Describe in detail two significant business operations that are affected by the financial regulations above, including the use of examples.
Financial regulations affect the operations that are carried out in a business entity. Two significant regulations include the business laws and the Sarbanes-Oxley Act of 2002. The former appertains to the guidelines and regulations that the IRS has given on the approach that businesses should use in filing their taxes. Sarbanes-Oxley Act of 2002 relates to the procedures that need to be followed in reporting the various financial statements for an organization. It appertains to the guideline and measures that have been put in place by SEC (Securities and Exchange Commission, n.p). A practical implementation of the procedures will realize effective and efficient activities in a company.
One of the business operations affected by financial regulation is filing a tax return. According to the requirements that have been highlighted in the business tax law, the approach to be used by a single enterprise in filing tax is not the same as that of a partnership. The framework that is implemented between the two is different from each other. For example, how the income tax from the two entities will be approached is distinct. It is possible to make payment of the taxes for an income that has been received at the end of a financial year. The income tax in such a situation will be withheld from their total earnings (Securities and Exchange Commission, n.p). However, if that is not the case, it will be necessary to create an estimated tax, especially if the revenue generated is from a partnership form of business.
Another business operation that will be affected is on reporting the financial statement. According to the regulation that has been provided in the Sarbanes-Oxley Act of 2002, the certification of the financial statements of a company ate done by the senior officer (Luthkevich, n.p). There is a need to have compliance with all the requirements which have been highlighted in SEC. More emphasis on the regulation is being placed on the aspect of auditing. For example, the regulation will affect an organization’s auditing and reporting procedure since it must have both an internal and external auditor. The end goal is to ensure that all the errors in the books of accounts, such as omission, have been effectively and efficiently eliminated either at the moment or in the long run. There is the creation of transparency in the presentation of the company’s financial statement to the relevant authority.
Describe three of the most significant parts of these financial regulations that govern crowdfunding business operations.
In crowdfunding, there is the creation of a fundraising program that will assist with collecting capital to be invested into a business. The sources of funds that have been collected are used in running new business ideas and ventures. Some of the operations that occur include reporting on the outcomes in funds collection and allocation towards the various business activities. That implies there is the preparation of the books of accounts to assist with tracking the progress of the operations. More so, there is a taxable income, implying that they will be affected by specific business laws. The focus will be on the strategy to be used in filing their tax returns based on the source of the funds, which can sometimes be a gift or a grant.
One of the most significant parts of the financial regulation that affect the operation taking place in crowdfunding is fraudulent and accounting errors. The section is mainly concerned with the transparency required in the funds that have been collected and how they will be used to run the different operations. Humans are prone to making errors, but with the regulation, there is a limitation on the number of mistakes that will be made (Securities and Exchange Commission, n.p). All the numbers, especially those relating to funds, need to the appropriated, written, and placed accordingly in the distinct books of accounts. The reporting operation will be influenced since there will be an increase in the number of individuals willing to participate in crowdfunding activities. Positive outcomes are anticipated at the end with increased adherence to accuracy.
Another part is that that of filing taxes. The section will mainly impact the commitment towards the standards and regulations that have been put in place by the IRS. Other activities in crowdfunding will be positively impacted if there is an appropriate approach used in filling taxes. The focus will be on the nature of the business and what is expected of them at the end of a given financial year. The last part of the financial regulation is that which relates to membership. The guidelines to be implemented in a business venture depend on the strategy used in the formation. The form of membership will affect the operation of the financial obligation since it will be vital in establishing the nature of business (Luthkevich, n.p). For instance, it will be possible for some operations attributing to the funding such as gifts and donations to be exempted from tax. The end goal of each entity is to realize the correct procedure that needs to be implemented and the contribution towards an increased standard of performance in the business venture.
References
Luthkevich, B. (n.d.). Sarbanes-Oxley Act of 2002. https://searchcio.techtarget.com/definition/Sarbanes-Oxley-Act.
Securities and Exchange Commission. (n.d.). SEC Staff Accounting Bulletin: No. 99 – Materiality. https://www.sec.gov/interps/account/sab99.htm.
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