Many businesses operate as S Corporations, largely due to the tax advantages unique to that particular structure. But there are extra responsibilities associated with S Corps as well, one of which is the balance sheet.<\/p>\n\n\n\n
While it can be easy to see your business\u2019s balance sheet as just another form demanded by the IRS, ask any accountants in Miami<\/a> and they\u2019ll tell you that it can actually be a powerful tool that helps you make smarter decisions for your business. Offering a snapshot of the financial health of a company, the Schedule L form is used by the IRS to check if income and deductions reported by the business owner, tally up with the actual financial health of the company.<\/p>\n\n\n\n When should you provide the IRS with a Balance Sheet?<\/strong><\/p>\n\n\n\n If your company has total receipts worth $250,000 or more, or total assets worth $250,000 at the end of the year, Schedule L must be completed. However, even if you fall short of these thresholds, maintaining a balance sheet is recommended as it\u2019s an important form for tax filing purposes, is something that is often required for loan applications, and is appreciated by shareholders for its transparency.<\/p>\n\n\n\n Prepping your balance sheet<\/strong><\/p>\n\n\n\n Although this list isn\u2019t exhaustive, here are a few of the documents and reconciliations you\u2019ll need to gather when preparing an accurate balance sheet:<\/p>\n\n\n\n These are the steps you\u2019ll then need to take:<\/p>\n\n\n\n All current and fixed assets must be listed, including cash, inventory, cash receivable along with property, vehicles and equipment.<\/p>\n\n\n\n Current liabilities like accounts payable and credit card balances, as well as long-term liabilities such as business loans and other debts, must be listed.<\/p>\n\n\n\n Lastly, you must list all key equity accounts including capital stock, additional paid-in capital, retained earnings and distributions.<\/p>\n\n\n\n The important link between balance sheets and shareholder basis<\/strong><\/p>\n\n\n\n Whether distributions are taxable or tax-free is determined by a company\u2019s shareholder basis, and begins with your initial contribution, then adjusts every year. Balance sheets must align with Form 7203, a form required by the IRS for all S Corp shareholders to report their basis; if they don\u2019t, IRS investigation may be triggered.<\/p>\n\n\n\n Balance sheets and distributions<\/strong><\/p>\n\n\n\n If distributions exceed your basis, they are then taxed as capital gains, emphasizing the importance of accurate and updated tracking to make sure that distributions are still tax-advantaged.<\/p>\n\n\n\n How balance sheets are used by lenders and investors<\/strong><\/p>\n\n\n\n When evaluating a company\u2019s solvency and liquidity, banks and investors will likely request to see the balance sheet. For businesses wishing to secure funding, having strong equity and accounts that are properly reconciled, can prove crucial. Failure to provide a balance sheet\u2019s that accurate and complete can put a delay on finding, or even block it. As any good tax accountant in Miami<\/a> will tell you, if you\u2019re a startup or a business seeking to grow, not having an updated balance sheet can mean you miss out on vital opportunities, critical to your success. <\/p>\n\n\n\n Showing you exactly where your business stands in the here and now, your balance sheet should be thought of as a strategic tool for guiding future investment decisions, salary and distribution. If you\u2019re not already working with a small business accountant, now is the ideal time to do so and ensure that your balance sheets and all other financial documents, are accurate, up-to-date, and useful as strategic tools.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" Many businesses operate as S Corporations, largely due to the tax advantages unique to that particular structure. But there are extra responsibilities associated with S Corps as well, one of which is the balance sheet. While it can be easy to see your business\u2019s balance sheet as just another form demanded by the IRS, ask any accountants in Miami and they\u2019ll tell you that it can actually be a powerful… Read More<\/p>\n","protected":false},"author":1,"featured_media":17828,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-17827","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-uncategorized","8":"entry"},"_links":{"self":[{"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/posts\/17827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/comments?post=17827"}],"version-history":[{"count":1,"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/posts\/17827\/revisions"}],"predecessor-version":[{"id":17829,"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/posts\/17827\/revisions\/17829"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/media\/17828"}],"wp:attachment":[{"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/media?parent=17827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/categories?post=17827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.heyerinc.com\/blog\/wp-json\/wp\/v2\/tags?post=17827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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