As Solopreneurs it is important to keep these 3 S’s top of mind in all aspects of running your business.
- Separate – What is personal and what is business. Whether it is emotional or financial, take note of the “cost” and be sure to place it in the correct column.
- Simplify – Implement KISS – Keep it Simple “Silly” – Try not to overcomplicate the process, the wheel has likely been created, now it is your time to perfect and make that wheel your own, rinse and repeat. Ask questions, others love to share their lessons learned. My personal mantra, Do as I say not as I do!
- Strategize – How can I make my business a success, and what does success look like to me?
In this post we are going to focus on the third “S”, Strategize. The following are 3 Implementable End of the Year Financial Strategies to make your business financially successful.
“I’m proud to be paying taxes in the United States. The only thing is, I could be just as proud for half the money.” – Arthur Godfrey
1. Defer Business Income Until January
Have you had a fabulous year? Did you underpay your estimated taxes? If you operate on a cash basis, why not wait until January to send out your invoices or maybe hold off on aggressively chasing those account receivables. Is there an account receivable that you know is not payable, maybe charge it off (talk with your CPA about charge off tax rules). Holding off on invoicing and collections does not eliminate, nor necessarily decrease your ultimate tax liability, simply defers it to the following tax year or the year collected.
2. My walls are DRAB!
It is not too late! Make office improvements and repairs by December 31st. Speak to your accountant to determine if your project is considered a repair and can be deductible in the current tax year, or if is an improvement which may need to be depreciated over a certain period. Since the pandemic, many of you continue to work out of your home - be careful to distinguish between an improvement or repair to your home vis-à-vis a home office.
3. Do I have a Business Retirement Plan?
If no, let’s talk. This is definitely one of the best ways for small business owners to decrease their tax bill, while saving for their future!
Establishing and if possible, fully funding, a retirement plan, can shelter hundreds of thousands of dollars. There is an alphabet soup of options – SEP IRA, Solo 401K, DB Pension Plan etc. – which one is best for you, depends on the maturity of your business and comfort level. You have until December 31st to fund the employee portion, and until you pay your annual taxes to fund the employer portion. Speak to a financial professional to help you determine which plan is best for you and to establish a plan before December 31st!
If you would like guidance on implementing the above Year End Financial Strategies, please reach out to me at firstname.lastname@example.org or contact us here to connect with a member of the Sandbox Financial Partners team. We're happy to answer any questions you may have. Live More and Worry Less!