According to the Kauffman Foundation, after falling for five years, the number of new entrepreneurs as a percentage of the population finally picked back up. That means, for many, we aren’t just approaching the end of the year – we’re also approaching the end of their first year of business. And as exciting as that is, a lot of new entrepreneurs aren’t quite sure what they should be doing to prepare for the new year. Sure, most know they have to get their books in order for tax season, but many are still asking:
“What else needs to be done?”
Honestly, the answer varies from business-to-business, but there are a few, generic end-of-the-year tasks that can help nearly any new company heading into the new year.
Review Your Company’s Staffing Needs
The vast majority of small businesses do not have any employees – 79% of all small firms are non-employers, according to the Small Business Administration. So you shouldn’t feel like you need to hire someone in the new year.
However, even if you don’t want to hire anyone right now, the end of the year is the opportune time to figure out if you could afford some help if you wanted it. You’re going through your books anyway, so see how much wiggle room you have in your budget, and what you could actually pay someone were you to hire them.
While you’re at it, you should also apply for an EIN, again just in case you do decide you want to hire someone next year. The whole idea behind much of this end-of-the-year work is to ensure the new year goes as smoothly as possible, and the last thing you want is to find yourself needing help with the business, but with no idea, if you can afford it, or even legally hire someone.
Invest in Your Business
Have you been putting off buying something for your business? Need a new computer? Want to hire a designer to refresh your site? Now is the time to do it. You want to try and maximize your deductions before the end of the year, and while you shouldn’t just spend money you don’t have, it’s a good idea at this, early-stage to re-invest any unexpected or extra profit back into the business. You don’t have to make any big purchases either. A few extra PPC ads on Google or a couple more sponsored posts on Facebook and Twitter are great places to spend just a little extra money to both help your business end its first year strong, and help lower your tax burden.
Every year, without fail, tons of small business owners begin weighing whether they should form an LLC or incorporate. And while generally, it’s a good idea to form a separate legal entity for your business, the end of the year is not the best time. LLCs and Corporations are normally required to pay annual fees and taxes. Forming before the end of the fiscal year could make filing your taxes confusing come April.
A better idea is to wait until the beginning of next year, though state offices are normally slammed by filings and other paperwork in January, so you could be facing a real delay before your corporation or LLC becomes effective. Thankfully, in most states, you can file now, when government offices are a little less busy, and just delay your effective filing date into the new year. They’ll get your forms, approve them, and form your LLC or corporation on whatever future date you chose. Every state is different, but typically they allow businesses to delay filings between thirty to ninety days.
A business’s first five years are often the most difficult, so if you started a company this year, you’ll want to build on to your momentum next year. Thankfully the economy is picking up and small businesses are doing a lot better, so your new year plan should look to potential growth. You could be hiring your first employee, investing in some new infrastructure, or even turning your small business into an LLC or corporation. Spend these last few weeks reviewing where your company is right now, and planning where you want to take it. Then set the groundwork for those plans now, so you’ll be ready to hit the ground running in the new year.