SHOW / EPISODE

#19 The Legalities Of Setting Up A Business And Other Helpful Tips with Dawn Patton

28m | Feb 10, 2021

About Dawn

Dawn is a small business CFO who has a passion for helping small business owners with their accounting & taxes. After years of working for another company Dawn made the jump to start her own business centered around helping entrepreneurs. She absolutely LOVES what she does now! Today she is here and more than happy to share her knowledge with us about the things we need to know when starting a new business!

What should we know when we want to start a new business?

Each business is different, so start with understanding your business and its needs.
Step 1: Figure out the funding and money. Are you funding the business? Are you raising capital? Are you getting a loan?
Step 2: Choose a business name. Make sure it’s available and don’t overthink this step. Think about whether or not your business name is keyword searchable. See if your name is trademarked.
Step 3: Obtain any licenses and permits for your business. Register your business in your state. Check out the secretary of state website for your state and they’ll list all of the permits you need. If you are having a hard time finding the information, call them.

What are the differences between different business structures?

When it comes to taxes, LLC, DBA, Sole Proprietor, and contractor are all taxed the same way. You report your income on a Schedule C with your personal income.
A partnership or S Corp have separate tax returns, and can lead to tax savings.
When it comes to the legal side of things, a contractor and sole proprietor are similar. A sole proprietor uses an EIN number and a contractor uses their personal social security number. Dawn recommends that everyone get an EIN number.
An LLC gives you more legal protection. It separates your business and personal assets and liabilities. If someone sues your business, they won’t be able to touch your personal property.
Dawn recommends that everyone get at least an LLC.
That said, an LLC doesn’t save you any money on taxes. If you want the protection of an LLC and tax savings, look into an S Corp.
In an S Corp, you need to be on payroll.

How can you budget and plan for taxes?

When you’re a W2 employee (working for someone else) social security and medicare taxes are withheld for you. When you’re self employed though, you are responsible for paying those taxes.
When it comes to budgeting for taxes, put aside at least 15% of your net income (profit minus expenses). On top of the 15%, you’ll also need to pay based on your income. Look up the tax brackets to learn more.
Whenever you pay yourself, you should withhold your tax money and put it into a tax savings account. Every quarter, you should pay your taxes and keep your receipts so that you don’t have to pay it all at the end.
https://www.irs.gov
Paying Your Taxes: https://www.irs.gov/payments

How do you figure out how much your time is worth?

Take a look at your net income for a specific period of time and then divide it by the hours you worked during that period.
This will give you how much your time is worth.
If you are thinking about hiring an employee or contractor for less than your time is worth, it’s a no brainer.

What counts as a write off for your taxes?

Only a business owner can write off business expenses. Not W2 employees.
Keep your finances as clean as possible.
For your home office either deduct $5/square foot of your home office or calculate the actual expenses and deduct the percentage your home office is of your home.

Links:

Instagram: https://www.instagram.com/_dawnpatton_/

Website: https://pattonaccounting.net

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