the new economy and work world of the future will be comprised largely of small business owners according to labor experts but navigating the laws and rules when setting up a business can be daunting and even discourage the most courageous on chopra new ors in this edition of pro se nation we're going to hear from an award winning accounting pro who's going to shed some light on what is often a mystifying and even frightening process welcome to pro se nation understand the law for one self i'm mary  lynch joining me today is gail rosen a leading accountant in central new jersey specializing in new business startups and business expansion gail has been named  influence by n j have been is the best of the best accountants by the courier news a person to watch by business news of new jersey and most recently outstanding citizen of the is best known for translating complex tax and accounting concepts into everyday language for her clients we all know that launching a new business can be both you know invigorating and it's an exciting but i think for a lot of people it could be pretty scary you know one of my forgetting oh my god what if i don't do this way am i going to end it you know is the the are you rest going to hunt me down  i'm sure people are kind of plagued with a lot of anxiety right i'm sure when you start a home business is a whole new world most people come from corporate america where everything is regimented and all the sudden you have responsibility for everything and you don't people don't even know where to start so i like to sell them down and start from the beginning so the so what are some of the critical steps by step right so my first step is to make sure that this business makes sense a lot of good ideas you've got but you've got to make sure you going to make money at this business and that you have enough money to fund this business so the first thing we do is we make sure we have a business plan if a client does it if they need some help except era but we want to make sure that at the end of the day that there's a break even point where you're going to have enough money to pay you and in the long and of course pay your expenses and also where's the money going to come to fund this just like if you build a house or do an addition to your home or whatever usually cost more money than you think so you have to have access to the to your money our other money because you don't want to run out so what would you say are what are some of the most common mistakes that people make well then then the mistake is ok so you decide ok this is a great business so now let's go to step number two which is a common mistake people don't do in and really think about work on entities should i be right there many choices and you really want to make a good choice from the beginning because many of the entity choices you cannot reverse there's a loss see as corp see corp sell proprietor partnership and you what kind of responsibilities do i have right how do i pay my taxes and that depends on what kind of entity are what taxes are my responsible for what records do i have to keep this is all not fun stuff and it really is it's like  diligence and you have to get through it and you have to and that's the part about doing your own business there's a lot of steps you may not enjoy some might enjoy it but most of my people don't but if you go through those carefully  then you're going to be set up right from the beginning there's you know i think there's kind of a stereotype type i think there's always been is a stereotype around creative people right whether you're an artist a musician  a writer do they tend to be sort of more difficult people to work with in terms of this very regimented part of a stablish in a business well yes i can say from all the years of working with creative people they approach they are not the best record keepers they are not the best at all this they're like you know just lead me to m stuff you know it's all good but you know what i don't even care if you do some of this on the back of a napkin right i have to do some of this because it's going to haunt you later so yes my creative people you know whether it's an artist or a chef d i mean but right but this you have to you have to go through all these steps and once you start in business and you have a system in place after a while and once you understand that if you have enough money you could hire people to do some of those steps for you right but now when it comes to the type of business and you know i don't expect you to run through every aspect of this but for instance   you are a simple organization that a started in generally but you have some protection by being an l l c so that's where most people start this exceptions to every rule but yes there is an easy and so when you're an l businesses are not see corporations that's for the big companies so what are the benefits of being a corporation why would one be a corporation versus an l l c you can be a perfect example a lot of people get are contractors for a corporation and they get laid off the job and right make it hard back and they have one corporation as clients in many of those instances their customer that corporation will only do reasons but one of the main reasons and con cooperate so is far is as far as the mistakes people make and i'll just let's just jump to the most dramatic what are some of the things that could really get you in trouble if you don't pay attention from the beginning well i'm one of the legally leads a lazy ass that really can get you in trouble is not knowing whether you have a sales tax responsibility so if you're supposed to collect sales tax and you haven't and you have it remitted it is him but i never took charge of my client well you are not only responsible you're personally responsible because you're an agent for the government and you should have remitted those taxes so not even an l l c or corporation won't shield you from the liability of those kind of taxes that you should've collected because one of the first things you have to do is know if i have to collect sales tax i better be collecting it and remitting it so that's a big is there an easy way for people to know whether like are people who sell products or people who for services or it's across the board is that too many exceptions the rules a lot of services are exempt and there are products that are exempt but there's that the new jersey does have a list on their website if you submit a question  thing that people get in trouble for is not remaining taxes on what they make so if you're in your own business and you're a unincorporated and l l c are a sole proprietor or our partnership you might have to remit quarterly taxes to pay your taxes are pretty much paid on exactly what you earn or what you think you're going to earn it's what what you learn from the past period net of expenses so it's important to know what tax deductions  that's a whole learning curve and that's the fun part people always like ok you know can i deduct my entertainment my auto my home right now and that's after we get through all the due diligence then i usually teach them tax deductions and the i start liking me and are there a lot of misconceptions around deductions do people tend to think they can take a whole lot more than they really can write great question because it was small business is the number one thing i see that's not very well publicized sometimes in the literature is that people start a business and they come in they can like just started a business they spent ten thousand dollars on it i can't wait to take the deduction for it  aware of that when they're spending the money it may not be in deduction and i think so now the thing is how do i deduct my auto so there's two ways you could deduct it right either way you have to keep track in writing of your for two thousand and seventeen income or i could take actual expenses and take a percentage it based on my business miles divided by my total miles it's a long long complicated than that but well yeah  much time when you take on new clients how much time do you spend educating them do you feel like to spend a lot of time you know what it actually goes quicker than you think and i think i you know i think i know well because once you explain it to people and usually i put in in writing right as i'm talking you know they're they start implementing and they start using it and once you you are something that you and you feel passionate about it you gonna learn it right and right and just you know with it with all the book keeping things available today like a lot of people for small businesses use quick books for their writing so it will take you through a lot of the steps i guess one of the things i was thinking about state and maybe maybe i'm confused about this for instance if you did duck to your home office ok where you take a home office deduction then you sell your house in three to five years or whatever isn't that somehow the deduction is taken off of what you earn from your house or a question i want everyone is going to wonder is about half the law i used to be office doesn't have that consequence when you sell your house any more of a percentage game being taxable if you have a gain on your home there is something and i don't want to make this too complicated call depreciation space exclusively for business so if you have a place in your alice you can't be having a putting green there or anything else they're in so if it's exclusively for business and you don't have it just for your convenience but taxes for business can be significantly going down for all types of entities so it's not out yet but there is a potential for businesses that make that are making watching because a business gets its sales and then spends expenses right and so you'd have yourself a lesser to duct well expenses equals net income or loss and you pay taxes on that net after expenses so no matter what you have to keep track of those expenses right and and come to a net so when people say you know is it going to be easier then i'm what you going to have to keep these records right right one of the best things i can offer is when you start a new business certain entities like an l l c are any unincorporated entity are not required to have a separate bank nice simple system that a reasonable cost right and then you put that checking account or a bank account that you use in for the business on quick books so that's kind of a wreck it keeping a way to keep your records and he keeps it clean virtually goes from ten percent to thirty nine point six percent and ok when you're in your own business this is another thing to realize you're paying federal tax bright new jersey and jumble social security and the employer and the employer so you people of all sides so federal goes from ten to thirty nine point six new jersey it goes from one point four to eight point nine seven and social security medicare stop at a certain point but the social security but it goes it's fifteen point three so when you had all that up your pain anywhere i'm going to scare you twenty seven to sixty seven percent taxes on your why good record keeping is so important because if you could keep good records you aren't you know legally entitled to a lot of deduction right like i kept a log of how many miles when i started here because i want my so if you and i have dinner afterwards and let's just say you know one of us pays and we talk business because we have to talk business right then the meal is it is auction but it's fifty percent adoptable there's just a quirk in the law meals are fifty percent adoptable whether it's two of us three of us or five of us right so if the me we keep that in our record keeping at one hundred percent but then when it goes to the form when you when you take the meals the the tax form then says ok it's a meal we then take fifty percent of the whatever not i that is and right only that amount is that the ball i just i don't want you to have to give up your rate sheet or anything but i was wondering when you're working with an accountant are you are you paying a really that's based on for instance what you think your business will will net or gross or net right or is it just i mean generally are you paying like by the hour yeah how does that work ok ones don't work based on how much you make ok where you kind of sort of set them up and then say go ahead you're on your own well that's the wonderful thing about what i do as far as a business because it's a continuation so i don't have to look for a million new clients ok because they have to come back after a while i mean that they're going to need that tax return done brighter than anything in any maybe projections along the way they're going to be at the the the and connecticut or something like that i mean some people may be able to do it on their own for a while and a lot of them land of calling me after and say ok right now this is it's getting too complicated excedrin so it's  hard to live without professional help and that's why i said from the beginning which will it be reverse the beginning you have to have a business plan and make sure that your business makes some money that you could afford  to you know do things wrong along the way and not registers or correctly or not take advantage of what's ever out there for you now do you also help do you help your clients stablish what they should be charging for their services based on well sometimes i get yelled at my clients because i see over time they've backed themselves into a corner right i'm like looking i'm saying that costs going up and their sales the same and i'm like did you raise your prices and costs are going up doesn't your gross profit percentage i mean that's a term we accountants like to look at it looks the same so a lot of people are like oh i can't i'm not raising mike prices and you know if then you're just going to be making less and yet i think that you know the temptation may be well you know what i don't want to price myself out of the market so i'm just going to you know i'm going to do this you know and they and they probably a lot of people tend to think well i was working for a corporation so this is what i was making an hour but they're not thinking about all the other things that are built in or built on top of that hourly wage or weekly salary or whatever could point to a lot of people are say oh i could do it for this right if everyone else is charging something else there's a reason right and you don't want to be the one that can afford the insurance and the profession everything because that is could haunt you at the end so you want to charge the right price going back to the business plan of making sure that when we do a business plan which you want to make sure you put on every single cost you're going to have right and then back into what's my breakeven point that's what i said from the beginning what do i have to charge to be able to afford to pay these necessary expenses and pay me a fair salary and is that break even sa reasonable to charge and if not then either i have to reduce my expenses raise my prices are not to the business and you also have to think about you know having been a been sort of in and out of business on think thinking about the time you spend marketing the time you spend doing it ministration right so it you in a sense you're not you can't just charge for the time you're all of those things so when you factor in ok this is how much after may well you're not going to be billing possibly every hour of the week exactly so just one more question when did you know when did opportunity with them so entrepreneurs are always too exciting thing they're a great firm they fit my culture they treat staff the same and clients the same so i'm very excited for this to continue going in the future  fantastic well thank you for sharing your expertise thanks for joining us for this edition of pro se nation if you have any ideas for future topics or you'd like to be on the show please contact