RECORD KEEPING

Although there are no set rules about how to keep records, one thing is certain, the government can be very fussy about this when tax time rolls around, an they expect you to have written records to support every item on your return.

But just as importantly, you need records to determine whether or not your business is profitable, if you are meeting your financial objectives, and whether you have money available to meet everyday operating expenses. This information will also be necessary, should you require outside financing.

If your business is small, if you prefer, you can keep your records the old-fashioned way, by hand, or you might want to use just a simple computer spreadsheet. But there are also a number of very good software packages available for personal and small business applications, such as Quick Books, that will help you simplify that task.

Although the basic accounting formula for determining profitability is Revenue minus Expenses equals Net Income, because of tax requirements, record keeping is a little more complicated than that. So you may want to go to the library and get a book on basic record keeping for a business. We also recommend that you send for government Publication 334, Tax Guide for Small Business, and Publication 583, Starting a Business and Keeping Records, which will give you basic information on the type of expenses that are deductible and what kind of records you need to keep. You can order these publications by calling 1-800-829-3676, or you can download them from the IRS website at http://www.irs.ustreas.gov/forms_pubs/index.html.

We also suggest you send for Publication 3207, Small Business Resource Guide CD-ROM 2000, which can be ordered by calling the above phone number, or by ordering online at the IRS Small Business Corner web page, http://www.irs.ustreas.gov/bus_info/sm_bus/index.html.

Even if you plan to have someone else keep your records for you, or have an accountant prepare your tax return at year end, we suggest that you still send for these publications.

Please contact us with any questions or comments.