Ever wish that, as a business owner, you knew exactly what would raise “red flags” at the IRS? Or how to make an IRS audit go as smoothly and painlessly as possible?

If you’re in the right type of business, you can get that information, directly from the IRS!

Traditionally, IRS examiners have been responsible for auditing many types of businesses. An examiner might audit a grocery store one week and a construction company the next. A lot of the examiner’s time was spent learning about the business.

To improve efficiency, the IRS launched the Market Segment Specialization Program (MSSP). Examiners now focus on specific types of businesses. To help the examiners understand each type of business business, the agency has developed training guides, called “Audit Techniques Guides.” The guides explain the standard practices for the business, and tell the examiners exactly where to look for potential problems. (For example, auto repair shops sometimes don’t report the parts they have in stock as inventory.)

The IRS has developed Audit Techniques Guides for dozens of business types, ranging from pizza shops to major league sports franchises. In addition, there are guides that deal with specific business practices, such as executive compensation, shareholder loans, or stock based compensation.

You can download the guides directly from the IRS website. There are other sites that distribute the ATGs as well, and some of them seem to have guides, perhaps a little out of date, that don’t appear on the IRS websites. (The best site I’ve found is at www.unclefed.com) You can find other ATG lists as well – just search the web for IRS Audit Techniques Guides.

We’ve previous talked about resources for starting a business.

Most of the time when people think about starting a business, they think about starting from scratch – but that can be a long and difficult process.

Buying an existing business may be an easier way to get started. With an existing business, you immediately have a customer base, cash flow, and established business processes.

Of course, there are also risks to buying an existing business. Methods and equipment may be outdated. There may be new competitors, staff problems, or hidden liabilities.

It will be much easier to see potential problems, and also to operate the business once you purchase it, if you choose a business type you already know about, and a business that does not exceed your management abilities in terms of size, staff, or financial flow.

After determining the type of business and approximate size, you can begin looking for business opportunities.

You can look for a business by advertising in newspapers or online, and even buy approaching existing businesses that match your criteria. You may even search online for businesses for sale. At this stage, networking is important… businesses you initially contact may not be interesting in selling, but could help you find other businesses for sale.

However you find candidate business for purchase, you’ll want to assemble an evaluation team, including your accountant, a business attorney, your bank representative if you will need financing, and potential one or more business advisors with knowledge of the type of business you’re considering.

You can save a lot of time and effort by working with a business broker. In exchange for a small percentage of the purchase price, a business broker will help you find candidate businesses, conduct research and evaluate the businesses, and negotiate terms. Bear in mind that a business broker is no substitute for doing your own financial and legal review, but the broker can be very valuable in helping you obtain the information you’ll need, and raising questions and issues that you may not have considered.

Your broker can also:

• Help to assess your background and skill to focus your business search
• Find business opportunities and make sure they meet your criteria
• Get answers to initial questions such as why the business is being sold, whether financing is available, and how much transitional management help the seller can provide
• Provide a checklist for reviewing business records, physical facilities, inventory, staff, and even competitors
• Work with your own accountant to evaluate the business and establish a business valuation
• Facilitate the purchase by negotiating terms, and by managing paperwork to meet business and legal requirements for the transfer of the business
• Work with you and the seller to put in place a transition plan to operate the business during and after the purchase process

The broker may also help find ways to finance the business. In addition to upfront cash and bank financing, there are many other options, including seller financing, lease-to-own, issuing stock, obtaining loans against receivables or selling business assets.

Current employees of the business may also be interested in buying shares and becoming part owners. Besides helping with financing, this can be a good way to build loyalty, provided you’ve done a good job of evaluating the employees, and determining if they are people you want to have as partners.

Buying a business is a major step, but assembling a strong team of advisors, and working with a professional business broker, can greatly increase your chances of finding the right business, and making a successful purchase.

You may be starting a business as a full-time livelihood. Or you may be building a hobby into a business as a way to supplement your income.

Whereever you are starting, and whatever your goals. as soon as you accept money for goods or services, you are in business.

And once you’re in business, you are subject to licensing, regulation, and taxation. You have expenses to cover, and commitments to meet.

There’s a lot to know about starting a business properly, to avoid legal problems, and hopefully to make a profit. The purpose of this article is to provide some resources you can use to get started on the right foot.

The author is not an accountant or a lawyer, and cannot provide legal or financial advice. However, the resources provided here can help you learn the basics, and save you time and money when you actually consult a lawyer or accountant.

Resources

1. Visit SCORE (score.org), an organization of retired business people who advise and help entrepreneurs and small businesses. They have a lot of great information and resources on their website. They also have offices in most large cities, where you can get in-person advice. Note that SCORE is partially funded through the US Small Business Administration (SBA). Your tax dollars are at work, so take advantage.
2. The SMALL BUSINESS ADMINISTRATION also operates its own website with useful info and resources for small businesses, atsba.gov
3. Visit you local library. Libraries are often overlooked in the age of the Internet, but they have lots of information on starting a business, and especially local regulations. Ask to see the REFERENCE LIBRARIAN.
4. Check your local COMMUNITY COLLEGES; they often have short courses on starting a business. This may seem like a big delay when you are anxious to get your business started, but some solid instruction in the basics of running a business can make the difference between success and failure. You’ll learn a lot, and also get a chance to network with other new business owners.
5. If you need to trademark a product name, you’ll probably need professional help. To understand the basics for yourself, read theNOLO PRESS book Trademark: Legal Care for Your Business & Product Name.
6. Another useful site with lots of great information is powerhomebiz.com
7. You may decide to form a legal “business entity” such as a corporation, LLC, or Partnership for your business. Legal entities can provide tax benefits and liability protection. Before you talk to a lawyer, we recommend learning the basics by reading Incorporate Your Business: A Legal Guide to Forming a Corporation in Your State (book with CD-Rom)
8. Consider joining your local CHAMBER OF COMMERCE. It’s a good way to network with other business owners and talk about common problems. And many chamber members prefer to patronize other member businesses, so it’s a good way to gain new customers.

Finally, it’s very important for most businesses to have a professional website, and to understand Internet marketing. Studies show that over two-third of consumers in the US now rely on the Internet as their first source of information when looking for local products and services.

For professional graphic design, website development, and Internet marketing, contact LunaGraphica Inc.