Raising Money When You Want to Start a Small Business

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StrategyDriven Managing Your Finances Article | Raising Money When You Want to Start a Small Business | EntrepreneurshipStarting a business is a common dream, and while you may only need a small investment to get off the ground, it can lead to big things. However, getting that initial seed money can be difficult, especially when you’ve still got rent and bills to pay while you wait for your first profit to arrive. That’s why you need a plan to get your business going, so here are some ideas.

Find Cryptocurrency Investors

While there are a number of platforms where people can invest cash in startups, you’ll find that people are very cautious about giving cash to inexperienced business owners. However, in the world of cryptocurrency, people tend to be more open to taking risks. Putting together an Initial Coin Offering, or ICO, can be a good way to get the money you need to kick things off, and the more unique and exciting the service, the more likely you’ll get funding.

Invest and Raise More Cash

If you’ve saved a little money but need to raise more, you may want to consider investing in and trying to get a return on your cash. For example, you could use Genesis Mining to mine Bitcoins, which you can then sell on an exchange, potentially making a profit. As with any investment, you should do your homework first and ensure you aren’t taking any unnecessary risks.

Sell Things You No Longer Use

A lot of people have things hanging around their house that they no longer need, so why not sell your old items for cash? You may be surprised that you can make hundreds of dollars in just a few days when you list your items online, and as long as you use clear photos and write a decent description, you should get a buyer.

Get A Loan

Understandably, a lot of people are worried about accumulating debt before they even have their first customer, but if you’re starting a business that needs a lot of specialist equipment or supplies, then it is often necessary. Put together a business plan, outlining what you need to borrow and when you expect to turn a profit. This will help impress banks and potential lenders, so they can see that you’re serious.

Scrimp and Save

A lot of small business owners start their ventures by using their own savings. While it’s a big risk to use the money you’ve so carefully saved, at least you don’t owe anything to a bank if things go wrong. Look at what you earn versus what you spend and see where you can boost your income or cut your expenses. You could also start your business as a side hustle with very low expenses. If you do something creative, look out for ways to do it more cheaply, such as finding bulk supplies or buying different equipment. While you won’t be able to quit your day job right away, you can at least start to build a customer base, which in time could take you to the next level.

 

How Is an LLC Taxed?

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StrategyDriven Managing Your Finances Article |LLC|How Is an LLC Taxed?Easily one of the most daunting parts of being an entrepreneur, tax season can be complicated if you’ve never been exposed to doing business taxes before.

In this article, we’ll explore how LLC taxation works, so as an LLC owner, you neither overpay nor underpay the government.

Before We Discuss LLC Taxation

Before we get into the nitty-gritty details of LLC taxation, it’s important to first understand what an LLC is.
A Limited Liability Company is one of the simplest ways for a new employee to structure their business and have it recognized as a commercial entity in the government’s eyes. The requirements to form an LLC are low, making it the path of least resistance for budding entrepreneurship to achieve legal status.

Forming LLC (through an attorney or online service) enables owners to protect themselves with limitations of the risk their personal assets face, should something untoward happen with the company. In addition, starting fees are relatively small (less than $200 in most states).

The principal benefit of LLCs, however, lies in the discussion of LLC taxes. LLC’s are single taxation entities, meaning that unlike corporations, the income can only be taxed at one level (business or personal income).

How is an LLC Taxed?

The answer to this question technically depends on how the company is structured. If the company is structured as a collection of multiple partners, then the LLC’s income is taxed only at the personal income level.

That means that each of the shareholders in the LLC report income from the LLC as their personal income, and they file individual tax returns. No additional forms have to be completed for the LLC itself.

However, if the LLC is structured as a C corp or S corp, which it can elect to do after it’s created, then it will be required to submit additional documentation. The IRS Form 8832 is used for the LLC to elect to submit taxes as either a C corp or an S corp. The documentation submitted thereafter will determine what additional forms the LLC uses to be taxed (Form 2553 for an S corp and Form 1120 for a C corp).

Without corporation status, the LLC’s income is classified as “pass-through” which means that it just goes into each owner’s personal income return.

Do LLC’s Pay State Income Tax?

Some states require that LLC’s pay income tax at the state level. This is fairly common, and will often take the form of a franchise fee.

The franchise fee is an annual fee submitted whenever the LLC submits its annual report. The annual report contains information regarding total revenues, total operational expenditures, philanthropic expenditures, etc..

Most states will use the federal tax liability as a starting point for their own tax determination. Look up your individual state’s LLC tax law to figure out how much you’ll be liable for this April.

Don’t Mess Up Your Taxes!

Few things can kill a growing company’s momentum than falling on the wrong side of the IRS. Take the right steps to ensure that you’re completing your LLC taxation correctly — look up state laws, fill out the right forms, and consider calling a professional if you need help.

Once you’ve gotten through this tax season, make sure to come back and subscribe for more small business advice!

What Harms Your Business Budget The Most?

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Every single business out there has a budget. Every single business who wants to survive beyond the first five years is going to listen to and obey their budget! It might be hard going at times, but it’ll be worth any potential risks in the long run.

And because of that, you might want to work out what costs are currently the biggest sucks on your budget. You need to be sure you can provide for them, month in and month out, and always be sure to prioritise them until you feel secure enough to move on. It might just be an example of growth, at the end of the day!

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Advertising Costs

Advertising is a big part of the business process. If you have a company, and that company sells a product, everything from brand name to your finished logo is going to come off as an advertising expense. It’s been found that businesses can spend at least 20% of their total budget on marketing, and that’s a huge chunk of money for one department alone.

As a small business, you’re going to be placing emphasis on advertising, to ensure you get the word out – have you budgeted enough money?

Travel Costs

Ferrying yourself to and from work every day is going to get expensive. Of course, you should be able to claim at least most of these expenses back at the end of the fiscal year, but that doesn’t change how expensive they can be in the meantime. You’ll still have to fork out for the fuel, and the car costs, and the mileage covered under your insurance, and that’s hard on a small business or startup fund.

At the same time, if your business makes use of a company fleet for general employee use, these costs are going to be maximised tenfold. How do you cut back on these kinds of expenses, when every working day is filled with employees going from A to B and back again? You’ve got investors to meet and clients to satisfy, after all.

Well, mandating a policy of writing down time spent with a vehicle, and making sure it’s returned at a certain time at the end of the day can help you to gather control. And with something like a Fleet Fuel Card, you should be able to save on standard fuel costs, no matter how much you need to use each year.

Rent Costs

And finally, you’re going to have to fork out for rent costs month by month too. Even if you’re running a home business, and have a mortgage to pay, you’re still going to end up counting these living expenses as a business cost.

And seeing as lease agreements are usually dependent on the kind of business you’re running, you’re going to be using some very niche and specific calculations to try and factor rent into the budget.

Your business budget can be quite stretched, so make sure you’re aware of sinkholes.

How do tax changes affect you?

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StrategyDriven Managing Your Finances Article |Tax Reform|How do tax changes affect you?Politicians of any experience and caliber love to talk about tax reform. Why should you care? As you already know, tax reform is a change in the current tax code. That includes the way taxes are collected as well as the amount of taxes you will pay. The keyword here is “you”. You are the taxpayer and therefore any change in the current taxation system will have a direct effect on you. Another reason to stay informed about any changes in the tax law is the change in the way taxes are managed and distributed after they have been collected. Your money will be managed by the local or federal government. The way it is done and the places your tax money will be designated to will have a major effect on you on many different levels. If you want to learn more about how tax changes will affect you, go to juliogonzalez.com or read more below.

What are some of these effects?

If the current tax code is simplified enough, you may be able to get your own tax return done. That translates into a few hundred dollars savings annually directly to you. Being able to understand the taxation rules and regulations will give you the confidence to file on your own. If you currently hire a professional out of fear to make a costly mistake, you will be able to save that fee by doing it yourself.

The major goal of any tax reform is to improve and streamline tax collecting processes. Depending on what exactly is changed, you may see effects like lower taxes that you have to pay. As a business owner, you may experience a change in the way you can make business expense deductions. As a homeowner, you may get more or fewer rebates for energy-efficient improvements done at your house.

Tax reform would also call for language simplification when dealing with the IRS. The plain language throughout will help you understand exactly what you are dealing with.

Tax reform will provide taxpayers with the necessary tools to plan ahead. It is especially valuable for self-employed people. The current code already has some tools on how to estimate the amount you will end up paying at the end of the year. However, more improvements will allow you to estimate your tax goals. You will be able to enter your goals like “pay zero” or “get a return” and see how much you will need to put in to meet a certain goal.

Tax reform will provide you with the tools to foresee and prepare for a tax bill or avoid paying a penalty. As we know, the current IRS administration is often ineffective when helping its main customers. Most people don’t feel like figuring it all out on their own. Tax reform will provide more resources for the current IRS. As more webinars by the IRS on how to use the system become available, you will be able to use those tools and save more time and money.

3 Types of Taxes You Need to Account for as a Small Business Owner

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3 Types of Taxes You Need to Account for as a Small Business OwnerThe longer a business stays open, the greater the chance it will survive. The latest statistics show a third of new businesses fail within two years. Things are more difficult for small businesses. Many small businesses try to stay afloat by cutting corners. The owners may try to handle their own accounting and tax returns. This is difficult for those who don’t have the proper training.

Start Out The Right Way

Failing to pay taxes can kill a business. Indeed, the IRS places a lien on a company’s bank account when they don’t make payroll tax payments. Likewise, a business can be closed for not paying sales tax. That’s why experts recommend hiring a company to handle Business Tax Services. The government scrutinizes the payment of payroll taxes. Owners face harsh fines and penalties for abuses. That’s because payroll taxes are taken out of the employees’ money. Payroll taxes include federal income tax, state and local tax, and medicare and social security taxes.

Payroll Taxes

The employer withholds income taxes on employee wages after deductions are subtracted. Withholdings are based on marital status, tax bracket and the number of dependents. Medicare and social security taxes are known as FICA. 6.2 percent of the employee’s salary is withheld for social security. That amount is matched by the owner. Likewise, each party pays 1.45 percent for medicare. Business owners must file the IRS form 941 quarterly. This form reports withholdings that were taken. The withholdings must be paid to the IRS by a certain time each month. It’s a lot easier having a company do this work. Employers are also legally obligated to pay unemployment taxes. This money has to be available when unemployment claims are made.

Income Taxes

The business owner pays income taxes to the federal and state governments. Indeed, the business’ status can help when it’s tax time. Sole proprietors are the only owner of a business. Hence, they can pay business and personal taxes on one return. A schedule C must accompany the tax return to show the business profits and losses.

Corporations have the most complicated tax system. A corporation must pay income tax twice. The corporation and its owners file separate tax returns. This means owners report after-profit dividends on their tax returns. They’re taxed for the same money as the corporation. LLC owners only have to file one tax return. Sole proprietors pay 100 percent of their FICA taxes. This is known as self-employment tax. This tax makes sure the business owner can get retirement, disability, medicare and survivor benefits.

Sales Tax

Small businesses that sell goods and services must pay sales tax. The owner must apply to collect sales tax before the business opens. Sales tax is kept in a separate bank account and turned over to the Department of Revenue with an accounting. Sales tax must be paid at regular intervals depending on what state one lives in. This is another job for a good accounting service.

Small businesses face a lot of liability if they don’t pay taxes. Sometimes, it’s difficult to keep up with varying tax schedules and do regular work. That’s why it pays off, in the end, to have someone do it for you. This is one area where the company shouldn’t try to save money.