Entrepreneurs: What You Need To Know About Taxes (Sports Edition)
Being an entrepreneur is an inherently risky (high risk, high reward) and stressful professional path; the financial stakes are often very high and it can require longer than usual hours and effort to be successful. Add in a lack of familiarity with business taxes and being an entrepreneur can be downright discouraging. Don’t let something that all businesses and individuals participate in be the thing that stops you; we here at Boxelder Consulting would like to shine a light on the things you must pay attention to when it comes to taxes and your business. With the universality of sports, we have added in sports analogies to keep it interesting and to give perspective.
What kind of business are you? (What sport do you play?)
There are several kinds of tax filings for businesses and like different sports, they all have different rules and objectives. The ways that Football and Baseball are scored are very different from each other; just like how an LLC and an S corporation are taxed differently. Make sure you completely understand the type of corporation you are, as well as have the right filing. You can do the legwork and research online to make sure you have filed correctly or a consultant can help you file and double check that you have done so properly.
Know Your Industry and State (The Rules of Your League)
Even though you may be playing the same sport, no two sports leagues are created alike (even the National League and American League under Major League Baseball have different rules and ways of playing the sport). Industries and states are the same way. Some industries have different tax breaks or credits for different things related to the work or services they provide. Additionally, states have different laws and collect and tax in different ways. Knowing the tax laws and rules for your industry and state can not only save you trouble down the road, but can save you money as well.
Timeliness (Shot Clock)
You don’t have an unlimited time to shoot a basketball, get off a football play or more recently now, throw a baseball pitch. You also don’t have forever to pay your taxes. Due to the nature of individual taxes, it can be easy to think that paying taxes is a once a year thing, which it is for an individual, but not a corporation or business. Taxes are often paid quarterly so it is crucial to research when taxes are due, to whom and for what.
Payroll Tax (Pay to Play)
If you have employees, you likely pay them. Like a sports team with their payroll, it is important that this is done correctly so you don’t lose any of your talent. There are taxes on payroll and the rules are different depending on the kind of pay you provide. There are many third party services that will do the work of running a pay roll for you and it is often worth it to ensure your legitimacy as a business.
Tax Credit Opportunities (“You Miss 100% of the Shots You Don’t” Take – Wayne Gretzky)
Missed opportunities are costly at the highest level of play; often a team only gets a few opportunities per game and if you don’t capitalize, you can lose. You can also lose if you don’t take advantage of tax credit opportunities. There are many ways to unlock these opportunities. Providing certain employee benefits, offering employees a retirement plan and working in an education program are all beneficial ways to seek out tax credits; these are also things that can keep employees loyal and productivity up.
Record and Document Everything (Stats, stats, stats)
Baseball is famous for the depth of its’ record keeping and stat tracking; they literally have a stat for everything. Additionally, records are a point of pride and bragging rights in Football. The records of your business are critical to keeping the pulse of your company alive. Document everything, save and file every receipt and invoice. It may seem like over kill but trust us, you will thank us if your end of quarter numbers don’t match up or if you get audited. A tried and true record keeping system will streamline the legitimacy of your business and will help ease minds should something come up.
We recognize that starting a business is one of the most daunting things a professional can do and taxes are just one part of the massive undertaking. Boxelder Consulting is happy to assist entrepreneurs with their taxes and organization so you can focus on other areas to help ensure the success of your company.