back to school, or recuperate from surgery, a flexible work schedule is greatly appreciated by those who need it to better balance their work and personal lives.

7. Give small gifts or rewards
For a low cost you can give deserving employees gift cards for restaurants, movie theaters, gas stations, book stores, etc. It may not seem like much, but this small gesture can do a lot to compliment your employees and boost morale.

8. Say thank you
This may seem too simple, but the truth is employees tend to stay where they feel appreciated. In fact, public praise is a great way to express thanks for a job well done. Highlight choice employees in a newsletter, company email, or even a staff meeting. You may choose to thank your employees privately as well; employee evaluations are a good time to note specific instances where an employee’s hard work and creative thinking have benefited you and your business.

Small business owners may think they don’t have much to offer those employees they hope to retain long-term, but that’s not always the case. With a little creative thinking and a lot of genuine appreciation you may be able to retain good employees longer than you may imagine.

To Contract or Not to Contract!

You’ve finished your marketing presentation to your most promising potential client. They’re impressed with your confidence, energy, and offer. They’re ready to say “yes.” Do you pull out your bookkeeping service contract, or do you not?

In most cases, the answer is “not.”

Most experienced freelancers have learned (the hard way) that small business owners avoid contracts, almost to the point of paranoia. They’ve heard all the horror stories where businesses signed a contract, any contract, and lived to regret it. Taking out the contract right now may kill the deal.

Not only does it put the potential client relationship in jeopardy, but you have to consider what value the contract is, anyway.

To begin with, the service contract simply formalizes your verbal agreement with the client. You can accomplish this just as well with a letter to the client, called an “Engagement Letter,” which you prepare and send when you return to your office. This one page letter, on your company letterhead, thanks the client for their time, lists the services you’re to offer, and restates your monthly fee.

Secondly, since you will pick up the set-up fee before you do any work, then request payment from the client upon delivery of financial statements, your greatest potential loss is one month’s billings. So the contract isn’t required for payment purposes, either.

Finally, since you guarantee their satisfaction, you’re taking all the risk. If they don’t like your work, they’re not going to pay for it, contract or not.

However, on occasion a client might ask for a contract for their records, and legal peace of mind. If that be the case, here’s a contract form you can customize to fit your business and services. To download this form, click here.

New Offer From Universal

Canadian Residents Now Have Their Customized Professional Bookkeeper Course

This past summer Universal Accounting Center sent out a survey to all our newsletter subscribers, in attempts to see what your needs were. Many of our Canadian residents requested accounting tips specific to their country. Universal heard the call and has responded.

Universal’s Customized Professional Bookkeeper Course
UAC’s PB course is one of its most popular, training students in the day to day accounting of small businesses. And that’s an extremely valuable skill when you realize that over 80% of accounting opportunities are with the small business sector. Not only that, but accounting and bookkeeping jobs continue to grow at an amazing pace; the U.S. Bureau of Labor Statistics estimates that by 2008 accounting jobs will increase by 20%. They explain, “As the economy grows, the number of business establishments will increase, requiring more accountants and auditors to set up books, prepare taxes, and provide management advice.”

In effort to bolster its support of Canadian residents, Universal Accounting Center has customized its Professional Bookkeeper course to include a supplement highlighting Canadian payroll taxes. The supplement updates the PB program with verbiage and forms specific to payroll taxes in the country. In addition, UAC will begin presenting bookkeeping seminars in Canada in March, promoting programs nationwide.

To Incorporate or Not to Incorporate:

The Pros and Cons of Different Business Entities (Part I of II)

Have you ever wondered if being a sole proprietor is your best business option? Maybe you should create an LLC (limited liability company), an LP (limited partnership), or an S-Corporation. There’s no one right or wrong answer when matching your business to just the right business entity. And the business entity you choose depends largely on your personal situation and circumstances. But we don’t want you to imply that your decision isn’t a weighty one; the type of business entity you choose will affect your liability, your creditors’ access to your assets, and your tax obligations. So it is a decision that requires pertinent information and considerable thought. Sometimes just a little knowledge can ensure that you make the best choice for you.

Sole Proprietorship

A sole proprietorship is a business owned and operated by one person. This is the most popular business type for new, small business owners, especially if they work from home. Perhaps you already decided that a sole proprietorship is the perfect match for your business right now. While there are many benefits in having a sole proprietorship, the one drawback is that you have unlimited liability for any debts or obligations incurred by the business. The business is not an entity separate from its owner, and if the business is sued, all of the business owner’s personal assets are at risk. If the business becomes insolvent, the sole proprietor must declare personal bankruptcy to avoid business debts

However, that may not be a problem you expect to encounter. If you work from your home office, you’re probably not incurring much business debt. But if you’ve grown your business enough that it requires a rental property with staff that you manage, then you might want to look at other options.

Limited Liability Company

The business entity you choose can greatly affect your personal liability. When shareholders or owners of a business are not personally liable for any business debts or obligations, they enjoy “limited liability.” The last thing you want to do is create a bsuiness where the negligence of a partner, or even an employee, puts your personal assets at risk. This week we’ll discuss the limited liability of C-Corporations and S-Corporations.

Keep in mind that every state handles each type of a company differently in set up and even taxation on the state level. What we are going over is what these business types do and generally cover for the business owner or founder. Make sure that you know exactly what and how your resident state handles each kind of corporation. This is usually found with the state’s Department of Commerce.

Corporations - Owners of a corporation are issued shares of stock and are thus called shareholders. A corporation exists independent of its shareholders, and is viewed as a separate entity, which can generate income, incur debt, and be sued. Corporations are commonly classified according to their taxation status as either C-corporations or S-coroporations. Unless the corporation elects otherwise, its income will be taxed at the corporate level at corporate rates. The following are some of the pros and cons of C-corporations:

• Pros -
  • Limited liability.
  • Shareholders are not required to manage the corporation.
  • Continues to exist after a shareholder’s death, retirement, or bankruptcy.
• Cons -
  • Filing a corporation can be expensive.
  • Corporate formalities are required (shareholder and director meetings, corporate minutes book, employer identification number or EIN, etc.)
  • Because the corporation’s income is taxed, and the shareholder’s income is taxed, corporation experience “double taxation.”

S-Corporation. If a corporation meets certain requirements, it can elect to be taxed as an S-corporation, with the profits and losses passing through to the shareholders to be taxed at the shareholders’ rates. Unlike a C-corporation, the S-corporation itself is not taxed, although an informational return (IRS Form 1120S) must be filed with the IRS. And S-corporations are limited to one class of stock and cannot have more than 75 shareholders. An S-corporation enjoys the same limited liability as a C-corporation and has some of the following pros and cons:

• Pros -
  • Limited liability.
  • Shareholders are not required to manage the corporation.
  • Continues to exist after a shareholder’s death.
  • Only shareholder’s income is taxed.
• Cons -
  • Filing a corporation can be expensive.
  • Corporation formalities are required (shareholders and directors meetings, corporate minutes book, employer identification number or EIN, etc.)

Many believe that businesses require a large number of shareholders in order to incorporate. But in most states you only need one shareholder and one director to from a corporation, and that shareholder and director can be the same person. And while that may be something you aspire to in the future, you may not feel either of these entities are the best match for your current business. That’s quite alright. Next week we will be covering more about other types of limited liability entities and how they may work for you. Keep an eye out for next week’s article about Limited Partnerships, Family Limited Partnerships, and the most common, Limited Liabilitiy Companies.

If you are considering taking the next step in the process of your bookkeeping or accounting business you have found the source that you need to have to not only gain the training crucial to accounting success, but also the training that will help you find how to grow your business. Don’t leave anything to chance by going anywhere else than Universal.

For over 25 years, Universal Accounting Center has helped people like you start their own accounting and tax practices. We recognize that 85% of the accounting opportunities are with small business so our curriculum is designed to help you learn small business accounting. Think back to our recommendation to increase your income by performing new services for new clients. When you learn small business accoutning you suddenly make yourself available to new clients whil increasing the number of services you can perform.

Become a Professional Bookkeeper today.