Operating a small business could be taxing enough since the sole proprietors are at particular risk of being audited. To avoid an audit it is imperative to keep records detailing income, deductions, expenses and debts. Double-check to ensure that your documents are complete and all the forms are signed. Cash transactions of amount $10,000 or more need to be listed and any loopholes would certainly get you an audit. Keep a track of any independent contractors that you hire since the government would usually be interested in the kind of manpower you employ. Only your small business expenses are deductible and therefore must be documented ideally.

Bookkeeping should always be a priority in a small business venture since it affects the longevity of the business. Regardless of the size, every business has to keep a detailed record of its financial activities, so as to comply with the tax rules. The phenomenon of maintaining such records is known as bookkeeping. Correct and meticulous bookkeeping is indispensable for small businesses. It improves your capacity to make functioning decisions and also establishes compliance with IRS regulations. There are two major kinds of bookkeeping systems – Single entry and the Double entry. Choose the one that would suit your small business in accordance to the bank lending rules.