Captain’s log, stardate 20220523
This week on TBOA, CPA Erica Goode joins Rochelle and I to share her perspective on handling money in your expertise business.
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The big money decisions you’ll want to make early and how to decide between setting up a sole proprietorship, an LLC or a Sub S.
When does it make sense to build processes to handle things like paying yourself and funding and paying taxes?
What to ask your CPA and why you don’t want to wait till year-end to get advice.
When to look for longer-term, perhaps tax-advantaged opportunities for savings.
How to think of and use your business profits now to build your desired legacy later on.
“Usually the starting point is a sole proprietorship and you don’t want to hang out there too long.”—EG
“If you can’t pay yourself what the IRS calls “reasonable compensation”…it’s not time for you to be an S-corp yet.”—EG
“I’m really big on paying yourself a consistent salary—not necessarily varying with your revenue stream—because with consultants, expertise businesses, coaching businesses, you get these roller coaster spikes of revenue.”—EG
“Get a small refund or maybe owe a little bit…but we try to always avoid these four or five figure surprises that you’re writing a check for in April.”—EG
“There’s a lot of relationships with CPAs where you’re just sending them a packet of documents in February, and they’re sending you back something in April, and you’re either happy about it or sad about it.”—EG
“My preference, especially for somebody in an expertise business where they’re a soloist, would be to look at a solo 401k. You can only have a solo 401k if you and or your spouse are the only employees or owners of the business.”—EG
“You say: ‘I can use this to change my trajectory or my lifestyle or my retirement plan. I could use this money I’m making in this business. And the more profit I make means that I could pay off my mortgage sooner.’”—EG
“It’s always good to have an out of tax season conversation with a CPA… And have somebody respond with ideas that you would have never thought of (or would have taken a lot of hours of research for you to get).”—EG
“If you’ve noticed that you’ve acquired two more cars, a four Wheeler, three campers and a boat, it’s probably time to start thinking about some tax advantageous ways that you can spend your money.”—EG
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