Self-employment gives you some tax breaks

When it comes to taxes, being self-employed has some advantages. Whether you work for yourself on a full-time basis or just do a little moonlighting on the side, the government has provided you with a variety of attractive tax breaks.

• Save for retirement. When you’re self-employed, you’re allowed to set up a retirement plan for your business. Remember, contributing to a retirement plan is one of the best tax shelters available to you during your working years. Take a look at the SIMPLE IRA, SEP IRA, or Solo 401(k), and determine which plan works best for you.
• Hire your kids. If your business is unincorporated, employing your child under the age of 18 might make sense. That’s because your child’s earnings are exempt from social security, Medicare, and federal unemployment taxes. This year, your son or daughter can earn as much as $6,200 and owe no income taxes. You get to deduct the wages paid as a business expense.
• Deduct health insurance. Are you paying your own medical or dental insurance? How about long-term care insurance? As a self-employed individual, you may be able to deduct 100% of the cost of these premiums as an “above the line” deduction, subject to certain restrictions.
• Take business-use deductions. Self-employed individuals can also deduct “mixed-use” items directly against their business income. Use your car for business and you can deduct 56? per business mile driven. The business-use portion of your computer purchases, Internet access, and wireless phone bills is also allowable. And if you meet the strict requirements, claiming the home office deduction makes a portion of your home expenses tax-deductible.

Please give us a call to find out more about the tax breaks available to self-employed individuals.

 

Make time for your annual business checkup

You get an annual checkup from your physician to monitor and manage your personal health. Shouldn’t you do the same for your business? To keep your operation in top shape, consider an annual business review. The benefits of such a review are evaluating current performance and better planning of future operations.

Some things you should evaluate in an annual business review include the following:

• Revisit your business strengths, weaknesses, and opportunities. Is your competitive position improving, or are you losing ground?
• How did you perform relative to your business plan? Did you meet or exceed your objectives? Are sales, profit margins, and cash flow improving?
• Get a pulse on your customers. An annual customer satisfaction survey is a great way to assess performance, obtain insight on potential new products or services, and to let your customers know how much you value their business.
• Evaluate your team. Are you developing a superior team, employing their unique talents, and training them to improve performance? Do you reward on merit or simply on seniority?
• How effective is your marketing? Are your current methods and channels working well, or are you simply doing what you’ve always done?
• Meet with your insurance agent. Is your coverage adequate and appropriate for changes in your business activities and acquisitions?
• Review your business tax strategy. Identify opportunities for tax savings. Are you using the right form of business entity? Are you aware of recent changes in the tax code that might benefit your business?
• How is your scorekeeping? Do your measurements track your progress or do they measure things that don’t matter? What are the key performance measures that drive your business?

If you are serious about improving your business, consider a yearly assessment of your operation. For any assistance you need, feel free to contact our office.

To grow or not to grow? That’s a business question

To grow or not to grow is a decision most successful small businesses face at some point. There can be opportunity and profit in growth, but there can be perils and risks as well. What should you as a business owner consider when you are faced with this important decision?

BENEFITS. First, analyze the potential benefits of expanding your business.

• The business can often achieve attractive economies of scale from increased buying power and operational efficiency. This can often reduce your cost structure and improve your margins. Growing your margins at a faster rate than your sales growth can achieve remarkable financial results.
• Growing organizations can often attract more skilled employees who prefer larger organizations with more opportunities for promotion and development.
• Growing organizations generally have a greater opportunity to go public.

RISKS. Next, take a look at the risks your business faces if you expand operations.

• Larger organizations typically require more elaborate systems and tend to be less personal than smaller companies. As it grows, the business will probably have a more rigid management structure.
• Increased complexity can result as operational issues tend to expand faster than anticipated. Operating remote locations can be very challenging.
• Loss of control may be a consequence of expanded operations. Growing companies face significant integration changes, and developing capable managers can be difficult.

For help in analyzing your company’s situation, please talk to us. We can help you weigh the benefits and risks of expanding your business.