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How to Make the Most of Your Small Business’s Assets

Part of the Small Business Financial Management Kit For Dummies Cheat Sheet

The assets of your small business drive your financial picture to a large extent, so you need to know how to manage those assets to maximize their use to you. Use the tips in the following list to help put your assets to work for your business:

  • Determine the sizes of assets you need to support the level of your annual sales revenue. The amount of your total assets determines the amount of capital you have to raise, and capital has a cost. The more assets you have, the more capital you need. Downsize your assets as long as you don’t hurt sales.

  • Don’t rush into securing debt and equity capital without doing due diligence. Many small businesses are desperate for capital. Carefully examine the true, total cost of the capital and scrutinize the potential for interference from capital sources in running your business.

  • Businesses that make profit generate taxable income. Small business (“S”) corporations, partnerships, and LLCs (limited liability companies) don’t have to pay income tax. They are pass-through tax entities; so, their owners include their respective shares of the business’s taxable income in their individual income tax returns. The profit of a pass-through business is taxed only once — in the hands of its owners. Cash dividends paid to stockholders by regular (“C”) corporations from their after-tax profits are included in the individual income tax returns of their stockholders and are thus subject to a second tax in the hands of the stockholders.

To keep your assets working for your business, trust, but protect. Business is done on the basis of mutual trust, but not everyone is trustworthy, even a longtime employee and a close relative. Enforce effective controls to minimize threats of theft and fraud against your business. An ounce of prevention is worth a pound of cure.

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Small Business Financial Management Kit For Dummies Cheat Sheet

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