When it comes to owning your own business, there are many perks to keep you going for years. However, at some juncture, every business reaches a stage where the owner needs to plan for the next stage of their life and the life of the business. In the world of financial planning, we call that Exit Planning. According to the Exit Planning Institute, the average business owner has around 80% of their net worth tied up in the business. If retirement is part of their life plan, then they’ll need that 80% to live off of. So how do you make those plans and get everything you want out of your business? Is your business sexy? Here are some things to think about as you formulate your exit strategy. Getting Out Whether your plan involves selling, handing down or going out of business altogether, you need a strategy in place to get the most out of your business. In the next ten years, 3 out of 4 business will change hands. The reason for that is that many baby boomers own businesses right now. Next for them is the retirement phase of life. So essentially what’s going to happen is a lot […]
Tax Tips for Students with Summer Jobs Many students get summer jobs. It’s a great way to earn extra spending money or to save for later. Here are some tips for students with summer jobs: Withholding and Estimated Tax. If you are an employee, your employer normally withholds tax from your paychecks. If you are self-employed, you may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments on set dates during the year. This is essentially how our pay-as-you-go tax system works. New Employees. When you get a new job, you need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form. Self-Employment. The money you earn working for others is taxable. Some work you do may count as self-employment. These can be jobs like babysitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct those costs. A tax deduction generally reduces the taxes you pay. Tip […]
If you participate in a qualified 401k plan, you’re among millions of Americans utilizing this option for retirement planning. These plans are a great way to stock away pre-tax dollars to fund your future lifestyle once you retire. A properly planned 401k can also represent an excellent benefit for a business owner as well. Here’s how. The Scenario We recently met with small business clients, along with their CPA. This particular client generates around two-and-a-half million dollars in gross revenue a year. The owners, a husband and wife team, each earn $75,000 a year in W-2 wages, and the business saw a profit of just over $297,000, which is split 50/50 between them. They’re frugal with their money, carrying no debt and spending roughly $6,000 a month on living expenses. This has been the key to their success. The Before and After They’re making almost $450,000 a year in taxable income. Before they incorporated 401k planning into their business model, it wasn’t unusual for them to get tax bills ranging from $150,000 to $180,000 a year. Now, with their 401k plan in place, their combined tax bill was $63,000. We placed $106,000 of their income into the plan. Utilizing employee […]
This week we are starting to see some of the fruit of our labor, with blooms popping out on many of our plants. So I wanted to talk about reaping and sowing this week. It’s not just a gardening concept. You want to apply this principle to your business transactions too!