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The new year changes the landscape in many US states, making some places better to do business—and others much worse. Just like in real estate, your “location, location, location” can influence your business’s chances of success or failure. 

This adage is also true at the state level, where state regulations can be a significant factor in the difference between your business’s profits and losses. We took a look at which states make it the hardest to do business and which states are making it even harder in 2020.

Several reputable organizations have ranked the best and worst states for small businesses. The Small Business & Enterprise Council ranks all 50 states by business policies and tax rates. Wallethub’s latest Best & Worst States to Start a Business list analyzes access to resources and business costs. And CNBC just updated its America’s Top States for Business, which considers each state’s workforces, economies, and infrastructure.

We combined these 3 lists and averaged the rankings because their methodologies vary a great deal. Consider California, which is ranked next-to-last at No. 49 in the Small Business & Enterprise Council (SBEC) ranking because of its high corporate income taxes and expensive gasoline. On the other hand, Wallethub ranks California all the way up at No. 8 thanks to the availability of venture capital and very strong average business revenue. 

These significant differences are why we’re presenting a “ranking average” that factors in all 50 state’s rankings. And when we average these rankings, here are the states that consistently finished near the bottom of the list. 

10. Maine

Maine is also the home of a curious 2017 legal ruling where the lack of an Oxford comma in statehouse legislation cost one business $5 million. A Maine dairy company was forced to pay its truck drivers $5 million because of a state law that meant to exempt overtime pay rules from truckers whose job involved “packing for shipment or distribution.” 

The problem? That phrase did not separate “packing for shipment” and “distribution” with a comma, so truckers argued that it did not apply to drivers who only distributed and did not pack the cargo. The truckers won the multimillion-dollar settlement, and the law was eventually revised.

But consider that the Maine legislature allowed such a snafu, and an individual business took the financial hit for the oversight.

9. Maryland

For the rest of us, Maryland scores consistently poorly with a very high cost of living and a high cost of doing business. Rent and regulation conditions in the most highly populated areas of the state make it hard to do business in large parts of Maryland.

New small business laws in 2020 include the increased minimum wage of $11, plus a 9% raise in Maryland commercial property taxes, marking the 7th consecutive year those taxes have gone up. 

8. Delaware

Unfortunately, this practice is subsidized in part by Delaware small business taxpayers. The state has far more complicated tax regulations for its own small businesses than the bigger out-of-staters. Delaware’s exceptionally high worker’s compensation premiums and difficulty in securing small business loans also contribute to Delaware having the 2nd-lowest small business survival rate in the country. 

7. New York

But New York is also a high-risk, high-reward state. The state’s access to venture capital, high-spending clientele, and potential for national visibility is the envy of most any other place in the nation. 

A slew of new minimum wage laws kicked in statewide on January 1, 2020, though these varied by region.

6. West Virginia

Small businesses can do well in West Virginia if they capitalize on the state’s powerful energy export trade. But few lucrative West Virginia small business opportunities exist outside the energy sector.

5. Connecticut

But there are other tough realities to doing business in the Constitution State. Connecticut has an unusually high cost of living, and a looming unfunded pension crisis in the state will likely spell higher taxes for the state in 2020 and beyond.

As of January 1, Connecticut expanded its 6.35% sales tax to include previously exempt items like laundry and dry cleaning, interior design purchases, parking fees, and safety clothing.

4. Vermont

But Green Mountain State businesses and those recent relocators face new 2020 costs with a recent property tax increase. The state’s minimum wage also increased by 18 cents on January 1, raising it to $10.96.

3. New Jersey

Garden State small business employers are still absorbing the costs of state-mandated paid sick leave and expanded family leave laws that went into effect last year. And as it will every year until 2024, the state’s minimum wage just went up by a dollar to $11.

2. Rhode Island

The smallest of states also raised its minimum wage on the 1st of the year, hiking the pay rate to $11.50. Rhode Island also recently reinstated the individual mandate of the Affordable Care Act, which had been effectively eliminated by the Trump Tax Plan, and added a tax penalty for any employees who do not have a health insurance policy.

1. Hawaii

The huge advantage, though, is that you’re in Hawaii, a beautiful area where tourists crank out mountains of disposable income. But certain Hawaii small business sectors face pesky new regulations in 2020. Retailers can no longer use plastic bags, and restaurants are required to provide juice, white milk, or water as children’s beverages. Hawaii and West Virginia are the regional outliers on this ranking. Most of these states are in New England and the upper northeast region of the US, something to take into account if relocating or expanding your business to a new state. 

No matter what state your business is located in, it’s always helpful to have more capital. Every state in the US has an internet connection, allowing you to apply for a loan online  to put your business in the best state of mind.

You opened a business to make money, not to give things away for free. However, sometimes offering free services can bolster your business. The key to having free services work for and not against you is understanding the right way to go about it. To help you navigate these murky waters, we’re outlining some essential dos and don’ts of offering free services. 

When to offer free services.

Free services: You gotta know when to hold ‘em and when to fold ‘em. Ultimately, you’ll need to review the unique costs and benefits for your business, but here are some of the best reasons to offer free services. 

If it’s something that doesn’t cost you anything.

There are certain cases where offering a product or service for free comes at no additional cost to the business. This is often the case in audience-based businesses. If you have a seat that would otherwise be left empty, you’re paying the cost of that seat whether or not a customer occupies it. Theater, seminar, or web-based classes are prime examples where offering a free slot may benefit your business if it means building word of mouth. If any part of your business is “set it and forget it,” this option could be great for you. 

Deciding if this applies to your business will depend on your industry. While there may be empty tables in a restaurant, allowing patrons to sit down for a free dinner comes with the costs of the food and beverage the customers would consume— not to mention the additional labor associated with accommodating them. 

If you can transition them to a paid user down the road.

This strategy is a common approach to offering free services. We see it everywhere from a Disney+ trial subscription to credit cards that waive APR or an annual fee for new customers. The theory behind these introductory offers is that you can show the customer how baller your business/product is. Once the offer is over, they’ll be hooked. Think of the introductory offer as a salesperson closing the deal for you. 

If you can offer a pared-down version of your paid product.

You may have been reading this article thinking, “Wait a second, Lendio offers free accounting. Where does that fit in?” Right here, and we’re telling you because transparency is an essential element in successfully offering free services. Lendio's software has multiple tiers. We’re able to offer accounting software for free to users who want a pared-down experience. Then, we offer more comprehensive products that include accounting help from professional bookkeepers for businesses that need more assistance with their bookkeeping. 

Free options like this work well for new businesses—especially in the tech space. It can help you build word of mouth and grow your business. To be successful, though, you need to make sure your free product maintains your company’s standards. There’s no point in offering something free if customers are going to be disappointed with the experience. 

If the benefits generally outweigh the costs.

In the end, you need to ensure the benefits of offering free services will outweigh the costs. That’s true of the reasons listed above, as well as any others you may be considering. It’s no good to offer free services if they’re going to drain your small business of money and resources. If you determine that offering something for free can benefit you, it might be worth a try!

How to offer free services.

Once you decide to offer a free product or service, the second step is execution. Much to our chagrin, customers will not give you a gold star for offering something for free. You need to execute your complimentary services well. 

Set clear expectations

Expectations can make or break the offer of free services. Make sure that the details of the offer are clearly outlined—for the benefit of both you and your customer. Explain expectations at the time of the offer. Don’t feel that you need to hide anything. If they only get limited access to your online classes, let them know. If you can provide a one-time offer for free admission, that’s great as long as they know. If you can provide a free trial or discount, provide clear communication of the terms. Setting clear expectations up front can prevent people from feeling surprised and disappointed, aka saving you a headache down the line. 

Keep communication professional.

If a customer is unhappy with your free services (we hate to see it, but occasional unhappiness is inevitable in love and business), you have to take it in stride. Remember: if you treat them with compassion when they’re angry, they may remember that when the cortisol dissipates, giving you the opportunity to win them over in the end. 

Keep communication professional, and under no circumstances should you make them feel you’re put out over complaints about a free service. If you’re not ready to receive negative feedback on something you’ve offered for free, you’re not ready to offer something for free. 

When to walk away.

In some industries, like creative fields, professionals may find themselves bombarded with asks for free services. If you find yourself on the receiving end of relentless requests for free work from the same person, that may be a sign they don’t value the work you do. Offering free services should be an opportunity to market your business. It should never be an avenue for people to take advantage of you.

It’s okay to constantly reevaluate your approach to free services. If it’s no longer working for you, change it. When customers ask why, you can clearly tell them. Again, expectations go a long way in securing and maintaining customer loyalty. 

Vendor credit, loans, and other lines of credit can be essential in helping your business maintain cash flow and keep up with customer demand. Your ability to obtain financing hinges largely on what’s included in your business credit reports.

These reports tell suppliers, vendors, and lenders how responsible your business is when it comes to borrowing money and repaying it. The more often you pay on time and the less debt you carry, for example, the more favorable the odds are that you’ll qualify for financing.

When your business credit is less than perfect, improving it belongs at the top of your to-do list. There are several things you can do to clean up your small business credit reports and improve business credit scores. This guide breaks down everything you need to know to work your way toward a better business credit rating.

Small Business Credit vs. Personal Credit: What’s the Difference?

It’s important to keep in mind that personal credit and business credit aren’t the same things. Personal credit history is associated with your personal identifying information. Chiefly, that means your Social Security number.

Personal credit reports are generated by the 3 primary credit reporting agencies: Equifax, Experian, and TransUnion. Information from your personal credit reports regarding loans, credit cards, and other debts in your name is used to calculate your personal credit scores. These credit reports and scores are what lenders look at when you apply for new credit. Landlords, utility companies, and employers can also check your personal credit for screening purposes with your permission.

Small business credit is different. Your small business credit reports detail financial information related specifically to your business. Instead of using your Social Security number, business credit information is linked to your business’s Employer Identification Number or EIN. Your business credit report includes information related to financial accounts opened in your business’s name.

It’s important to note that you may use your Social Security number initially to obtain business credit. For example, if you’re applying for a business credit card, the credit card company may ask for your Social Security number, EIN, or both. Once the account is opened, your account activity would be reported to your business credit reports.

Now that you’re clear on the differences between personal and business credit, here are 7 helpful ways to polish up your small business credit.

Start with a Thorough Review of Your Credit History

Before you can address any issues with your business credit, you first need to know what those issues are. That means checking your business credit history.

There are numerous options for pulling business credit reports, both free and paid. Dun and Bradstreet, for instance, is considered the gold standard for business credit reporting. However, you can also get business credit reports through Equifax and Experian, as well as credit monitoring services such as Nav or Capital One’s Business CreditWise tool.

What’s important to note is that different business credit reports may contain different information, depending on what’s being reported by your creditors or vendors. When reviewing your reports, check closely to make sure the following types of information are accurate:

• Your business name and address
• The Standard Industrial Classification (SIC) code used to identify your business
• Payment history
• Creditor or vendor information, including account numbers, balances, and available credit
• Public records, such as judgments or liens

When checking your credit reports, it’s important to make sure these items are being reported correctly. Unlike consumer credit reports, business credit reports aren’t covered by the Fair Credit Reporting Act. This means there’s no formal dispute process in place if you find an error on your business credit history. However, Dun and Bradstreet, Equifax, and Experian each have policies in place for business owners to dispute errors or inaccuracies.

You should also look for any items on your credit report that might be hurting your score, such as late payments or past due accounts. If you have any of these on your business credit, you can move on to step 2.

Get Past-Due Accounts Up-to-Date

If your credit report review reveals late or missed payments, make getting those accounts current a priority.

Reach out to each creditor or vendor that you’re behind with to discuss terms for bringing the account current. If you have multiple accounts to negotiate, consider whether you can work out a payment plan that allows you to make progress with each of them. Alternately, you might want to pay the most delinquent account in full and work out payment agreements for the rest.

Once your accounts are current, you can re-establish a positive payment history by making on-time payments going forward. While different factors influence your business credit scores, payment history ultimately carries the most weight since creditors and suppliers want to know they can count on you to pay on time.

You might be wondering if bringing late accounts current will give your business credit score an automatic boost. The short answer is no. Even though the account may no longer be past due, the negative payment history will remain on your credit report. You can, of course, reach out to your creditor to ask them for a courtesy removal of negative marks, but they’re not obligated to honor your request.

Add Relevant Information to Your Credit Report

It’s entirely possible that not all of your vendors or creditors report your account history to the business credit bureaus. Or they might report your account to one business credit agency but not the others.

Making sure that you’re getting proper credit for a pattern of responsible credit use is having all of your accounts listed on your credit history. With Dun and Bradstreet, for instance, you can report any open tradelines even if your vendors don’t report them, which could help with improving your credit history.

It’s also possible to help your business credit using bills related to expenses other than debt. A reporting service like eCredable, for instance, allows you to submit account history for things like utilities or cell phone services. This information is then transferred to the credit bureaus.

It’s important to note that services like eCredable may report to smaller credit bureaus, rather than larger companies like Dun and Bradstreet or Equifax. But it can still be a helpful way to improve your small business credit using your payment activity for bills you’d already pay anyway.

Work on Reducing Credit Utilization

Getting your payments in on time is the most effective way to clean up small business credit. Second to that, however, is minimizing the amount of revolving debt you’re carrying on credit cards or revolving credit lines.

Reducing some of what you owe could improve your credit utilization ratio, which in turn can help your credit score. Make a list of each revolving debt owed, including both the current balance and the total credit limit. Then, divide the balance by the credit limit for each one to determine each debt’s credit utilization.

For example, if you have a small business credit card with a $10,000 limit and you owe $5,000 on it, your credit utilization is 50%. Credit experts typically recommend that for the best credit score results, you keep your credit card utilization at 30% or less.

Aside from reducing balances on credit cards or lines of credit, there are 2 other strategies you can try to improve credit utilization. The first is to call your credit card companies or log in to your online account and request a higher credit limit. The second is to open an entirely new credit card account.

Either option could increase your total available credit. Assuming that your balances remain the same, this would help your credit utilization ratio. For example, say that you increased the limit on your card from $10,000 to $15,000 but kept the same $5,000 balance. Your new utilization ratio would be a more favorable 33%.

The key is not expanding your debt when expanding your credit limit. Doing so would only be counterproductive to your business credit score and potentially add strain to your business cash flow when it’s time to repay it. Something else to keep in mind is that applying for a new business credit card could ding your personal credit rating slightly if you apply using your Social Security number. Each new inquiry for credit can trim a few points off your personal credit score.

Consider Consolidating Business Debt

If you have business debts spread across multiple credit cards, loans, or lines of credit, consolidating them could make managing the balance easier while also potentially yielding positive credit results.

When you consolidate business debt, you’re getting a single loan to pay off your existing balances. You then make payments to that new loan going forward.

This move can do 2 things for you. First, it can make your debt more manageable. When you have just a single payment to make each month, you reduce the odds of forgetting to make the payment and incurring negative payment history on your credit report. That alone could help your score if you’re able to establish a lengthy track of paying on time.

The other benefit of consolidating business debts into a single loan is the potential to make your debt less expensive. If the interest rate on a consolidation loan is less than the average combined rate you were paying on your debts, that can translate to savings that you could reinvest elsewhere in your business.

If you’re considering consolidating business debt, pay attention to the terms different lenders offer. Compare the interest rates, fees, minimum and maximum borrowing limits, funding speed, and the minimum requirements for approval. Ideally, you should be looking for a loan that represents the best combination of favorable terms with a payment that’s realistic for your business cash flow.

Separate Personal and Business Spending

When you have a sole proprietorship or a small business with just a few employees, it may be tempting to use business and personal credit interchangeably, but this can be a mistake. Mingling expenses and debts can result in a negative impact on both your business and personal credit histories if you miss payments or max out credit cards.

If you use credit cards to fund your business, stick with business credit cards for those expenses. Avoid charging personal expenses to business cards or business expenses to personal cards. This practice can simplify things when it’s time to separate deductible business expenses for tax reporting purposes, and it can keep your personal credit activity from impacting your business credit history—and vice versa.

Just keep in mind that separating business and personal debts doesn’t necessarily separate your liability. If you open a business credit card or take out a business loan that requires a personal guarantee, you can be held personally responsible for the debt if your business defaults on the payments. A defaulted credit card or loan account could then be reported to your personal credit history.

Monitor Your Business Credit Regularly

The last tip for cleaning up business credit is simple: keep an eye on your credit history.

When you’re continuously monitoring your credit, problems like errors or potentially fraudulent accounts are less likely to hurt your score since you can address them before any real damage is done.

The easiest way to monitor business credit may be using a free service. Remember to read the fine print to understand what type of services you’re receiving and how your business and personal information is being accessed before entering into an agreement for free or paid credit monitoring.

Why Your Small Business Credit Matters

One of the most important reasons to take care of your business credit is financing.

In an ideal world, you may never need a loan or credit card—your business finances are sustained entirely by your cash flow. But that’s not always realistic.

If you’re planning to expand your business or purchase an expensive piece of equipment, for instance, you may not have the cash on hand to cover those costs. Or, if you operate a seasonal business, your cash flow may experience ebbs and peaks throughout the year.

In those scenarios, financing can help you maintain business as usual and continue pursuing growth opportunities. While your credit isn’t the only thing lenders consider when applying for a loan, line of credit, or business credit card, it is something that comes under scrutiny.

If you have poor business credit, that could limit your financing options. For instance, you may have to use short-term financing methods, such as a merchant cash advance or invoice factoring, to meet capital needs. While those options are convenient, they can also be more expensive than other types of financing, such as an SBA loan or a term loan.

Your business credit can also impact other credit scenarios with your suppliers. If you have a good credit score and you’ve always made reliable payments on vendor tradelines, then you may be able to renegotiate better credit terms. On the other hand, a poor credit history could make vendors reluctant to extend credit to you at all. That could make it difficult to get the supplies or materials you need, which in turn makes serving your customers more challenging.

Building Business Credit History from Scratch

Having limited or no business credit history is a situation you might be in if you have a newer business. In that case, some of the tips included here may not be as effective for helping to clean up your credit.

You can, however, take other approaches to create a positive business credit history. Here are some of the simplest ways to get started with building credit for your business:

• Apply for an EIN if you haven’t already
• Register for a DUNS number with Dun and Bradstreet, which is used to establish your business credit profile
• Open a small business credit card
• Automate your business’s monthly bill payments
• Apply for vendor credit
• Consider a small business loan

One last tip to know about business credit—your information is available to the public. Anyone can look up your business credit file.

That’s yet another motivator to work on cleaning up any past credit mistakes, since potential customers, vendors, or business partners may take a peek at your credit history. The more effort you put into improving business credit, the bigger your potential return when it comes to your bottom line.

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The word "audit" elicits fear, not unlike that of the Salem witch trials. Although punishments are less brutal (thank goodness), the government isn't afraid to set fire to your business. If the IRS decides to audit your company, your financials need to be in tip-top condition to avoid hefty penalties.

Audits aren't just about investigating your integrity—even honest small business owners can fail. These financial investigations care little about ignorance and lots about meticulous records.

But fear not! There are simple steps you can take now to guarantee your small business passes with flying colors. Although an audit is very unlikely (about a 0.5% chance), it's best to be prepared for the worst.

By taking these 6 steps now, you'll be ready if the IRS knocks on your business's door.

1. Keep Detailed Financial Records

Occasionally, the IRS audits businesses randomly. But more often than not, the IRS decides to audit businesses with suspicious tax returns. To make sure you're honest and can prove it, keep detailed records of all your income, expenses, losses, and deductions.

The law requires you to keep these records for up to 3 years, but most tax professionals advise you to keep it for at least 7. 

So, if the IRS has questions, you'll have easy-to-access answers.

While you're at it, make sure to separate your personal expenses from your business expenses. Keep a separate bank account and credit card for your business. This practice will help you identify the appropriate transactions without any confusion.

2. Create Digital Copies of Your Receipts

If you're using cloud bookkeeping software as we’ve suggested, uploading and organizing your receipts is simple. If you claimed deductions, you're going to need itemized receipts to prove your purchase. No expense is too small—make it a habit to create a digital copy of every business receipt.

3. Lean on Your Accountant and Bookkeeper

Get in touch with the accountant or tax professional who performed your tax return. They should help compile the appropriate documents. Also, make sure your bookkeeper is present, too. They'll be able to speak to the bookkeeping processes and help accelerate the audit.

Don't have an accountant or bookkeeper? Consider hiring one. Keeping track of your financial records is hard work—even if you're never audited, they'll be well worth the price. And if the IRS does decide to audit you, you'll be forever grateful you have help to lean on.

4. Be Transparent About Your Contractors

More small businesses are saving money by hiring freelance contractors instead of full-time employees. This approach saves the company from paying for benefits, paid-time-off, and other employee perks. But high expenses on multiple independent contractors trigger the IRS.

That doesn't mean you shouldn't use freelancers—it just means you need to make sure they qualify as independent contractors and not employees. The term you give them isn't as important as the 3 factors the IRS considers: Behavioral Control, Financial Control, and Relationship of the Parties. Review the IRS's guidelines to avoid misclassifying and receiving hefty penalties. 

If you pay any contractor more than $600, you need to file a 1099 with the IRS. Make sure every contractor sends you a signed W-9 before you pay them. 

5. Stay Up-to-Date on Regulations

Laws change, state and local taxes vary, and auditing rigor fluctuates. But the IRS won't let you use that as an excuse. It's your duty to stay current on all regulations and taxes. Stay compliant by verifying your tax settings are always up-to-date on the software you're using.

6. Hit the Deadlines

Not too late, not too early—just right. File your tax return too early, and you'll give the IRS plenty of time to review it meticulously. Even if you're 100% honest, it's best not to give the IRS extra time to dig for errors.

It's more important, though, to avoid late filings. If you fail to file on time (or fail to file at all), the eye of the IRS will find you. Imagine Sauron’s eye finding Frodo whenever he puts on the One Ring—it’s just like that. Make sure to meet all of your important deadlines—not just the yearly tax return.

An IRS Audit Isn't the End of the World

Usually. While an audit can be a major pain in the backside, it's not an indictment. It's an investigation. 

By following these 6 steps, you can avoid IRS suspicion and stay on your merry way. If the IRS does audit your business, whether at random or due to suspicious behavior, you'll be ready to survive unscathed. Don't wait for the unwelcome letter from the IRS to land in your mailbox—start audit-proofing your business today.  

If you’re a veteran and a business owner, you’ve likely looked into a veteran-owned business certification in the past. You’ve also probably found the whole process confusing. There are several ways to get certified, and considering the substantial time commitment, it may not seem worth it to go through the process.

However, becoming a certified veteran-owned company can help you win more business from both government agencies and corporations. The certification can also be used as a marketing tool to help you reach potential customers who want to support veterans.

Read on for some tips on how to get certified, as well as a breakdown of the different types of certification available to veteran-owned businesses. 

Why should I register?

The primary reason to register your business as veteran-owned is to win more business. Specifically, both government agencies and many large corporations set aside a certain amount of business each year for veteran-owned businesses (as well as women and minority-owned firms). 

The certification process is pretty time consuming but necessary to compete for contracts for government agencies. But if your small business focuses on selling to government agencies, it’s worth the time and effort.

Corporations will also prioritize giving business to veteran-owned companies. For example,  nearly 15% of Fortune 1000 companies have set goals to give business to veteran-owned businesses. The process of registering as a veteran-owned supplier for corporations tends to be less time consuming than the process for government agencies. 

Additionally, many businesses and consumers like to prioritize purchasing from veteran-owned businesses, so getting your business listed on more consumer-facing sites like buyveteran.com can help you reach a larger group of potential customers. The process of getting listed is relatively simple compared to some of the other certification options.

How do I qualify for a veteran-owned business certification?

To be eligible for most veteran-owned business certifications, your business must meet the following requirements:

• More than the majority (51%) must be owned by a veteran.
• The veteran owner must have been honorably discharged from service.
• The veteran owner must be involved in management and daily business operations.

If you’re looking to qualify for the Service-Disabled Veteran-Owned Small Business (SDVOSB), you must meet the above criteria. In addition, the veteran business owner will need to prove a service-connected disability (which should be included in your discharge paperwork). 

What are the different ways to get certified?

There are a few different levels of certification.

Federal contracts

To compete for national government agency contracts, you will need to get either veteran-owned small business (VOSB) certified, or SDVOSB certified via the Vets First Verification Program. The verification process includes submitting business ownership-related paperwork, your honorable discharge papers, and a federal review.

Private contracts

If you’re looking to be included on national registers of veteran-owned businesses to attract work from other private businesses, you simply need to register with the National Veteran Owned Business Association or the National Veteran Business Development Council as a Certified Veteran’s Business Enterprise (VBE).

State contracts

You can also apply for state-level certifications, which may be necessary if you’re looking to work with state agencies. Some states offer their own veteran-owned business certifications, while others use third-party certifiers like the National Veteran Business Development Council (NVBDC) or the U.S. Department of Veterans Affairs.

As mentioned above, you should also consider listing your business on websites like buyveteran.com.

Beyond specific veteran business owner programs, you are also eligible for broader contracting assistance programs with the federal government as a veteran business owner. The SBA website provides the full list of programs you may also qualify for.

Are there other resources for veteran-owned businesses?

Sometimes it can be helpful to connect with other veteran business owners, whether for advice while going through the certification process or just general mentoring and networking. The SBA runs outreach centers across the country where you can get in touch with other local business owners who served in the armed forces. 

SCORE, a non-profit organization that provides resources to help entrepreneurs grow their businesses, has also pulled together educational articles for veterans.

Looking for additional funding for your business? Learn more about business loans for veterans.

Whether you call it freelancing, entrepreneurship, or hustling, there's no denying that the non-traditional work is more prevalent now than ever as more people turn side gigs into flourishing careers.

Independent contractors, who encompass everything from Uber drivers to freelance graphic designers, are taking the job market by storm. Over the first 15 years of the 2000s, 1099-MISC forms⁠—the tax forms issued to independent contractors⁠— increased by about 22%, while the number of W-2 forms⁠—tax forms issued to traditional employees⁠—decreased by 3.5%, according to George Mason University's Mercatus Center. 

Here's why today's economy is the perfect incubator for a nation of self-employed, side gig hustlers, whether we like it or not.

The Difference Between 1099 and W-2 Work

1099 and W-2 are two different forms used to report income to the IRS when filing taxes. A 1099 form is used by independent contractors, while a W-2 is used by full-time employees. However, the distinction between the two types of work is far greater than how taxes get paid.

Being a traditional W-2 employee means your taxes are taken out of your paycheck and you're provided with a list of benefits, ranging from healthcare to retirement contributions. Companies are required to pay W-2 employees a minimum wage, provide everything an employee needs to do their job, and reimburse most business expenses.

As a 1099 employee, you don't receive the same protections and benefits. You're responsible for filing your own taxes, covering business-related expenses, and obtaining the equipment and supplies needed to do your job, although these expenses can be written off on your taxes.

The Perks of the 1099 Lifestyle

If you're working as an independent contractor, your client can't dictate your work schedule or force you to come into the office or attend meetings on a full-time basis. Your job is to complete your work by the agreed-upon deadline, but how you get there is up to you. If you want to take a random Wednesday off or hire someone to help you complete your work, you can. If you need to spend a day working for a different client, you can do that as well. How you spend your time is none of their business.

As a W2 employee, your employer has a lot more leverage over you. They can tell you what hours to work, where to work, and how to complete your work, and they also have some power over what you do outside of work. For example, employers can preclude W-2 employees from doing other work on the side, running their own blogs, podcasts, and social media platforms, or even partaking in activities outside of work that make the company look bad.

Why Millennials and 1099 Work Are the Perfect Match

Millennials aren't the only generation participating in 1099 work. In fact, contract work has been around for decades in the form of farmworkers, construction workers, musicians, and more.

However, culturally speaking, younger generations are a large driving force in new labor trends. While often stereotyped as lazy and entitled, millennials are marked less by a lack of ambition and more by a shift in priorities away from superficial achievements and toward personal and collective fulfillment. According to Deloitte's 2019 Global Millennial Survey, the most common ambition amongst millennials is to see the world, and millennials as a whole are more interested in positively impacting their communities and the world than they are in having children and starting families. 

Pair this with a prevalent sense of skepticism toward business and a tendency to change jobs more frequently than previous generations, and it's easy to see why the freedom and self-direction of 1099 work might be attractive to this generation of folks born between 1981 and 1996.

Financial Crises and Technological Advancement at the Forefront of This New Economy

The technology is certainly here to support growth in the self-employment sector. Thanks to the internet, remote work is quickly becoming the norm. The ability to work for any company from anywhere in the world lends itself nicely to freelancing. Social media has given everyone the ability to create their own platform and profit from it. Sharing economy apps that allow anyone with a smartphone to partake in ridesharing, home-sharing, meal delivery, and more have also facilitated the growth of the gig economy.

There are other profound reasons that self-employment and the "gig economy" have caught on so rapidly in recent years. For one, events like September 11th and the 2008–2009 financial crisis shocked our nation, and along with impending crises like climate change and terrorism, have paved the way for a generation that feels very uncertain about the future. While the major benefit of full-time employment used to be a feeling of stability and security, no job is a sure thing in today's economy.

The Increase in 1099 Work Isn't Completely By Choice

While millennials might seem made for self-employment, not all young folks are happy participants in the gig economy. According to the Mercatus Center report, the most likely culprit for the increase in 1099 work isn't the increased availability of side gigs. Rather, side gigs have become more available because more people are demanding them⁠—often out of necessity.

The report explains that there's been a sharp decline in the job creation rate since the early 2000s, with the biggest drop taking place around the financial crisis. Pair difficulty finding traditional employment with stagnant wages, and it's not hard to understand why more folks are turning toward freelancing and side gigs to fill gaps of unemployment and underemployment. Previous decades proved that the single-earner household is no longer financially tenable for most families⁠. Perhaps what we're seeing now is that holding a single job is no longer financially tenable for most individuals.

Many industries have taken huge hits to business in the past couple of decades. In the search for bigger profit margins, firing W-2 employees and replacing them with 1099 contractors can be a huge help. Companies are no longer on the line for shelling out benefits and covering their half of payroll taxes. Businesses can also avoid paying salaries to a full staff during slow periods by using contractors and doling out work only when need it⁠—and the budget to pay for it.

1099 Work Can Lead to a Better Work-Life Balance

Because you're able to set your own rates as a contractor, 1099 workers who demand their worth often find they're able to make far more money freelancing than they ever could in traditional employment. Higher hourly rates also allow freelancers to make up for increased tax rates and having to cover their own health insurance and plan for retirement as a small business owner. Freelancers can demand higher rates because they're much cheaper for companies than a full-time employee.

Self-employed individuals also have the flexibility to pursue new opportunities as they wish, giving them full control over the direction of their careers. When it comes to personal fulfillment, the ability to set your own hours, and maybe even work remotely, is for many a priceless benefit that greatly outweighs 401(k) matching.

For folks who prefer the stability of working full-time or can't afford to surrender employer-sponsored benefits, the rise of 1099 work can be frustrating and scary. However, those with personalities and goals that align with self-employment can reap great benefits from this new economy. 

The information provided in this post does not, and is not intended to, constitute tax advice; instead, all information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their tax professional to obtain advice with respect to any particular tax matter.

Does the thought of bookkeeping fill you with uncontainable excitement? Probably not. What about money in the bank to make your business ambitions a reality? Now we're talking. 

It turns out that boring ol' bookkeeping and business capital have more in common than you might think. You need cash to grow your business, but as you well know, money doesn't grow on trees. You're going to need to secure top-notch financing to get ample capital to invest in your business. 

But before lenders start doling out the big bucks, they're going to want to make sure you're a safe, reliable applicant. They'll look at your credit score, cash flow history, financial projections, business plans, and more. And how do you keep these critical financing factors in tip-top condition? With fundamental bookkeeping habits, of course.

You can't qualify for business financing without the proper financial documentation. And even if you do have your finances neatly organized in a silver 3-ring binder, the numbers need to prove to lenders that you and your business are a worthwhile risk. Fortunately, bookkeeping not only helps document and organize your finances, but it arms you with the information necessary to improve your business's health and qualify for financing. 

Win-win.

There's no need to make bookkeeping more complicated than it needs to be. With just a few basic, routine habits, you can stay on top of your books each month with little-to-no hassle. Follow these bookkeeping best practices, and you'll be well on your way to bigger, better financing for your business.

1. Adopt Cloud Bookkeeping Software

First, it's 2019—ditch the spreadsheets and ledgers and get cloud bookkeeping software. Tech can do practically all of the tedious bookkeeping for you. Okay, not everything, but a bookkeeping platform like Sunrise can automate your invoicing, expense tracking, income categorization, and financial reports. That adds up to a lot of saved time.

Software doesn't replace the need for professional accounting guidance, but it does simplify the minutia of running a business. It'll help you get your finances in order and keep them in order. Plus, by using a cloud-based solution, you'll always have real-time financial data on your business's performance—no need to wait until end-of-week or end-of-month reconciliations.

Make sure your bookkeeping tool also has high-quality document management features. The right tool will streamline the process of managing financial documents like invoices, daily expenses, payables, receivables, and receipts. The software should also allow you to easily share your files with your accountant—no copy/paste or screenshots necessary. Less time bookkeeping means more time focusing on growing your business.

2. Track All of Your Expenses

Before you start paying, tracking, and reporting, you need to separate your personal and business expenses. While it might be convenient to just swipe one piece of plastic in your life, this practice will ultimately make tracking your expenses a nightmare.

Open a separate bank account and get a business credit card. By separating your accounts, you won't have to waste hours sifting through your expenses at the end of the month. You'll always know how much your business has spent and what the money has been used to purchase.

Now that you've separated your accounts, it's time to track all of your expenses. Business lunches, printer ink, travel expenses—everything. There are a ton of small business tax deductions you can capitalize on, and every penny counts.

3. Create Cash Flow Forecasts

This process is where bookkeeping turns from entries to insights. Yes, bookkeeping is a necessary evil for legal purposes, taxes, and audits, but it also informs and drives your business strategy.

With detailed financial records, you'll be better able to forecast your cash flow. With accurate cash flow forecasts, you'll always be prepared to make the best financial decisions for your business. These insights will help you avoid dangerous amounts of debt and leverage your existing capital to its utmost potential. Coming full circle—these informed business decisions will improve your financial health and help you qualify for financing.

4. Pay Your Taxes

Remember when we talked about separating your personal and business expenses? Yeah, tax time is when you really reap the rewards of that upfront decision.

Income tax, payroll tax, unemployment tax, excise tax, sales tax, property tax...that's a lot of taxes. Don't let the fees creep up on you come tax season.

If you've been consistent and organized with your bookkeeping, tax time will be a breeze. If you're using a solution like Sunrise, you can simply invite your accountant to access your transactions and financial reports —they’ll take care of the rest. Easy peasy.

5. Regularly Review Your Financial Records

Financial reports won't do you much good if you never use them. Make it a habit to frequently analyze your statements. Keyword: analyze. Don't just glance at them or give them a quick read—dive into the details. These are the same reports lenders will be looking at to decide if you qualify for financing. You should be looking for the same red and green flags they're trying to discover.

To some degree, you should check your financial records every day. At the end of each day, make sure the money in the bank matches the receipts. By monitoring your transactions daily, you'll be able to catch errors, fraud, and unexpected fees before it's too late.

While it's important to track day-to-day transactions, you also need to review the big picture with month-to-month statements. The profit and loss statement, balance sheet, and cash flow statement are your most important financial reports. These telling financial documents will give you quick and deep insights into your business's health. They're also the first thing lenders and investors will look at when examining your business's potential.

Make sure to block off time in advance to take care of your bookkeeping tasks. You're likely extremely busy, and many things might seem immediately more important than tracking your day-to-day finances. Don't slip into the procrastination trap—set aside time at the end of each day and month to reconcile your books.

6. Remember the Rule of GIGO

Remember: "garbage in, garbage out." GIGO. The reward of your consistent bookkeeping is equal to the quality time and thought you put in every day and month. It's not enough to just go through the motions and check bookkeeping off your to-do list each day. You need to ensure the quality and legitimacy of your entries if you ever want your reports to benefit you.

Come tax time or a surprise audit, your financials won't do you much good if you got sloppy for a month or two here or there. Saving minutes now will cost you hours later (and likely a more substantial fee from your CPA, too).

7. Consider Hiring a Professional

Numbers and entries might not be your thing, and that's okay. As an entrepreneur, you have to wear a lot of hats—fortunately, you can hand off your bookkeeping hat with little hassle.

If you know you don't have the bandwidth or the slightest desire to deal with day-to-day bookkeeping, consider hiring a professional bookkeeper. Bookkeepers can help track your transactions, reconcile your books, explain your financial reports, and answer all your number-related questions.

You can hand the entire bookkeeping process over to a professional and get back to doing what you do best—growing your business.

Excellence Is Not an Act—It's a Habit

At first, you might approach each of these bookkeeping habits as tasks. You may need to add reminders on your phone and calendar to nudge you to get the job done. Some days you may have other pressing obligations, and other days you might simply forget. That's fine and dandy—it's all part of the process.

Over time, however, diligence to these tasks will evolve from act to habit. You'll find the value in bookkeeping and make it a priority—not a burden. That's when you'll achieve true bookkeeping excellence. And that's when your bookkeeping labors will really start to pay off.

Better Books Lead to Better Financing

With your books in order, you're ready to pursue your financing ambitions with confidence. Armed with financial insights, you'll know exactly how much cash you need and how much you can afford.

At a moment's notice, you'll be ready to apply for whatever financing you need. Your awareness of your business finances will help you determine if you even need financing—and if you do, which loan makes the most sense. 

For example, you may discover your cash flow is taking a hit because your clients are dilly-dallying on their payments. If that's the case, you may want to consider accounts receivable financing instead of a short term loan. Or maybe you find that you consistently receive more sales during November, leading you to acquire a business line of credit to hire seasonal help.

Better bookkeeping practices lead to better financing—it's that simple. Once you receive that lofty sum of cash with oh-so reasonable terms, you'll realize all the tracking, reconciliations, and reports were all worth it. Get after it, entrepreneur. Your next loan is just a handful of bookkeeping habits away.

Because the international reach of the internet has impacted every business in some way, it is likely that the scope of your small business goes beyond the boundaries of your state.

You may be conducting interstate business in a myriad of ways. Perhaps you are a freelancer working for a client across the country. Maybe you own an e-commerce shop and you ship items around the United States every day. In a more traditional sense, you could be considering a second location of your brick-and-mortar store in another state. 

Even if you are a sole proprietor, you may technically run an interstate business. However, there are several factors to consider depending on the scale and goals of your company.

Defining ‘doing business.’

If you operate an online store or perform freelance services, you probably don’t have to do anything special if you ship to other states or have clients located elsewhere. Making money from people or companies in other states does not legally require you to incorporate there—that would place an extraordinarily high burden on freelancers.

However, as the connection between your business and a specific state strengthens, you will want to look into that state’s regulations to see if you need to register with the state’s agencies. For example, hiring a remote worker in another state is a much weaker connection than opening another office there, but there could be cases where you would still need to incorporate.

Regulations differ from state to state. Famously, state governments compete to attract businesses to their borders. For peace of mind, it’s always smart to check the rules for the states where you do any business. Typically, you will find relevant small business registration regulations with a state’s Department of Revenue, Secretary of State, and Department of Labor.

Situations to consider.

If you are thinking about opening a physical office, store, or restaurant in another state, you will need to register with that state. This process is called “foreign qualification.”

You may have already incorporated your business in a state that is not your home state, perhaps for tax reasons. But if you conduct most of your business from your home state, you will need to register for a foreign qualification there. Generally, it is recommended that you incorporate in your home state if you have fewer than 5 shareholders.

Even if you have an online business, you may need a foreign qualification. If you are incorporated in Nebraska but own and operate a warehouse or other shipping facility in Oregon, you probably need a foreign qualification in Oregon.

You probably need a foreign qualification f you have waged (W2) employees or pay payroll taxes in a state. Other factors may include the location of your bank accounts and where you have a physical presence. If you find yourself taking frequent face-to-face meetings in a state, you might need to file a foreign qualification as well.

Research different agencies.

States usually have several agencies involved in the operation of small businesses. Check with the Small Business Administration or local Chamber of Commerce groups for detailed, state-by-state information about what you need to do to set up your business in a specific state.

To register and incorporate your small business, you will have to get in touch with the Secretary of State. Payroll withholding and sales tax remittance can usually be set up with a state’s Department of Revenue. If you have waged employees, many states will require you to register with their Department of Labor.

You may also need to be aware of business licenses or business-specific taxes you. Many cities have agencies you have to register with, too.

A state typically wants to know 3 details: your intention to do business in the state, the nature of your business, and your contact information.   

Strength of nexus.

The concept of “strength of nexus” will be your guiding light when determining where your business should be registered. Strength of nexus describes how strong the connections of your business are to its surroundings. For example, if you open an office in a state, there is a very robust strength of nexus between your business and the state.

Again, different states have different definitions of nexus. If you have a remote employee working from his or her home, one state may simply require employment taxes. However, another state may require annual reports or even sales tax from products sold in that state.

Foreign qualification

The Secretary of State is usually in charge of overseeing foreign qualification filings. Corporations and limited liability companies (LLCs) are only considered domestic in the state where they were formed, which is why they are considered “foreign” for other states, even though they are American-operated.  

Occasionally, the office might require a certificate of good standing from the state where the business was formed. Therefore, you want to ensure that you closely follow the regulations in your business’ home state—things like paying taxes and holding the proper business licenses—before you plan to go interstate.

Without a foreign qualification, you can be fined and found liable for back taxes. Importantly, you cannot file a lawsuit or defend against lawsuits in a state without a foreign qualification.

Beyond initial fees, there are usually annual costs to keep a foreign qualification in good standing. Because of this, you want to have as few foreign qualifications as possible.

Registered agents

Some states require annual reports, and only so-called “registered agents” or “resident agents” can file these reports. A registered agent is an individual or business legally residing in the state. This entity will have to accept mail and file documents.

If you cannot be the registered agent, you want the person or company you designate to be reliable and responsible, as they will serve as the company’s contact in the state. There are companies dedicated to being registered agents, and some legal or accounting firms offer registered agent services.