Mark is a tax and law expert who co-founded Kyler Kohler Ostermiller & Sorensen--a business focusing on estate planning, maintaining company records and much more. He's a best-selling author and speaker, his latest book being "The Tax and Legal Playbook." Mark's work has been featured in major media publications such as Wall Street and CNN Money.
Everybody is a sole-proprietor by default when starting a side-hustle.
Whether you’re selling something on eBay or doing business consulting. There are two reasons why you might want to upgrade to a different business entity.
Number one is taxes.
You’re going to get all the regular tax write-offs, whether you’re a sole proprietorship or an LLC,
We can write off all those expenses related to our business. But, what makes the difference is when you’re a sole proprietor and start making money. If you’re earning more than $30,000 annually you need to change your business’s entity from a sole proprietorship.
I’m going to say 95% of the time upgrade to an s corporation. We want to get you from an LLC or sole-proprietorship to an s corp for tax savings–since you’re going to pay way too much in self-employment taxes in these other business entities.
Be wary of legal zoom or some websites that help you set up business entities alone.
It’s not legal zoom does a bad job. It’s people incorrectly clicking boxes believing they’re saving money.
Everybody’s going to have different levels of write-offs.
A rule of thumb is for every thousand dollars you make put at least 10%-20% aside for taxes. Open up a separate savings account and put this percentage of your sales away for taxes.
As you earn more money, you may want to put away a little more like 15% or 20%. Make setting aside money for taxes a habit. Worst case scenario, you’ll have a savings account with cash at the end of the year.
Investing in myself.
You’re not going to learn how to be a business owner in a classroom. So, build a support group like a team of advisors.
I had a janitorial business for nine years while I went to college.
It took me nine years working part-time at nights, running my business with 20 employees. We’d clean 90 toilets at night in restaurants and in commercial buildings. It was hard, but I learned how to hire and fire people.
I also learned how to do my books and buy equipment. It took time to build a sustainable business.
I’d find something I could resell on eBay making a profit.
Build a board of Advisors.
Choose three to five people who’d give you tender but hard-hitting advice. Get them around the table and say, “help me.” Then, be humble enough to accept their advice.
Money provides an opportunity for me to give to others, to find time to do what I love, and help my family.
Chris writes personal finance and productivity articles for software companies. He gets fresh ideas through continuously investing in himself and interviewing successful entrepreneurs.