WASHINGTON – Jan. 9, 2013 – Most Realtors enter the industry, in part, because it frees them to work for themselves – to be their own boss. David Ehrenberg of the Young Entrepreneur Council, however, says that startup businesses many times make tax mistakes. He lists the top seven.

1. Not choosing the best legal entity. Each business type – sole proprietor, partnership or some type of corporation – has advantages and disadvantages. There is no best choice overall, but there’s a best choice for the type of business you hope to build and the taxes you hope to minimize.

2. Not taking time to understand tax laws and your business’ obligations. “What does full compliance look like for your company?” Ehrenberg asks. In addition to paying taxes, businesses must submit a roster of forms, if applicable, such as 1099s and more.

3. Trying to do it alone. Taxes take time and energy that takes an entrepreneur away from the core function of his business. Network with potential clients and other Realtors, and keep an eye on the big picture. A good tax adviser will make sure a business follows all the rules, and he should accept liability for errors.

4. Keep business expenses separate from personal ones. Ehrenberg says it’s surprising how many business owners don’t do this. In some situations, it simply creates confusion. But in other cases, an owner could be sued and required to pay more taxes.

5. Understand all business tax deductions and use them. Travel expenses, office supplies, certain meals, business fees, rent, utilities, home offices and more can be deducted as a business expense. But it’s easier to organize receipts if you study the system before filing your first year’s taxes.

6. Stay organized. This usually means some kind of software program that tracks the business and organizes tax-related info behind the scenes. “At least 80 percent of our clients use Quickbooks because it is relatively inexpensive and easy to use,” Ehrenberg say. “But there are many other systems – both software and cloud – to choose from.”

7. Pay the quarterly taxes. New businesses can ignore these the year they incorporate, but funds must then be deposited every quarter. A tax adviser can suggest the amount to deposit.

“With a little foresight, planning, and the right professional assistance, staying on top of your tax obligations can be relatively painless,” Ehrenberg says.

Source: David Ehrenberg, CEO of Early Growth Financial Services; Young Entrepreneur Council (YEC)

© 2013 Florida Realtors®