Now that the Obama Administration has finally prevailed in turning its Health Care Reform initiative in to law, it is time to focus on what this really means to small business owners. And here it is…YOU’RE GONNA NEED TO MAKE MORE MONEY!

Regardless of which side of the debate you were on a couple weeks ago, the reality is that changes are coming and those will include increased taxes for businesses and many business owners. Not only are your taxes going to increase, but so is the level of tax enforcement by federal and state governments. In President Obama’s Fiscal Year 2010 budget delivered last May, it was noted that the IRS stood to receive an overall increase in funding of $764 million, including a $400 million increase in tax enforcement funds. This represented a 13 percent increase for IRS enforcement activities. Among the primary targets of this increased wave of audits will be sole proprietors, single member LLCs, and other closely held businesses. I have personally talked with a number of people who are terrified to take common deductions such as those associated with

  1. A home office
  2. Entertainment
  3. Vehicles
  4. Health care issues
  5. Family farms

They have reason to be fearful. All of these are red flags to the IRS and can trigger an audit. While the thought of an audit is scary, the only thing to really fear is being unprepared for an audit. If you don’t have your records in order then you will have a miserable and expensive experience. If you do have your records in order, odds are that you will zip through the process. I want to be clear about what these records include. In addition to your financial records, receipts, mileage log and so on, in a business audit you must have your corporate record book up to date. If you are a corporation or LLC and your record book does not show that you have been respecting the corporate veil, I guarantee you that the IRS auditor will not respect it either. Every year we hear stories of valuable corporate deductions being disallowed because the corporate record book did not indicate that the shareholder was treating the business like a separate entity. Instead of enjoying the tax deductions and protections afforded by a corporation or LLC, the business formalities were ignored and the shareholder managed the business like it was a sole proprietorship. These are expensive mistakes and hard lessons to learn.

As you navigate in this increasingly challenging environment, you will need every possible advantage you can employ. As a business owner, one of the most obvious and trusted protective shields available is a corporate entity. Using such a shield can keep you and your family safe from all kinds of attacks. But if you don’t take care of your armor as you should, you will find it rusted and worthless when it comes time to go to battle. There is no reason that this should ever happen.

The ride is about to get more turbulent for many small business owners as the government doubles its efforts to exact funds from our bruised and shrinking private sector. Those of us that are committed to being in business for ourselves will have to deal with working more days each year for Uncle Sam. However, the number of days that each one of us works for him will differ based on our thoughtful preparation and targeted plan of action. It’s all up to you.

My company, Laughlin Associates, provides consultation, education and hands on help to thousands of business owners every day to ensure that their corporate records are in order and ready when they need them most. If we can help you, check out our website at