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It’s the three letters that can send shivers down the spine of any small business owner—IRS. Don’t mess with them, and the hope is that they won’t mess with you.

It’s a good rule of thumb, but unfortunately, because of this motto, many owners miss out on plenty of legal deductions they can claim for their small business. Oftentimes, even the most savvy entrepreneurs overlook all their options.

Before you do your taxes, check out this list of deductions you can claim to minimize the federal toll on your small business and maximize the net profit of your company. Some of the options may surprise you.

1. Home office: The key to avoiding an audit from the IRS when it comes to claiming a home office deduction is knowing what exactly they define as a home office. According to tax specialists, this must be a space that is solely devoted to office work, not doubling as a family-computer room or guest bedroom. The home office deduction can also be applied to a part of a room. Just measure the square footage of your work area and divide it by the square footage of your home. That percentage is what is deductible for business expenses. Just make sure the home office falls under the specific guidelines defined by the IRS.

2. Office supplies: Keep all the receipts you receive for office supplies—paper, printer ink, staplers, pens, post-it notes, you name it. The stack of receipts at the end of the year may be a hassle, but can pay off by offsetting your taxable business income.

3. Furniture: There are a couple different options when it comes to deductions for office furniture—100% deduction on the year of purchase or a depreciative deduction over 7 years—but either way, be sure to take advantage of this one. Furniture really adds up, and using it for deductions can really bring down taxable income.

4. Other equipment: This covers all remaining office equipment not specified in the supplies or furniture deductions—laptops, copiers, fax machines, etc.—and work the same way as furniture deductions with depreciative or 100% deductions.

5. Software and subscriptions: Whether it’s a computer program needed for the operation of your business, or a subscription to a magazine of your industry, you can claim these deductions on your taxes. As of recently, business owners can take the total cost of the software or subscription as a full deduction within the year they were purchased, rather than depreciate the cost.

6. Mileage: If you drive for your work, the IRS gives you money back for business-related driving expenses. The catch? They need documentation. So keep a notebook in your car to record all dates, mileage, tolls, parking costs, repairs, and reasons for the trip. But remember, only claim a deduction for business-related travel. Taking your kids to school in the minivan doesn’t count.

7. Travel, meal, entertainment, and gifts: In addition to mileage, you can receive deductions for airfare, hotels, restaurants, car rentals, and other travel expenses from being away from home for business. Plus, except for restaurants, all of these items are 100% deductible. Eating out is only covered by 50%. So eat cheap, and stay in a nice hotel—or just get room service. Gifts directly for clients are also 100% deductible. Again, keep those receipts!

8. Insurance premiums: If you are paying your own health insurance premium, and are not eligible for any other health care coverage (from your spouse for example), then the good news is that this is also 100% deductible. There are limits to this claim, such as the deduction cannot out-value the net profit of your business, so review the IRS guidelines to see if you are entitled to this deduction.

9. Retirement contributions: Business owners who are self-employed and saving for their own retirement shouldn’t forget to claim a deduction for their contribution.

10. Social security: Here comes the bad news—self-employed entrepreneurs are considered both employee and employer, and thus have to pay double for social security. Luckily, half of the contribution can be deducted on your 1040, so it all works out in the end.

11. Telephone charges: When your phone bill comes in, record the business-related calls and total up the cost. Add up the 12 bills at the end of the year and claim the 100% deduction. It’s that easy, and can be a huge saver.

12. Child labor: We aren’t talking sweat shops here. But employing your children can give you a nice tax break. The IRS does not charge Social Security tax for business owners that hire their children while they’re under 18 years old, and you can deduct their salary as a business expense. The catch is that you must be the sole proprietor of the business, or be in a partnership with your spouse as the only other proprietor. This is a nice way to save a little money and teach your child how to save at the same time.

These are just a few of the ways you can keep more of your hard-earned money away from the clutches of the IRS and in your pocket.

Small business owners don’t have to live in constant fear of being audited. Know your options, including states with the best tax climate, and take advantage of all the opportunities you have—not a bad rule to follow for business and life.

Getting sued is a complicated legal process, as most things are when it comes to law, and the really difficult thing is that it’s not pleasant. Businesses often get into legal battles before they fully understand what a legal battle entails, and a prolonged lawsuit can cripple a small business before it even takes off. Getting sued is never a subject you want to be forced to read about, but just like that Micro-economic class in high school, it may come in handy one day.

A straight-faced man with a large envelope throws open the front doors of your business, makes a beeline for your office, and puts the envelope on your desk with a thump. “You’ve been served”—or in layman’s terms, you’re being sued. The process begins.

The envelope, usually delivered by a third-party, is a court summons and petition/complaint. On the summons will be the details of who is suing you and why, in addition to information concerning when, where, and how to respond to the lawsuit.

STEP #1

After you’ve read the documents closely and fully understand the lawsuit against you, immediately call your attorney. If you don’t have one, that’s all the more reason to act quickly and find one. You can ask business associates and friends, or go online, to find an attorney that has expertise in cases like yours.

Finding and consulting an attorney can be a lengthy process – all the while, the date to respond to the summons is coming closer. Be sure you know when you must respond by, and prepare for it promptly with your attorney. Thus, quickly finding or contacting your attorney is key when preparing for a lawsuit.

STEP #2

Also, notify your insurance agent in addition to your attorney. Just because you are covered from other business risks, like employee injury, doesn’t mean the lawsuit will also be covered. Some insurance companies hire attorneys for their clients, so they may even be of some help in that matter.

But again, this process takes time, and in order for the attorney hired by you or your insurance company to properly mount a defense, immediate action must be taken when you receive the summons.

If you are unable to find an attorney and mount a proper defense by the trial time, the plaintiff can make a default judgment claim on you, meaning you lose the lawsuit whether you have a good defense or not. The typical summons gives you 30 days to respond, but your attorney may file for an extension on your behalf to give you time to prepare.

The two most common lawsuits waged against small businesses are product quality disputes and billing issues

If proper documentation is available, the case may be a simple fix. Regardless, it is advised that you never talk with the opposing attorney without first consulting your own, as your statements could be used against you in court.

Also, be sure to talk to your attorney about the estimated costs and fees of the lawsuit so the bill doesn’t come as a surprise. Consider organizing a budget and schedule of work with your attorney so you can better manage financial costs associated with your defense.

And lastly, be patient.

Prepping for a trial can be a lengthy process, 18-24 months in most cases. Make sure the communication line between you and your attorney stays open during the whole pre-trial process. Unfortunately, being sued is inevitable if you stay in business long enough, so don’t get discouraged. By acting quickly and bunkering down the hatches, your small business can be better defended.

Take advantage of the host of resources for small businesses available on our blog.

In the past here at Incorporation-e, we’ve discussed whether it’s better to buy a franchise or open your own unique business. From an incorporating perspective, the processes for both options are essentially the same in most states.

But from a business perspective, it’s a very significant decision.

While franchises are great in the respect that you get support from the corporate office among other things, they’re also expensive to obtain and come with strings attached. If you’re looking for less risk, a franchise may be the way to go but it all really depends on your particular goals and situation.

(Read more about buying a franchise vs. opening your own business in our prior post)

If you ultimately decide to pursue the franchise route though, there are a few things you will need to think about before opening that next Subway or Dairy Queen.

One is costs…

In a typical franchise setup, you will have the following costs:

• Initial Franchise Fee and Setup Expenses

In exchange for consulting and using the company’s name, you will pay a fee, which sometimes can be tens of thousands, to the franchisor. There are also other costs like equipment, procuring a location and any licenses and insurance. Also, many franchisors may have a “grand opening” fee to promote their new outlet.

As with any business, you will also need to consider your staff as well.

• Continuing Royalty Payments

This essentially pays for the right to continue using the franchisor’s name. These fees may consist of a percentage of your weekly sales or monthly gross income. Even if your business isn’t earning much income, you will likely have to pay royalty fees. Also, you’ll likely be obligated for an entire term so if your business closes, you will likely have to pay the royalty fees until the end of the agreement.

• Advertising Fees

Another common cost for franchises, many companies require its franchisees pay into an advertising fund. Each company allocates these funds differently.

Another characteristic of franchises is that they are, understandably, more controlled.

While this can be helpful, it can also be frustrating if your reason for wanting to own a business is true independence.

However, franchisors usually assist their franchisees in a variety of areas, including site location, upstart, etc. Often times, they will have to approve the site before you open. Other restrictions like what you can sell, design or appearance of your storefront and method of operation may be directed by the franchisor.

If you’re considering a franchise, it would be wise to research the particular company and franchising in general. The U.S. FTC has some good resources on what to look for.

And remember – whenever you decide you want to incorporate your business, whether it’s a franchise or your own business, MaxFilings can help you easily form a corporation or LLC in any state in the U.S.

While you don’t have to be a computer expert to start a small business, IT planning is a necessary step.  Unless you are already a computer guru, though, you may not know where to start.

This three step process isn’t exactly simple, but at the end you have a working list of your IT needs as well as an inventory that can be used for future planning and budgeting.

Step 1: Equipment Inventory

If you’re already in possession of any resources at all — be it a functional computer in need of upgrades or an old printer you can pull out of the garage — maintaining a detailed inventory is key to keeping track of the resources needed for your small business.

IT inventories should generally be as detailed as possible, but don’t worry about that too much right now. Getting on the right track with documenting your purchases just makes planning easier in the future.

Divide your resources into two main sections for hardware and software.

Include the following hardware details, if available:

• Item type/purpose
• Manufacturer
• Model number
• Date of purchase
• Vendor
• Technical specifications
• Warranty information
• Cost of item
• Expected life of item (with a little internet research you can often find this information via product reviews or other sources)

And for software:

• Software name/edition
• System requirements
• Registration key
• Number of licenses owned and license numbers
• Date of purchase

Gathering some of the above information will require a bit of research, but that just means your future IT purchases will be more informed.

Step 2: Needs Assessment

Now you know what you have. Time to look for the gaps that need filling.

Create a document that includes the following columns:

• Item name
• Item type
• Item cost
• Additional notes

Treat your needs assessment as a wish list and include everything you can think of that might make life easier for your small business.

IT wants versus needs will get sorted out in your budget.

Considerations for a business with a retail storefront:

• A cash register or a desktop computer with point of sale software
• A printer to generate receipts and sales reports

Considerations for any type of small business:

• IT outsourcing if you aren’t a computer guru yourself
• The number of work stations you will need
• Internet services and website design
• A database or other method for tracking retail inventory
• Accounting software to ensure accurate record-keeping
• Software options for compiling mailing lists and customer contact information

Additional considerations:

• When purchasing a new, pre-built workstation, a mouse and keyboard will generally be provided. However if a laptop is purchased as a primary workstation, you may want to consider adding an external mouse and keyboard, if not a full docking station.

• Make sure you are not only accounting for the main piece of equipment or software, but also for any peripherals you may need. Printers don’t always ship with all of the necessary cables, and certain business software requires a yearly tech support charge.

•  When purchasing software to be used on more than one workstation, there are almost always multiple license fees to be considered.

Step 3: Budgeting

Now that you’ve compiled a full assessment of your small business’s IT needs, you’ll be heading back to the internet to do a bit more research.

Search for every item on your needs assessment, select the brand and version you prefer, and write down the price of each selection using the four-column list you made in step two. Use the “additional notes” column to store links to the websites where you found each item.

With pricing at hand, pare down the list until the total fits your finances. Eliminate items you can do without, and consider where you might save by buying a lower-end or refurbished piece of hardware.

As you make physical purchases, don’t forget to add them to your inventory.

Doing Your Research Now Saves Time and Money Later

As you work through this process you will become more comfortable with the technology in your office, or you may decide you’d rather look into outsourcing.  Don’t worry; sometimes hiring a professional is the best thing for your small business.

IT consultants are no different than accountants or registered agents. They handle the details so that you can focus on the big picture: making your small business a success.

Navigating the financial aspects of starting a small business can be perplexing at times. Taxes, in particular, require proper management. Otherwise, you could find yourself having not-so-pleasant conversations with the IRS. The best way to avoid these conversations and safeguard your small or online business is to make sure you have a proper understanding of the laws and processes involved in administering sales tax.

How Sales Tax Works

Unlike some taxes, sales tax is not federally mandated, but rather is handled on the state level. All but six U.S. states currently require vendors to charge sales tax, and even in states without such laws, there may be local requirements that vary between municipalities. For this reason, researching tax-related laws in your area is an important first step in starting your small business. If your plans include an online business, you will need to be prepared to account for all variations of sales tax.

A few types of small businesses are exempt from charging these taxes, although again, some areas may have their own specific ordinances. Unless you produce raw materials, sell on the wholesale level or do business specifically with nonprofits, it is likely you will have to deal with sales tax in some fashion.

Permits and How They apply to an Online Business

Most states require that you obtain a permit before collecting sales tax. If you are starting an online business, though, don’t worry. You are only required to obtain permits for taxes charged to customers in the state where you are physically located.

For example, if you sell nationwide but only have one office located in Oklahoma, you only need to collect sales tax on purchases made by Oklahoma residents. If, however, you were to open a second physical location in Texas, sales tax would then extend to Texas residents, even if the specific item they order ships from your Oklahoma location.

Note that the rate of sales tax is determined by the state from which the order originated, so Oklahoma customers of your online business will pay the going rate in their state, while customers from Texas will be taxed according to Texas laws.

Protect Your Small Business with Proper Filing Procedures

Once you’ve determined applicable tax rates and obtained the necessary permits for your small or online business, your remaining concern is how to file and pay those taxes. Whereas tax filings for individuals generally take place once a year, most small businesses are required to file and pay sales taxes each quarter, although some states will require your small business to pay its sales tax monthly.

Be prepared not only to report sales for which you collected taxes, but also any other sale you have made, including those made to nonprofits or other exempt entities.

Taxes for small businesses really aren’t as complicated as they seem at first glance, especially if you are operating a storefront from a single location. If yours is an online business, circumstances may be a bit more complex, but as long as you are aware of the laws in the states in which you operate, obtain the proper permits, and file at the correct intervals, your business will be on the road to success — and the right side of the IRS.