20

Licenses, Taxes, and Accounting

Goals:

• Introduce the basic licenses and taxes that apply to most businesses
• Introduce why it is necessary to maintain accurate and timely financial records
• Introduce the relationship between setting up a financial accounting system and routine bookkeeping activities
• Encourage prospective entrepreneurs to seek professional advice when setting up their financial accounting system and when preparing tax returns

Skills:

• Develop an appreciation of basic business licenses and taxes
• Become aware of how to obtain license, tax, and accounting information
• Enhance ability to seek advice from professional advisors

Overview:

Licenses and taxes are important business start-up considerations. For many people the hardest part of complying with licensing and taxes will be their acceptance that voluntary compliance is a basic moral and legal responsibility that is relatively unique to entrepreneurs. Discussions address how students feel about paying taxes and emphasize the consequences of trying to avoid licenses, personal income taxes, and payroll taxes. Discussions also emphasize that licensing and taxing authorities have staff who will help entrepreneurs comply with requirements. In addition, the Chamber of Commerce and other local community-sponsored small business development centers are available to provide assistance.

A similar approach applies to discussions related to establishing and maintaining financial records. Discussions emphasize that the benefit of financial record keeping is not simply to comply with tax reporting requirements but to provide the entrepreneur with information needed to make good business decisions.

Discussions address the difference between setting up an accounting system (basically a one-time activity) and the daily/weekly bookkeeping needed to operate the system. Since most entrepreneurs are not accountants or bookkeepers, they are encouraged to seek assistance from a local accountant who specializes in serving small businesses.