Female entrepreneurs are leaving their mark in the business community in the United States. In 2019 there were more than 12 million female-owned businesses, accounting for 40 percent of all businesses generating in excess of $1.8 trillion in revenue. This dynamic growth underscores the importance of accountants for female entrepreneurs versed in bookkeeping, tax planning, and financial planning.
Tax Laws and the Growth of Female Owned Businesses
In recent years, Congress has taken steps to promote women’s business ownership, including outlawing discriminatory lending practices and promoting counseling opportunities and federal contracting for women-owned businesses.
The tax code targets problems small business owners in general have in getting access to capital. However, it sometimes ignores the disadvantages some women face when getting capital to grow their business. Key expenditures in the tax law designed to increase business growth and investment are so limited in their scope that most female entrepreneurs cannot use them as part of their tax planning strategy.
For example, section 1202 is an exclusion from capital gains tax on profits made from the sale of qualified small business corporation stock. However, this exclusion, which will cost the taxpayers more than $6 billion over the next five years, excludes businesses in the service sector. More than 80 percent of female-owned businesses are in the service sector.
Other key expenditures only work for businesses structured as C corporations. However, most small businesses are not structured as C corps.
Surveys show that a large percentage of female entrepreneurs are not taking full advantage of sections 1202, 1244, or 179, all of which may drastically reduce business owner tax liability. At Fusion CPA we use pioneering techniques when tax planning strategies for female entrepreneurs, to help them to take full advantage of all deductions and credits they may qualify for.
Bookkeeping Tips and Tricks That May Promote Business Growth
Accurate bookkeeping for female entrepreneurs may make the difference between a business being profitable or needing to close its doors. Some tips that may improve the accuracy of bookkeeping for female entrepreneurs include the following.
1. Reconcile Your Accounts Every Month
Reconciling your accounts is just like balancing a checkbook. It is a line by line comparison to make sure that what’s recorded in your bookkeeping matches with your bank statement. Any discrepancies should be investigated and corrected.
2. Record Payments to Yourself As an Owner's Draw
If your business is a sole proprietorship or a single member LLC, payments to yourself should be categorized as an owner's draw. You would not categorize them as an expense. However, if your business is structured as an S corporation, wages you pay to yourself as a salary should be categorized as an expense.
3. Do Not Double Record Income
CPAs for female entrepreneurs should look out for this, especially if payments are accepted through a service like PayPal and then transferred to a checking account. Cloud accounting programs may see the transfer to PayPal as income and the transfer from PayPal as income, which could lead to income being recorded twice.
4. Save Your Receipts
No matter if something costs you one dollar or $10,000, you should have receipts if you are going to count it as a business deduction. CPAs for female entrepreneurs may keep digital copies or may keep paper and digital copies. Businesses should plan to save receipts for at least five years.
Financial Advice for Female Entrepreneurs
Fusion CPA offers CFO advisory for female entrepreneurs designed to help modern women build successful businesses. We provide personalized and proactive services with an honest, trustworthy approach to build on open communication.
We offer our clients tax planning, bookkeeping, accounting, and tax compliance. Our experienced and proactive financial advisors are here to help you make the best decisions for your business throughout the entire year. We align our service with your vision to help you achieve your goals. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. Articles are based on current or proposed tax rules at the time they are written, and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.