TJ asked:

I am considering buying a business, but am new to this. How do I check up on whether they make the profits they say they do? I know I can probably ask for a profit loss statement, but can’t those be embelished? Basically, how do I do my due diligence on this?

SBTI Solution: Do Your Research. You should ask for all the financial statements…Profit & Loss, Balance Sheet, Cash flow Statement.  You should ask for a copy of the books–the company’s official financial records. You should also ask for a copy of the tax returns from the last 3 years. Then take all this info to your accountant and have them review it. If it has been fabricated, there should be signs your accountant will pick up.

charlesm4450 asked:

I am a small business owner and am using Quickbooks to do my financials. We just starting paying salaries (to myself and the other owner) and now we notice that the net income is taking a big hit, from these salaries. How can we plan each month, or account for the real net income while still paying these salaries? For example, last month our books say we lost $5000, but that is only because it is reflecting the salaries we paid ourselves for the month prior. We only pay salaries once a month, for example, June 5 is payday for May, and July 5 is payday for June. How can we manage this??

Larisa’s Response: The reality of the situation is your business has a loss. I know you hate to admit it, but it’s true. You and your partner are supposed to receive a salary each month, on time, not a month later. The only way to manage this situation is to have more income coming in. Perhaps you need to focus on marketing your business. There are some really good ideas in my book “Pay Yourself Instead of Uncle Sam” that will help you get more clients in the door without spending a lot of money.

We have a lawncare business and have a lot of deductions. We will still show a profit again this year in our our 2yr old business. A couple of business owners tell me to use more deductions and show a loss. We have two small children, so wouldnt it be better to show more of a profit for the tax credits. I dont get it. Which would be better. I dont want to mess them up. I am using turbo tax.

Larisa’s Response: Your first mistake is using turbo tax. You need the advice of a professional in order to make sure you come out in the best situation possible. There are so many different ways the business could help or hurt  your refund that turbo tax doesn’t ask you about. My experience with turbo tax is if you don’t know it, turbo tax isn’t going to tell you.  In order to have to best outcome possible, all the numbers must be in sync so that you would be able to collect the maximum refund possible and the maximum tax credit possible.