Starting a tax preparation business or any business is difficult; there are things you need to know to safeguard your new business from failure and to safeguard yourself from going down with it. Success is the ultimate goal and knowledge is the key to that goal. The odds of a new business failing within the first three to five years are high but you can reduce your risk of failure by knowing the mistakes to avoid right from the start. The list below will help you know some of the costly mistakes to avoid.
8 Mistakes to Avoid
- When forming your own business whether at home or in a storefront, separate your personal finances from the business entity. In case your business fails, this will protect your personal assets from any business lawsuits, creditors, or liens.
- Whether they are business or personal, never max out your credit cards, it will affect your revolving debt ratio in a negative way and will make getting other lines of credit a lot harder. By maxing out your credit cards, the credit institution assumes you have a negative cash flow and they will be less likely to grant you credit.
- Don not operate your business as the sole proprietor, form either an LLC or incorporate immediately. Once you incorporate, apply for a business credit card in the name of your business and as it grows, you can then apply for a business line of credit.
- Do not start your tax preparation business close to the last of the year. This is when tax season starts getting busy and if you are in business by yourself, you could easily make a mistake on someone's tax return and finish your business before it gets started well. Instead, start your business at the first of the year to give yourself time to get started before you get busy.
- As long as you have finances, knowledge and experience enough to run your business alone, do not bring in a partner. Having a partner will only cost you twice as long to start seeing a return.
- Do not spend more money than is necessary to start and keep the business going, the more you save, the more likely you are to be successful.
- Never turn down the chance to further your education as this will only add to your competitiveness and enhance your skills as a tax preparer.
- Never make the mistake of starting your tax preparation business without a set of long-term business goals. The lack of a plan or set of goals shows a lack of direction and focus.
If you were the kind of person who loves math and numbers and looks forward to doing your taxes every year, then this would be the right business for you to start. With the tax code becoming more difficult every year, more people are looking for a tax professional that is up to date with all current tax codes.