There are so many things I wish I had known when I started my business, but a huge one would have been understanding my business’ finances. My hope is that this guide can be helpful if you are looking to take your side hustle more seriously, starting your own business, running it full time, or whatever it may be.
*The legal things….... I am not a financial advisor or tax professional, these are just things that have helped me with my business. This is for educational purposes only, nothing I say is intended for, or should be taken as tax, legal, or financial advice. Laws are always changing, and you should always contact a tax or legal professional to help with your situation.
Let's start with one of the most important things, register your business! You own a business, you need to register that business with your state to make sure you are following all the legal requirements of owning and operating it. Each state and county has completely different laws, so be sure to read and find out what you need to do. I started off as a Sole Proprietor business but when I took Likewoah full time I registered as an LLC. Talk to a tax professional to find out what works best for your business situation.
Here are a few things I wish I would have done when I first started running Likewoah, and over the years, through lessons learned the hard way, are all implemented now.1. Open a business checking account
- I can not stress how messy my finances were in my first year running Likewoah full-time because I did not do this.
- In order to track your expenses properly, this is key for your sanity and organization
- Game changer doing this!
- Taxes are expensive, like truly far more expensive than you could have imagined
- I put 30% of my income from Likewoah into a saving account that is specifically set up to pay my taxes from
- Having all your business expenses separate from your personal finances will save you hours of headaches when it comes to taxes
- I try my very best to only use my business credit card for business purchases, but inevitably some purchases make their way onto my personal credit cards
- This will save you endless time when it comes to filing your taxes, as well as your sanity
- I use Quickbooks self-employed and find it works great for my needs and incredibly affordable
- You may want a CPA to look over your transactions to help you categorize them properly
- I sit down at the beginning of every month and manually add in any transactions that end up on my personal credit cards to my QuickBooks account, things such as my cell phone bill, internet, etc
- If you are running your business full-time you no longer have a retirement account such as 401k from your employer
- I have a SEP IRA setup with Acorns that I contribute to weekly, which is like a 401k if you are self-employed or own a small business
- You can find out more information here regarding SEP IRAs, and if you want to open one with Acorns, here is a link to do so!
- After a few years of fumbling through my finances and taxes during tax season, I finally hired an accountant in 2020 and it was a game-changer
- Do your research to find someone in your area who specializes in small businesses and understands your industry
- It took me about five months, multiple conversations, and one fired accountant until I found the right one for me
There is so much to running a small business and you wear many hats as an owner. I hope these financial tips can help save you some time and stress!