Finance questions on starting a muse...

[siraskalot]

OK, Ive got the idea. Ive got the technology (website, online shopping cart, etc). Ive got the marketing (magazine ad and sales copy for website).

What I dont have any clue on (and Tim didnt touch upon at all in the book) is what bases do I need to cover from a financial standpoint? I setup the LLC on-line. Not too difficult. Cost $125. What do I need to do next?

I assume I need to open a seperate bank account for the business?
What do I need to do as far as collecting/paying sales tax?
How is that setup?
Do I only need to charge sales tax to people in my state?
What else should I be considering?

Any help is appreciated!

[Drewkerr]

Consult a CPA. This will save you the most time and money (making mistakes can be costly when it comes to takes), they can advise you on all this and even handle the monthly accounting on top of the taxes.

You will need a Tax ID number to open a business bank account in the name of the LLC. You can get one in about 5 minutes for free.

http://www.irs.gov/businesses/small/...=98350,00.html

Good Luck!

Drew

[frank.cabrera@gmail.com]

Apply for an EIN you can call the IRS do it over the phone or do it on their website... then go see your CPA it will be the best thing to do.
When I spoke to my CPA he advised me to open a business bank account with my bank regular checking and savings account and then to go see him afterwards... either way check with your CPA first

[siraskalot]

Good info here. Of course, I have no patience, so I went to the bank this afternoon without checking here first. The lady there had me sign up online for the Federal EIN number (Careful, there are all kinds of websites that want to charge you $100 or so to do this, when it is FREE and EASY). I then signed up my Business Bank account and transferred some funds.

Seems to me that Im ready to go... why do I need to see a CPA? I will worry with that once there are some sales rolling in. At this point, I hate spending any $$$ until its justified.

[madchadder]

Originally Posted by siraskalot

Seems to me that Im ready to go... why do I need to see a CPA?

Remember those questions you asked earlier?:

Originally Posted by siraskalot

What do I need to do as far as collecting/paying sales tax?
How is that setup?
Do I only need to charge sales tax to people in my state?
What else should I be considering?

That's what the CPA is for.

Once sales start rolling in, it's possible that you may be sorry you didn't know a few things ahead of time.

[jefftrower]

Go sit down with a CPA before you make one sale. It is not a waste of money, you will need to make sure you have all of your business records and your entity set up properly. I'm sure your bank was helpful getting your accounts set up, since that is how they get paid, but it isn't in their best interest to make sure you have everything set up properly. You need to have a good team of people supporting you, and a CPA is one of the biggest key parts. You can't truly automate without a good CPA working for you, don't be cheap and do it right once.

[final_id]

I've never visited a CPA before. I don't even know how to go about getting one.

A story: we have a family real estate manager who takes care of some properties in another city which we inherited when a family member died. They are small stores rented by the proprietors of shops and hairdressing salons. Our manager takes care of minor repairs, closes up for hurricanes, collects the rent, and keeps 10%. He has his mom do the accounts. But his mom the accountant doesn't know basic math. We charge our tenants a round number for their monthly rental fee, although that amount is actually rent plus tax. We thought it would be silly for their total to be something like $988.43 a month, so we just rounded it up to an even $1000. If tax is 8%, and the total check is $1000, then his mom the genius accountant sends us a hand-written accounting sheet that includes the notification that rent was $920. She just assumed that you take the total check (which represents 108%) and subtract 8% from it. NOT! This from our official "accountant." So we have all this accounting, WHICH WE PAY FOR, that we must ignore and correct. (Hint: if the check totals rent PLUS tax for 108%, then the rent will be 100/108ths of that, NOT 92/100ths of it.) Our accountant shouldn't be increasing our taxable rent income! I'm sure the IRS will love digging through that crap when we get audited. "So, you ignored what your accountant said and instead reduced what you reported as your total income? Innnnnteresting ... ." Geez. Thanks lady. We've explained it twice and gotten nowhere -- she balks, then sends her monthly accounting with blanks in all squares, and petulantly writes in at the bottom "How do you like THAT?" and other unprofessional stuff like that.

In my experience with professionals in this sort of thing, they're either too expensive for me to consider, or they do this sort of stupid thing that just makes clear to me that I shouldn't be paying them to do the work. We shouldn't be paying the math-challenged accountant to do accounting, and we shouldn't be paying her son to be our property manager because he is dumb enough to hire his math-challenged mother to do the accounting.

How do you go about finding a decent CPA? I don't question that maybe I need to see one, but I can't figure out why everyone I know is annoyed as heck that his or her accountant is as stupid as described above. How much am I going to have to pay to a CPA, and what if I get "stuck" with an idiot again? I have never met one who's not an idiot.

[jefftrower]

Cliff,

I would recommend looking into finding a real estate investment club in the town where your properties are. Once you talk to a few via email or by telephone, get the answers to these questions:

1. Ask them for a list of reputable property managers, call each one of them and interview them, ask them what services they offer, what they charge and for references of current clients.

2. Talk to some local real estate investors and see who they use for their accounting purposes, real estate accounting and tax reportingcan be very confusing and it takes a professional CPA who deals with real estate to keep you out of trouble with the IRS.

3. Call the local chamber of commerce in the city where your properties are located, get a list of CPA's and interview them. I know this is a very labor intensive way to get this done, but this is your money you are dealing with, and it is always better to spend some extra money up front for some peace of mind.

4. Fire those people now. You are taking a big risk by keeping them; they may be cheap, but you are risking big fines from the IRS. (never, ever fun) If you are worried about pricing, shop around, and remember that everything is negotiable.

I hope this helps

[final_id]

They aren't fire-able. There's family relations involved here.

We did, in fact, do a lot of the research you suggest in order to find this fellow. He's essentially the only decent dude willing to take the task on. That's because we're really small-fry relative to most property management. I think the monthly rental total is around $2000 maximum, from three or four tenants. When I say "we," I mean mom and dad. Mother inherited this stuff from HER mother when she died. The properties are breaking even right now, and the guy ended up being involved with us because of my mother's mother's choice.

I know, I find it idiotic. But it's not my choice. My mom and dad are good at maximizing grief, and this is just one of their many poor choices. I have made my opinion known ("If she is that bad at arithmetic we don't want her anywhere near our ...") and that's all I can do. Move on.

[frank.cabrera@gmail.com]

Siras,

maybe you have a few friends that may know a good CPA, how do you file your taxes? do your parents use a CPA... ask around and you will see that a good CPA is always needed... if you choose not to have a CPA then find a good lawyer or learn your local and state laws. You will also need to figure out sales tax and how much you will have to pay the IRS at the end of the year...

A good CPA will manage your salary, savings, company profit and make sure you have enough money for other things if you feel you can do this on your own then more power to you... keep us posted and good luck