Have you ever considered turning your hobby into a business? Maybe you are currently working full time for a local business and dream of working for yourself. You are not alone. According to the US Small Business Administration, North Carolina has 843,724 small businesses employing 1.6 million employees. The biggest gain of new jobs was seen in the smallest firm size, of small businesses with 1 to 4 employees. If now is the time to consider a career change, then here are some tips to assist you.
1) Determine what type of organization is best for your business. You can be a sole proprietor, partnership, LLC, S-Corp, or a Corporation. You should consult with your attorney or CPA in making this choice as there are legal and tax considerations you need to consider.
2) Estimated Taxes – Self-employed taxpayers are required to make quarterly estimated tax payments. This amount is a function of the amount of profit you have made in your business along with other sources of income. If you are uncomfortable making that calculation, your CPA can do that for you.
3) Taxpayers must file a Schedule C, Profit or Loss from Business, or an additional tax return for your organization. The type of business you have formed will dictate which type of return you need to file. The Schedule C is a part of your individual tax return. Some business will require a separate tax return all together.
4) SE Tax – for those companies that have made a profit, you will need to calculate the amount of self-employment tax that is due to being paid. These funds will need to be added to your estimated tax payments. Your CPA can assist you with these calculations.
5) Keep your financial records in order. You will be able to deduct expenses paid to run your business if those expenses are ordinary and necessary. Some larger purchases will be capitalized and therefore deducted over a number of years.
For a free tax planner checklist visit my website: www.SiskMorrisCPA.com and download one right from the site.
Alicia Sisk-Morris is a CPA with over 20 years’ experience in Asheville and Weaverville. Her firm services individuals, small businesses and not-for-profit clients that range from solo-entrepreneurs to artists, alternative and traditional medical professionals, construction firms, architects, engineers, real estate professionals, schools, business executives, and start-ups. Alicia is an instructor for AB Tech College, Small Business Administration workshops, and the Western Women’s Business Center, and a public speaker and trainer. Learn more at: www.siskmorriscpa.com.