Category Archives: Small Business

Small Business Ideas: How to Live the American Dream of Owning a Business

Starting a small business is an exciting time in a person’s life. The business owner gets to become the boss, can come and go as he or she pleases, and has the final say in all business decisions. It is this sort of independence, free will, and self-determination that truly personifies the great American dream.

 Before Starting a New Business

Before starting a new business, the prospective business owner should visit the U.S. Small Business Administration website for comprehensive information on starting, managing, and expanding a small business. Other information includes how to formulate a business plan and how to obtain SBA loans.

Turning Hobbies and Interests into a Small Business

Many successful small business owners have started a business based on their hobbies and interests. These may include sewing pillows and clothing; opening an antique or thrift shop; making birdhouses; starting an automotive shop; or arts such as pottery and painting.

Small Business Ideas

Many other small business ideas have provided small business owners with independence and financial security. It still takes a lot of hard work and dedication, but given time and patience, the business owner can reap the benefits of owning a small business. Other small business ideas include:

  • HVAC. For the HVAC professional who has been in the business for 8-10 years, starting an HVAC business may be lucrative. HVAC is a recession-proof industry – all homes and businesses must run their HVAC systems year-round, and problems must be fixed by someone. This same principle applies to electricians and plumbers.
  • Lawn Care and Landscaping Services. Lawn care and landscaping is another recession-proof industry. The grass, weeds, and bushes never stop growing – and somebody has to trim them to keep property values up and everything looking tidy.
  • Pest Control Services. Pests such as roaches, ants, spiders, rats, and mice invariably invade homes around the world. The first line of defense is a pest control service, who sprays away those uninvited guests.
  • Consulting or Freelancing Business. This can include a graphic design business, accounting business, technical writing business, training business, and much more. The small business owner can either hire a staff and start a full-blown consulting business, or go solo and freelance for journals, magazines, news media, and the internet.
  • Handyman. Handyman services are particularly in demand among the elderly who may not be able to perform minor household repairs on their own. These services include painting, window repair, fixing leaks, and much more. A more apt title for this business idea would be “Handyperson,” since more women are choosing this business opportunity.
  • Janitorial and Maid Services. Janitors and maids provide a valuable service to everyone: keeping things clean. So long as there are homes and businesses, there will always be a need for janitors and maids; hence the reason this is a great idea for a small business.
  • Hair Care Professionals. Everyone has at least a little hair on their heads, or perhaps just want a new look. Thus, there will always be a need for talented hair care professionals. Some have opened up hair salons in their homes, and have reaped the benefits of making money from home.

These are just a few of the hundreds of small business ideas available to those who would like to own their small piece of the American dream. Though small business owners must overcome some challenges along the way, owning a small business can be very rewarding at the same time.

Protecting a Small Business from Disaster: A Different Approach

The Small Business Administration (SBA) reports that 85% of small businesses that go through a disaster event never recover. Key to ensuring that businesses not go under is planning for business continuity. Ensuring that a company is resilient is crucial to protecting the company from failure. This is the first of four articles on preparing a small business for disaster. For this series, a small business is any establishment that has fewer than 200 employees, and/or an income of less than $25 million in earnings per year. However for any business,whether it is a micro-business, a medium-sized business, or a major corporation, these tips are practical and worth exploring.

The articles will cover the following areas:

  • Protecting a Small Business from Disaster: A Different Approach
  • Risk Analysis and Mitigation
  • Creating and Executing a Business Continuity Plan
  • Realistic BCP Exercises and Testing: Beyond DR

Business Continuity = RESILIENCY

Business continuity is not a project that ends when a document is created, signed by the Board, tested, and filed away. First, banish the word “recovery” from the company dictionary. The goal is not to recover from a disaster; it is to continuethrough the event without failing the company’s primary stakeholders: the employees, the customer, and the owners, whether shareholders or the company founder(s). A business owner should consider business resiliency as integral to their business operations. Each area of the organization should be built to continue if there is a disaster. Resiliency is as much a part of the bottom line of any business as location, information technology (IT) support, or a loan from the local bank.

Send a message: this is serious business

Do not look at continuity as an “add-on” duty. Take the approach of ensuring that the company’s existence depends on the ability to continuefunctioning no matter what happens. Continuity planning should be someone’s full time job. That person and their staff (if they have one) should report directly to the CEO or the COO. This makes it clear to everyone in the organization that continuity matters: resiliency is what will keep the organization flowing.

While the Business Continuity Manager may want to have a disaster recovery specialist on the team, the BCM manager should be someone who understands how businesses work and how resiliency can boost the bottom line. Focus on hiring someone who has the outlook that business continuity affects everyone from the janitor to the C-suite. If necessary, hire a consultant to help get the Business Continuity Management department started.

A steering committee should be formed that involves the managers or subject matter experts from throughout the organization. This may include the CEO/owner,COO, CFO/accountant, warehouse supervisor, head of retail management, or whatever is appropriate for the business. The steering committee will determine what the risks are to the organization, what the critical tasks/functions are, and what strategy to take for mitigation and continuous resiliency. The committee does not have to be static; people can be added or released as needed. But the top people in the company are permanent members. Again, this lets everyone know that resiliency is just as important to the organization as accounting, sales, and the fashion buyers.

Focus on Resiliency

Company management must be committed to looking at every area of the company and determining how to continue the business of business during a disaster.

The first issue is to expand the definition of the word “disaster” to this one, as defined in the Disaster Recovery Journal’s Glossary of BCP terms: “A sudden, unplanned catastrophic event causing unacceptable damage or loss.”

This definition is broad enough for the focus of this article. A sudden drop in stock prices that cuts the company’s cash reserves in half in an hour is a disaster because the loss is unacceptable. Has your company already secured credit that can be tapped during a sudden downturn? At reasonable rates? The head of Accounting, who is actually the entire Accounting department, survives a heart attack on Thursday and decides to retire. Immediately. Who is going to take over on Friday morning and get the payroll processed? A wild fire burns down your warehouse full of spring fashions on February 28, just as the sales circular is arriving at prospective customer’s houses. How quickly can stock be replenished?

Oh, and someone forgot to do the backups in the IT department for the last three days. So when the air conditioners go out and the servers crash from the heat (I have seen it happen), there is a good chance that the transactions for the last three days are not recoverable.

In traditional Business Continuity Plans, only the heart attack and the IT debacle are considered in planning. Challenge the BCP Steering Committee to create a list of all of the risks to the company. Do not worry about going overboard. Only colonization by Martians is off limits. Cutting the brainstorming list down to a reasonable and manageable number during a risk analysis will be discussed in the next article.

Continuous Resiliency

Finally, consider the day-to-day activities of the organization. What steps can be taken to ensure that, no matter what happens, the business continues to run? If the electricity goes out, do the cashiers have calculators? Do they know how to use them? If the price of gas goes up to $5 a gallon, have all of the landscapers been trained in fuel consumption, and do they use those procedures daily? If a fire breaks out at the charter school, have the students and teachers been trained in evacuation?

Resiliency requires the company management to create procedures that are not only efficient, saving money and time, but also resilient. Using laptops for every employee instead of desktops may allow the company to continue processing customer requests from the local coffee shop if the normal workspace is uninhabitable. Better yet, the company can save money on leasing office space by using telecommuters and increase the company’s resiliency by disbursing the staff to different geographical areas. If a tornado hits one area, the entire staff will not be affected, and work may be able to continue.

This article provides a general overview of what a resilient organization should look like. The next article, “Risk Analysis and Mitigation,” will provide an overview of how to determine the risks to a company and how to effectively mitigate them without breaking the bank.

Small Businesses That Thrive Overseas: Deciding Whether a Company Should Compete in the Global Marketplace

Webkinz, Amazon and Overstock all have one important thing in common. These big companies did not exclude the global marketplace when they focused on expanding their business. Today, they are major players in their fields, both overseas and at home. So, should every business owner focus on growing globally? Not necessarily. The folks at talk about businesses that should concentrate on global sales in this interview.

What Types of Businesses Do Well When They Expand to Include the Global Marketplace?

Two types of businesses absolutely must have an international growth story: 1) Niche Product manufacturers; and, 2) Established online retailers.

If you are manufacturing a new toy, consumer electronic or starting a clothing or apparel line you have to make it easy for buyers to get your projects. If you sell direct-to-consumer the shipping costs has to be low and preferably locally delivered. If you sell b2b or through retailers, you can grow market share by offering distributors and retailers drop-shipping (inventory-less selling) and small minimum order quantities that can be easily restocked; both of these features require local storage.

If you are an established online retailer with a large product catalog – focus on your best sellers. Find a limited selection of inventory that will sell well overseas and focus on just increasing your sales of those products. Don’t worry about selling your whole product catalog overseas. By focusing on best sellers you can optimize your time and investment. If a buyer wants a product that isn’t stored overseas it is an easy conversation and most buyers understand that the product may take longer for delivery; however, you got the sale because you were in market with local products.

Our customers that have gained an international market share include everything from apparel and toy companies to more niche verticals like mattresses and automotive accessories.

What Are the Top Three Things You Wish Every Small Business Owner Knew About Overseas Markets?

  1. The opportunity is there for those looking to expand into key new markets for very little to no extra cost.
  2. You don’t have to be a Fortune 500 company to enter overseas market. Look for tools and resources that provide you the flexibility without the high cost.
  3. Make the international market operate like your local market: don’t ship products one-by-one to international recipients. Create working relationships with local warehouses (through Shipwire). An Internet enabled distribution center (warehouse) will help you respond to buyers like a local e-tailer.

Small Business Management: B2B Data Lists Sales Benefits

While it goes without saying that increased business growth comes from increased sales, there is something to be said for the benefits afforded to small business owners who use B2B data lists to shorten the time it takes to find those potential customers and convert them into consistent business. So, what are B2B (business to business) data lists and how can they help small business owners in their marketing & sales efforts?

B2B Data Lists Contain Essential Information on a Given Industry

Business to business data lists provide all the pertinent information on a given market and industry. This information is available through an easy to use database containing information on a company’s key decision makers, their positions, their phone and email addresses, the company’s core competencies as well as the location of the business itself.

 Improving Marketing & Sales Leads is Essential to Business Growth

Every company, regardless of its size, spends a considerable amount of time and money locating customers, gathering information and using that information to close on sales opportunities. Shortening the time it takes to locate those customers, and gather that information, is critical to reducing costs and increasing sales. B2B data lists provide companies with the tools needed to shorten those times and provides the necessary leads to close sales.

Having access to essential customer information is just one benefit of B2B data lists, but there are others. These are summarized below.

  • Improved Sales & Marketing Strategies:

    Successful sales is predicated on being able to reduce the costs of finding and keeping customers. These data lists allow companies to reduce their costs of finding customers while improving their overall sales and marketing initiatives by allowing companies to focus their message to the most interested parties.

  • Improved Telemarketing Strategies:

    Most companies assume telemarketing to simply be calling up anyone about anything. However, telemarketing is simply cold-calling and any small business owner must have a sales team capable of performing cold calls. B2B data lists provide the necessary information to speed up that process.

  • Improved Email Marketing Strategies:

    Email marketing allows companies to focus their message to new and potential customers. It’s cost effective as the only cost pertains to managing the email list. Email marketing allows companies to provide product information, discounts, rebates and pricing initiatives as well as including a company newsletter on industry and market news.

  • Improved Direct Mail Strategies:

    Direct mail is another aspect improved by B2B data lists. While not used in every aspect of business to business sales, it still plays a vital role in a company’s overall marketing campaign. Again, companies can deliver focused marketing messages to the most interested parties.

With some estimates that it costs a company up to four times more to find a new customer than it does to sell to an existing one, it simply goes without saying that to be able to reduce the costs associated with finding customers is a savings in itself. This savings goes directly to the company’s bottom line. Reducing costs means to work smarter. In this case, sales can not only work smarter, but faster and produce results sooner.

Why Have a Small Business Website?: Websites Are Cost-Effective Small Business Solutions

For the small business owner, having a URL on a business card is vital for establishing credibility with new clients and a low cost way to promote the company brand and products. Customers and new clients now expect to find in-depth information on a company website.

When starting a small business, website development must be part of the business plan. In fact, many businesses start as a website first to test the markets before investing in commercial real estate.

A Small Business Website Lends Credibility

Like a good business card, a professional-looking website creates a favourable impression of the company whose name is on it. A well designed website will give users the information they need to feel confidence in the company. For example, a website can offer company history or biographies of the owner and key employees in much more detail than could be conveyed in a conversation.

Small Business Advertising on the Web

There are over 250 million Internet users in North America alone and more than half of them use the Internet to research and makes purchases online. A website is lends itself to a national market that can allow a small business to expand beyond geographic boundaries that may not provide a big enough market in which to succeed.

A Small Business Strategy for Customer Service

A website is always open. Customers can visit the site any time of the day or night, any day of the year. A small business owner can use a website to answer customer questions instantly. By visiting the website, the customer can find out all the products and services offered that they may not have been aware of.

A Cost-Effective Business Idea

Setting up a small business website is easier than ever. For simple sites that give information and contact information only, a website can be maintained in-house for as low as $10 per month. There are many turn-key site and applications where a business owner merely selects a design template and enters the content.

Even websites with simple e-commerce capabilities to allow customers to purchase goods online, can be set up inexpensively and quickly with minimum technical knowledge using any of several applications available.

More complex applications will no doubt require the services of a designer and programmer to set and maintain customized applications.

Having a company website is no longer an option. The small business owner must include a website in any marketing strategy proposed.

Sample Forms for Small Business Bookkeeping: Free Accounting Templates vs. Business Budgeting Software

Many business owners believe that it is necessary to find accounting software in order to perform small business bookkeeping functions. Free accounting templates, such as accounting ledger templates and access databases, allow small business owners to perform accounting functions without expensive software purchases. This reduces expenses as well as training time, due to the level of complexity found in many types of business budgeting software.

An Accounting Ledger Template

Using an accounting ledger template allows entrepreneurs to keep track of small business bookkeeping information. A free general ledger template can be easily downloaded to a computer running Microsoft Excel, or any later version. The template can be used by opening the file with Microsoft Excel, and allows a small business to keep their books without additional expense, or extensive training. Once the accounting ledger template has been opened, information regarding transactions can simply be plugged into the appropriate cell in the pre-made worksheet.

Accounting General Ledger Purpose

In accounting, a general ledger is a vital document for businesses, and consolidates all information found in other accounting documents, including accounts receivables. Also known as a nominal ledger, this allows a business to track revenue and expenses, as well as assets and liabilities and all other vital information. In order for the general ledger to perform its function correctly, all information must be entered, or posted, into collateral documents correctly, and in a timely fashion. Using an accounting ledger template to keep track of general ledger information ensures that this process is error-free, and up-to-date.

Business Budgeting Software Alternatives

Business budgeting software is often expensive. An accounting ledger database, such as this Microsoft Access database, can also be extremely useful as an alternative to business budgeting software, such as Quickbooks. In order to use this database, the destination computer must be running Microsoft Access, version 2003 or later. Users can download the file for free, and customize the information to reflect the needs of specific businesses. This database allows business owners to enter information about transactions, including the date of the transaction, a description, and the amount of the withdrawal.

Accounting Templates for Small Business Bookkeeping

Small business book keeping can be difficult, due to the challenges of learning new types of software, and expensive, due to the costs associated with most kinds of business accounting software. Using accounting templates, such as a Free Travel Expense Report Template, or a Free Time Sheet Template, which can be downloaded via the Internet, allows business owners to keep track of their finances without excessive cost or training. Even Time Tracking Business Software can be bypassed with the use of timecard templates.

Business Cards a Necessity for Small Businesses: Small Companies Need Cheap Custom Business Card Printing

Business cards are just one of the things entrepreneurs need. Many people need more than one card because they run more than one business, or wear more than one hat at one organization. Some specific examples:

  • daycare and other small business owners
  • actors and other artists
  • electricians and other independent contractors
  • cleaning services

Cheap Business Cards Can be of Good Quality

Cheap as in “inexpensive” doesn’t have to mean cheap as in “poorly made.” Small business owners want to find cheap business cards that are high quality, but doing so can be a challenge.

Low prices don’t necessarily mean shoddy workmanship. Low cost can be a result of the bulk buying power that professional printers have. Printers who keep overhead down can also pass on the savings to customers.

Business Card Design Choices Include Creating Own Business Cards, Hiring Graphic Designer

Special business card creating software is available for small business owners to buy, but it isn’t necessary for creating business cards on a home computer. Business cards can be made with programs that are already installed on most personal computers – Microsoft Publisher and Microsoft Word are just two programs that will create business cards.

Hiring a graphic designer or a professional printing company may be a good idea for those who are not confident in their ability to design their own business cards. Local art students, marketing majors and business majors might also be able and willing to design business cards at a low cost. The businessperson can then take the card design to a printer, or make business cards at home.

Business Card Printing Options Include Printing at Home, Sending to Professional Printer

Many people who are starting small or home-based businesses believe that it costs less to print business cards on their home computers. They may plan to use a free program online, use software they already have, or purchase special software.

Printing business cards at home is the least expensive option only when printing a small batch of cards. Buying card stock and computer ink is more expensive than ordering the cards from a printer. If more than a few cards are needed, it is more cost effective to order cards. Purchasing special software also adds to this expense.

Order Business Cards Online From Internet Printers; Possibly Get Discounts, Free Shipping

Ordering business cards online may be the most convenient option for small business owners who have some experience shopping and ordering online. Entrepreneurs can design their own cards, or they can have other professionals design their cards for them. Professionals who design business cards include graphic designers and printers, and local art students can be a good resource.

Online printers or internet printers can be a source of high quality business cards and other printed materials at affordable prices. Most are fast and flexible, offering standard and custom printing options. Small business owners may find them to be less intimidating to deal with than traditional printing houses may be.

Ordering business cards from a professional printer can be the most cost-effective option, whether small business owners design their own business cards, or have the printer design them. Some companies run specials from time to time or offer volume discounts, so customers should be on the lookout for discounts and free shipping when ordering business cards online.

Small Businesses Go Green to Save Green: More Comapnies are Realizing Big Savings from Eco Initiatives

Big green companies like McDonald’s continue to find ways to green up and to save. McDonald’s recently announced they are researching ways to use less potato pesticides. International aviation trade groups are looking at Performance Based Navigation (PBN) to cut the length of trips which will cut fuel use and reduce greenhouse gas emissions.

Small businesses also continue to find ways to take the eco initiative one step further and reach higher for green techniques and green savings.

Small Business Goes Green

More and more new ways to take advantage of the going green present themselves every day. Here are nine greenings that any company can implement while saving some green.

  1. Install a water cooler at the office and stop buying bottled water. Also use pitchers of water and glasses for attendees of meetings and conferences instead of bottled water. This reduces the amount of plastic that needs recycled and it saves money when paying for the water cooler than paying one to two dollars per bottle of water.
  2. Use the new soy based toner for laser printers versus the petroleum based toner. There are several manufacturers of soy based toner cartridges available. Check with your printer’s manufacturer before using the soy based toner. When buying new printers, buy those that can use soy based toner. Using the soy based toner reduces the oil use as well as being more eco friendly.
  3. Extend the life of your current technology by upgrading computer equipment instead of buying all new. Many computers that are less than five years old have the capability to have the processor, the storage devices, the graphics cards and monitors upgraded. This step again reduces the amount of technology items ending up in the landfills as well as saving money for the company.
  4. Include questions about reduce, recycle, reuse in all purchasing projects and requests for proposals. Buy products that are manufactured green, that provide green savings when in use, and provide an environmentally friendly disposal.
  5. Buy mobile devices that serve multiple purposes. For example, buy one cell phone with GPS functions per employee rather than buying one cell phone and one GPS device per employee.
  6. Bring going green seminars and training to the workplace through webinars and distance learning. Or, enroll select employees in some of the new green degree programs such as those at the University of Dayton and Wright State in Ohio. Using the webinars and distance learning will reduce fuel usage, save paying the employees travel expenses and utilizes technology to its fullest.
  7. Replace current lighting in parking lots or building entrances with solar lighting. Using the power of the sun, solar lighting recharges during the day saving on electricity use and electric bills.
  8. Encourage the use of web or audio conferencing for meetings. Driving or flying to meetings cost money, use unnecessary fuel and takes lots of time. Using the webinar or audio conferencing for meetings is an effective way to conduct meetings and the savings can be phenomenal. offers web and audio meeting resources at reasonable prices.
  9. Encourage employees to rent business, leadership, and other reference books from the local library versus buying them. Library usage is up. One local Canton, Ohio library reported seeing over 11,000 more people in the first two months of 2014 versus the same time frame in 2015.

Going Green Saves Green

All of these tips will help preserve the environment while preserving cash for the company. With such simple to implement green tips available these days, there are no longer any excuses for not joining in on the green movement. Remember that small continual contributions make a long term big impact.

Market Research for a New Small Business: Careful Market Analysis is the Key to Successful Business Plans

A good business plan is the foundation of success in starting a business; not only is it essential in winning the support of investors and lenders, but it also provides a roadmap for steering a new business through the critical early months.

Not all business ideas are good business ideas; if there are flaws in the basic concept, thorough market and business research will help to identify them, and possibly show how to overcome them. Even if the basic idea is a good one, lack of marketing research can deny it the success it deserves.

Although large businesses can afford to employ expensive market research agencies, this should not be necessary for a small business startup. This simple guide to the information you need and where to find it should help to carry out a successful DIY market analysis on which to base writing your business plan. Listed below are the questions your market research should answer:

The Business Sector

  • What is the overall market size and structure of the sector?
  • Who are the main operators or providers?
  • Who are likely to be your main competitors, geographically, in size, or in your particular niche?
  • What are their strengths and weaknesses and how can you capitalize on these?
  • What percentage of the sector can you realistically aim to capture?

The Customers, Clients or Users

  • Who are they, and where are they, by socioeconomic group, age and geographic location?
  • Who are your particular target customers or core customers?
  • What are they looking for in quality, price and accessibility?
  • Which advertising media are most likely to reach them?

The Product or Service

  • Does the product or service match the needs of the target customers?
  • How does it compare with competitors?
  • What is the unique selling point which will give your product the edge?

The Operating Location

This can have important implications for even internet centred businesses in respect of:

  • The availability and cost of staff and materials,
  • Storage and workspace.
  • Transport links.
  • Communications including telephone, broadband and mobile phone coverage.
  • Property costs, rentals and rateable values or other local taxes.

For conventional customer contact retail businesses location will generally be an overriding consideration, and you also need to consider:

  • Does the site have enough passing road and/or foot traffic to bring in opportunity customers.
  • Are the proposed premises appropriate and will they suitably impress/attract customers?
  • Are they easily accessible for customers in your target catchment area, including road, rail, sea and/or air transport facilities as appropriate to the business.
  • Car parking.

Legal Considerations

What is the impact of legislation on employment, health and safety, freedom of information and taxation on the business?

Financial Research

What are the start up and operating costs including:

  • Capital costs for premises, vehicles and equipment?
  • Materials and supplies?
  • Labour?
  • Heating and lighting?
  • Transport and distribution?
  • Communications IT and telephones?
  • Insurance and security?
  • Marketing and advertising?
  • Loan interest and bank charges?
  • Legal and accounting fees?
  • Tax liabilities, including, as appropriate, Corporation and Business Tax, Income Tax, National Insurance, VAT and Business Rates?

Where should your product be priced taking account of competitors’ prices and customer perceptions of value? What will be your profit margin? Based on these figures and your expected market share, what will be your cash flow for years 1-3? And the final and most important question resulting from all this- is the business financially viable?

Sources of Information

Much of the information you need will be readily available from Government and business association statistics, trade journals, company reports, the financial press and the local press, all of which can generally be found through the internet or public libraries, or by personal request from the organisation concerned.

Government business support agencies, like the UK’s BusinessLink can often provide information, or advise on where to find it.

Census data can be a useful starting point for demographic information, though this becomes increasingly unreliable over the 10 year interval between censuses. Government, and particularly local government, statistics may be more up to date. Personal observation and sampling of an area’s car and house quality, property costs and ownership and the clustering of other businesses can be very useful, but only to supplement soundly based factual statistics. Advertising departments of local newspapers, and estate agents often have useful information if you approach them in the right way.

Carrying out a self help customer survey can be particularly useful, and if the demographic profile of a particular area is especially important, you can buy off the peg post code analysis from market research companies or even Royal Mail at a reasonable price.

Finally, telephone directories and other advertising can tell you quite a lot about the competition.

Tax Audit Flags for Small Business: Reduce Your Chances of the IRS Choosing Your Company to Review.

The Internal Revenue Service plans to increase the number of audits of small businesses. Knowing and understanding what the IRS looks for can help you to decrease your chances of an audit, although this is certainly not a guarantee that you won’t be audited.

Some of the “red flags” the IRS looks for are:

  1. Handwritten, sloppy returns or those that contain math errors.

    If your return needs to be reviewed because your handwriting can’t be understood, it is sloppy or it contains math errors, they will look for additional errors as well. Filing electronically is a better choice.

  2. Large compensation for corporate officers in C-Corporations.

    When corporate officers have high compensation, it means lower corporate taxes. The IRS will flag returns showing high compensation for corporate officers.

  3. Low salaries in S-Corporations.

    Sometimes employees will take low salaries and then receive profit distribution, therefore avoiding payroll taxes. The IRS will flag returns showing low employee salaries.

  4. Using the wrong reporting system.

    There are two types of accounting methods, the cash method and the accrual method. Although any business may use the accrual method, not every business may use the cash method. Be sure to know if you are required to use a certain accounting method.

  5. Using independent contractors.

    Although there is nothing wrong with using independent contractors, some companies will pay people that should actually be employees as an independent contractor. If caught, companies will need to pay taxes back, plus penalties and interest. If you use independent contractors, be sure they should not really be listed as employees. In addition, for any independent contractor that is paid more than $600 in a calendar year, you need to complete a 1099 and send to the independent contractor as well as submitting to the IRS.

  6. Miscellaneous expenses.

    When completing your list of expenses for the year, avoid using a “miscellaneous expense” category if at all possible. Divide your expenses into categories such as office supplies, rent, utilities, etc. If you have a miscellaneous expense category, be sure to include only miscellaneous items and be sure to keep documentation.

  7. Automobile expenses.

    The IRS has certain regulations regarding the deductions a company can make regarding automobile expenses. Understand whether you need to add amounts to an employee’s W2 if a vehicle is used in part for business and in part for personal use as opposed to a vehicle owned and operated strictly for business use.

Again, understanding these red flags will not guarantee that you avoid an IRS audit, however, you may be able to decrease your chances by following the IRS regulations carefully.