Do I need an accountant?

Can I personally be liable for a business loan? Yes, there are several ways you can be personally liable for a business loan. If you are the owner of a sole proprietorship or partner in a general partnership you are personally responsible for all loans your business takes out. If you personally guarantee a business loan, it means that you are personally liable as well.

Some people get business loans without thinking about how it will affect their personal credit. If your business is structured as either a sole proprietorMeta Description: Do I need an accountant?

Key words: CPA, tax attorney, book keeper, certified public accountant, small business accounting, tax law, tax preparation, accountant,

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Do I need an accountant?

As with most things the cost of hiring professional accountant is usually well worth the price and usually pays for itself. But there are a few questions you should ask yourself before hiring an accountant.

The obvious questions are: Am I good at the day to day record keeping of my expenses and income? Can I keep accurate records? Do I have the time and ability to keep those records? Would my time be better spent increasing my business and doing what I set out to do when I started the business or keeping the records? Could I make more money by hiring someone with more education and experience to do the accounting for me so I am free to do what I am more experienced in and have the desire to do? Are my accounting needs out of my educational ability? Do I really need some professional advice and expertise to make the best business decisions?

Most business owners have the ability to do their own basic record keeping adequately but the ability to really excel in sales and business building. Those type of business owners would be making more money and building much faster by hiring an accountant to do the accounting for them to free them up to do the things they really excel at and build their businesses more quickly.

An accountant is usually able to save you money in ways you had no idea about. They have expertise in tax laws that will help you make good tax decisions along the way rather than at year end telling you how you could have done it better. Many accountants give very sound business advice not just numbers and figures. You can get good advice on when to expand and how for the best tax and financial advantage. A good accountant can be a business partner and help you make good decisions. You must of coarse ask their advice before you make a deal for it to help you. After the fact advice is always hollow at best.

There are 3 main types of accounting professionals you should consider and depending on your needs there will be a different answer for each business owner. The first is a CPA this professional has gone to 5-6 years of school and taken a hard test to become certified in your state, they are educated in tax preparation, financial statement preparation and auditing. A book keeper is a record keeper and records figures for others to use in preparing taxes and financial statements. Their education is much less usually less than a year of formal training and therefore they are less expensive. A tax attorney is also highly educated, licensed by the state and can prepare tax statements and represent you in court if necessary. Tax attorneys are the most expensive and specialized.

Which you choose will depend on your needs and the amount of time and business you are doing. If you really only need help at tax time or to prepare a financial statement than you can just pay for the time or job that you need the accountant to do. If you are being sued or audited by the IRS you would want to have the help of a tax attorney to represent you.
Accountants can really help your business to grow and can free you up to run and promote your business as you would like. The question is not whether you should hire an accountant but which type is right for you and how much you need their expertise to help you.
ship or general partnership that loan is not just going on your business but your personal credit. If your business defaults you will have to pay the loan or declare bankruptcy. It is a serious commitment and whether you personally sign the paper work or agree to guarantee the loan you do.

It is much better to structure your business as a limited liability cooperation or use some collateral or investment property rather than your personal guarantee on your business loans. Either of these ways will help prevent you from being personally liable on your businesses loans.

Some banks will require you to personally guarantee your businesses loans if your business is too young or has an insufficient credit history to be responsible for the debt. You should avoid personally guaranteeing your businesses loans if at all possible. Some banks will accept real estate or other collateral as a guarantee on the loan instead.

If your business is structured as a sole proprietorship than you and your business are the same in the eyes of the law. This means you are personally responsible for all loans your business takes out. If the business can't pay the loan, than your personal assets including bank accounts and even your house can be used to pay it off. This would have to go through court and the creditor would have to prove the debt and your responsibility for it. The court would then decide which of your assets the creditor could take to pay for the debt.

The scarier structure for a business is a general partnership because each partner can take out loans without the other partner's permission and each partner is responsible for the whole amount the business owes not just their share of the business. So your partner could take out a loan, you know nothing about, and you would be responsible to pay it back, should the business and your partner who took out the loan, default. This combination could get very serious fast.

The IRS holds all business owners personally liable for unpaid payroll taxes regardless of the business structure. The government has made it so even an LLC owner can't get out of the responsibility for this debt and also has made it so even bankruptcy won't save you. Unpaid payroll taxes are a very serious debt to owe.

For some the answer could be filing personal bankruptcy, with a chapter 7 bankruptcy the bank takes your personal assets to pay off the debt. This is only to your advantage if your personal assets are significantly less than the debt owed.Your personal assets would be sold to pay off what it can and usually the rest would be discharged by the courts.

With a Chapter 13 bankruptcy you would be given a monthly payment by the court and a time frame that you are "in" bankruptcy making payments toward the debt. The debt amount is usually considered with debt secured by an asset getting 100% and unsecured debt getting a lower percentage paid.

You can be held personally responsible for business debt so make sure you are going into debt you can pay and the safest form of a business structure for personal liability is a LLC.