There are many steps involved in order to establish and maintain a lucrative small business. Initially, the individual or group must decide what the business will be and prepare a business plan outlining where the company intends to go and how they will create revenues over the next few years. Once the business plan is prepared the type of business must be established, this is done by choosing whether it will be a sole proprietorship, limited liability company, partnership, etc. and registering it with the appropriate entities. Obtaining a federal tax identification number is also necessary in order to file the appropriate tax returns, open bank accounts, and eventually pay employees. Finally, a location can be found to house the business and employees can be hired.

After completing all of the above steps the new focus would be on the structure of the company. The structure is comprised of many factors such as effectively leading the employees towards the goals of the company, managing the funds of the company, and establishing additional ways of maximizing the overall wealth of the company. Creating and maintaining an accounting system is of vital importance for a growing company.

The first step to creating an accounting system is choosing which accounting method to use. The Cash Method (or Cash Basis) is when income is counted when it is received (either as cash, credit card charges or check) and the expenses are counted when they are actually paid. This is the most common method for small businesses, especially those that take immediate payment for a product or service. The Accrual Method (or Accrual Basis) is when income is counted when a sale is made (regardless if you actually receive the money for it) and expenses are counted upon receipt of the good or service (rather than paying for it immediately upon ordering). This method is common for