DO NOT:

Fail to Pay Adequate Owner/Officer Salaries

“The IRS may take issue when a business owner or officer is paying himself or herself too much or too little,” Halley says. Business owners should document why their salary wage level is reasonable in accordance with their market, experience, business investment and services performed.

Misclassify Employees as Independent Contractors

“This has been a hot-topic item for the past several years,” Halley says. If an employee is misclassified as an independent contractor, a small business is at risk for employment taxes — for both the employee and employer — plus interest and penalty related to the compensation of the misclassified employee.

On a related note, Remer points out that it’s important to make sure diligence is paid to reporting on employees and services rendered across state or international borders. It’s particularly important to remember in communities close to state borders, such as Grand Forks and East Grand Forks, Minnesota, or Fargo and Moorhead, Minnesota. “You can’t just cross the river and do business over there and not report it,” Remer says. Ensure proper tax reporting is done for employees who might live across borders, too.

Overlook Retirement Planning

Many business owners do not set up retirement savings plans, assuming selling their business will provide them with the retirement funds they need when the time comes. That’s a risky prediction, Remer says. Selling a business can be more difficult than expected and if it doesn’t sell, the retiring owner is left with nothing.

Lisa Gibson EDITOR, PRAIRIE BUSINESS 701.787.6753

LGIBSON@PRAIRIEBUSINESSMAGAZINE.COM