Assets vs. Liabilities in business

        Depending on the persons involved in the discussion. There are different definitions of assets and liabilities. The dictionary and accounting defines as follows:

Asset, Dictionary -  A valuable item that is owned

Accounting definition- The entries on a balance sheet showing all properties, both tangible and intangible, and claims against others that may be applied to cover the liabilities of a person or business. Assets can include cash, stock, inventories, property rights, and goodwill.

b. The entire property owned by a person, especially a bankrupt, that can be used to settle debts.

Liability, Dictionary - Something that holds one back; a handicap. Accounting definition - The financial obligations entered in the balance sheet of a business enterprise.
My mentor explained it to me this way,Assets -  something that makes you money. Liability - something that cost or looses you money.
  There can be grey areas. Should my children be considered an asset? If my son and daughter would have become a detriment to society, (in and out of juvenile detention and thus graduating to state penitentiary) would they still be considered an asset or a good return on investment (ROI))? The answer is obvious.
What I am talking about is strait forward. I am talking about a more immediate ROI. (Or a close to immediate ROI). I want to discuss this from a business perspective.
There are things that can be done in business that bring quick ROI's. 

Examples of assets and liabilities in business are as follows:
      Asset;
mentors - mentors are a great assets because a good mentor has fruit on their tree. They can help you avoid costly mistakes. A mentor is like a tour guide along your journey to success.
       Liability:
Negative friends and family and associates. Love them or hate them we all know of the nay Sayers. Individuals for whatever reason have nothing positive to say. These individuals are a drain on your mentality and offer nothing in the way of putting money in your pocket. The more time spent with them the less time available for making a business work. Negative people can’t be converted. If there is doubt, consult a mentor.
        Asset:

Business seminars, books and other business related training. This should be self explanatory but for the sake of argument.....  Business related training is an asset because it offers information, when used properly can have an immediate impact on a business. Training properly recorded offers a residual effect. Can always be referenced.

         Liability:

Television, video games - I can here the booing and hissing as I write this. These two mediums offer very little in the way of productive learning and education. Cable cost on average $159.00 dollars per month that is more than $1800.00 dollars a year. Video games cost on average $39 dollars per game not to mention the gaming system with all of its accessories. If $2000 dollars annually are spent on TV and video games, in 5 years the cost is 10,000.00 dollars (that could pay off a credit card). Enough said

Asset :

A master mind team - A master mind is a team of like minded  successful individuals. They meet on a regular basis (at least once a quarter) . They normally have expertise in valuable areas. (Law, Taxes, Marketing and Finance). Strategic plans are laid out and performed for the betterment of the team. The return on the investment is priceless.

        Liability:

Apathy/waiting on the government to improve the countries situation. This country had the greatest economic boom in its history during the 90’s through 2000. If the average person was not able to become independently wealthy during that time then there time has passed. That was the best the government could do (if you believe the government was responsible,forgive the sarcasm).

Basically there are a couple of choices, surround oneself with assets and increase net worth or surround oneself with liabilities and decrease ones net worth.

Tax preparation is an annual endeavor, happy tax season.

While doing a good work in and for your business..... dont get caught up

    I want to congratulate all those business owners that did more in their business in 2010. You set a goal to increase your clientele, get more referrals and  attend more training seminars. You even took a business trip in a vacation location. All these things were done but, (wait for it) you did not properly document those events. If you don't have proper documentation then all the work you did to increase your productivity in your business will increase your bottom line, however it will also unnecessarily increase your tax liability. Proper documentation answers the questions who, what, when, and where. Who were you with? (client , potential client , prospect, a referral). What was the purpose for the meeting? (to gain a client, to gain a referral, to show appreciation for a referral, to introduce a new product or service). When did this take place? (date and time) where did it take place? (location).
     I have receipts,  isn't that enough? Having receipts is a good start but,  it only proves that you purchased something (the what). Receipts do not show intent. Remember the IRS needs proof that you intended to make a profit. Without proof of intent you only have a hobby. Trust me hobby's are expensive and a liability. In any economy liabilities are not good.
 How do I keep good records to keep the IRS off my back?
     A good old fashion day planner is the least expensive way to keep track of you daily progress in your business. If you have a smart phone, i pad or samsung galaxy, there are many free apps that allow you to accomplish the same thing as a day planner. Do not go out and buy an expensive device for the purpose of  keeping track of your daily business
Keeping track of your business in this manner will allow you to see how close you are to reaching your goals for the week. You will be able to look back at your week and determine if you needed to keep doing what you were doing or if adjustments needed to be made. This is critical to your business. If you do not know how far you have gone in your business You will not be able to determine how far you have to go to reach your goals
     Proper record keeping on a daily basis keeps the IRS from deciding your business is a hobby. Once the IRS determines your business conducts it self as a hobby all business deductions are denied and  penalties and fines follow. The IRS will also look back through all your tax records.(this is allowed because they have determined that you have defrauded the government by under stating / under reporting income).
     I can not emphasize this point enough. Proper documentation is key to keeping the IRS from penalizing you with fees and bringing down the audit hammer.

Remember, tax preparation is a daily endeavor so happy tax season. 

Not All Business owners have until April to file their Taxes...........

For all the business owners that operate under the entity of LLC, LLP, SCorp or C Corp, you have leass than a month  to file your corporate taxes.(15 march 2011), or file an extension (Form 4868).
The filing date is not to be confused with the personal tax filing dead line of 18 April 2011. To the veteran business owner this may seem like a no brainer, or you may not even know that two different tax deadlines exist. One of my  new clients were unaware that there had ever been 2 separate tax deadlines, and they had been in business for 8 years. I suspect their previous tax professional just filed an extension for the business taxes and then filed everything ( personal and business taxes) by The April dead line. Now some business owners may be confused because you only receive a copy from your tax professional of a 1040 with a schedule c attached. The only reason that should happen is you are a sole proprietor or the sole owner in a LLC. If either are the case you would not be required to file form 1065 (limited liability tax form). If the corporate tax forms are not filed on time (15 march 2011), you will face penalties from both the federal and state government. Businesses that file taxes quarterly continue to do what you do.
Should you feel that you would not be able have your information in time to file your 2010 corporate taxes by 15 March 2011 I suggest you file an automatic extension (form 4868). Form  4868 must be filed on or before 15 March 2011 or you will face penalties and fines.
Tax management is a year round occurrence, so happy  Tax Season!