HOW TO MAKE YOUR BIZ LEGIT
LLC vs Sole Proprietorship, EIN, trademark vs copyright. There are so many things business owners need to tackle to make their business legit in the eyes of the government. In this episode, Phoebe tackles these subjects and providers advice on how to get legit.
LLC VS A SOLE PROPRIETOR, WHAT’S THE DIFFERENCE AND WHICH ONE IS RIGHT FOR ME?
If you make $600 or more in revenue, you're a sole proprietor. A sole proprietor means you are the sole owner of your business and also includes people who are freelancers or contractors.
LLC's, which stands for limited liability company, is in essence a business structure that allows your business to be separate from you. Meaning for instance if your company were to get sued as an LLC, your personal assets should be protected from the suit.
So which is better for me?
For most solo owned and small businesses, it makes sense to keep them as sole proprietorships. However, for businesses in industries with potentially high liabilities (i.e. food nutrition, events [like us!]), or if you have a lot of personal assets that you wish to protect, an LLC might be the better option of the two.
THE 2 THINGS YOU NEED BEFORE STARTING YOUR BUSINESS
Let's start with something basic—your city wants you to have a business license. Point blank, period. To find out about specific requirements for obtaining your business license, go to your city's website, and you should see an online application.
Another application you should fill out when applying for your business license is an EIN or an employer identification number. Quickly done through the IRS's website, and free, an EIN is an excellent alternative to using your own Social security number for business bank accounts, permits, and is an absolute must-have if you have employees.
BANKING, BOOKKEEPING, AND MORE
Business bank accounts are essential, and some online platforms require you to have them registered underneath your business name. We recommend that you have at least two credit cards—one for personal expenses and one for business. For your business credit card, it's important to use it only for things that make your business run, as it could potentially become a write-off. For more info about what you'll need to open a business account, you should set up a meeting with your bank and go over the options that they provide.
To help keep track and manage your expenses, you must take your bookkeeping seriously. Not only does bookkeeping help you know the amount of money in your accounts or the amount of taxes, you'll be expected to pay, but it can actually help you make informed decisions about what revenue streams are making you versus costing you money.
When you avoid paying your taxes, fees go up, and that avoidant energy is going to harm you. The energy of you avoiding your books and taxes is going to cause more harm then paying them.
IT’S TIME TO TALK TAXES!
First of all don’t avoid paying your taxes! “...When you avoid paying your taxes, fees go up, and that avoidant energy is going to harm you. The energy of you avoiding your books and taxes is going to cause more harm then paying them,” Phoebe says.
As a sole proprietor, you are paying taxes on your profits. In order to do this, you need to make sure that you keep track of your business expenses and then deduct that from your gross income or revenue.
If your LLC is solely owned, you'll be taxed like a sole proprietorship. If multiple people own your LLC, it's usually taxed as a partnership, meaning each LLC member will pay self-employment tax on their share of partnership earnings. I also wanted to mention that an LLC can also be taxed as an S- Corporation. An LLC taxed as an S-corp means you pay yourself a salary. The tax benefits of being taxed as an S Corp may make sense if you are making $100,000 profit or more.
For more on taxes and bookkeeping check out Moneywitch’s Business Coven course on taxes, accounting + biz structure.
TRADEMARKS VERSUS COPYRIGHTS
Most people think that these two concepts are interchangeable, but actually, they protect you from very different things. A copyright protects literary and artistic works, while a trademark is more focused on protecting items that define and identify a company's brand, such as a logo. Meaning you can trademark your brand and logo, while all of your courses and designs are copyright protected.
Taxes and accounting course
Business Coven (formally Business Basics for Not-So-Basic Business Babes) is a comprehensive course on Bookkeeping, Taxes, and Business Structure.
So you can finally feel GOOD about the organization of your money, reduce your stress about taxes, and learn how to make important choices about your biz as you see your expenses and income quarterly.