October 2009 Archives

October 27, 2009

Building Your Business Credit

Having good business credit is essential for any small business trying to obtain financing, especially in today's tightened financial climate. There are steps that small business owners can take to improve their credit profile and put themselves in a better position with lenders. Businesses also need to establish their own separate credit history as opposed to relying on the personal credit history of the business owners as frequently happens with new or small businesses.

According to a recent Wall Street Journal article, the three most effective credit building strategies for small businesses are:
1. Keep good books and records. Get an accountant to review your finances. This adds credibility to your business and finances for lenders. Think about forming a business entity if you're a sole proprietor. Keep your business licenses up-to-date.
2. Build your business credit through your vendors. Do business exclusively with companies that can report your credit to credit-reporting agencies like Dun & Bradstreet. Register with these commercial credit agencies and check your credit report each year.
3. Be fiscally responsible. Always pay your bills on time. When you go to borrow money, do it for revenue generating items, like essential equipment and staff, not less essential or nonrevenue producing items.


For a clear explanation of the practical and legal information you need to run your business, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).

October 22, 2009

New Lending to Help Small Businesses

Yesterday President Obama announced some new lending to help small businesses: smaller community banks who loan to small businesses will be able to borrow at low rates from the Treasury Department's Troubled Asset Relief Program and the current loan caps on some SBA programs will be raised, though Congress will need to approve the raising of caps on the SBA loans. According to Jeremy Quittner of Business Week, changes to the SBA program that we reported on previously have encouraged about $13 billion in new lending, so these stimulus programs do seem to be providing some much needed loans to small businesses. 

October 8, 2009

Final Deadline for Filing 2008 Income Tax Returns

Business owners who got extensions last April for their 2008 income tax returns must now face the music. October 15th is the final deadline for filing 2008 income tax returns. Don't have all the money you owe? It doesn't matter--business owners should file a return by this deadline even if they can't pay what they owe to the IRS.

It's always a good idea to make some effort to pay when you file your tax return, even if it's not the full amount you owe. First of all, this will reduce the penalty and interest charges you will incur for late payment. It also puts you in a better position to negotiate with the IRS for additional time. Depending on your circumstances, you may be able to reach an agreement with the IRS to "full pay" within 60 or 120 days--meaning you will come up with all the money you owe the IRS within a 60 to 120 day timeframe. This arrangement buys you a little time if that's all you need and the charges, penalties, and interest you incur during this period will be less than they would be if you have to do a longer term installment agreement.

If you can't do a full pay agreement and you still owe the IRS money, you will probably need to enter into an installment agreement. If you owe the IRS less than $25,000 in taxes, penalties, and interest, you can complete an Online Payment Agreement (OPA) on the IRS's website. Alternatively, you can download Form 9465 from the IRS website and mail it in. If you owe more than $25,000 in taxes, penalties, and interest, you made need to complete a Collection Information Statement, Form 433F, in addition to the installment agreement. This form requests some financial information to assist the IRS in coming up with a payment plan.

For more information on your late payment options, see "Filing Late and/or Paying Late" on the IRS website.  


October 1, 2009

Deadline Fast Approaching for Special NOL Refund Claim

If your business had a large loss in 2008 and any profitable years in the prior five-year period, you'll want to take advantage of a special one-time refund offer from the IRS. Under a new provision of the American Recovery and Reinvestment Act, small businesses that had a net operating loss (NOL) in 2008 can elect to carry back that loss for up to five years instead of the usual two. This extended NOL carryback can be used only once and is only available to businesses that average $15 million or less in gross receipts for the three-year period ending with the NOL carryback election year.

Eligible small businesses will need to act quickly to take advantage of this one-time offer from the IRS. Individuals--which includes sole proprietors, partners in a partnership, and shareholders in an S corporation--have until October 15, 2009 to elect the three, four, or five-year carryback period. The deadline for calendar year corporations ended on September 15, 2009. The deadlines for fiscal-year taxpayers vary depending on their year-end date. For more information, see IRS Issue Number IR-2009-072.