Owning a business is fun

I've recently went out on my own as a sole proprietor. There are some really neat things about it such as certain items I need that I can write off. I just wrote my first quarterly check for taxes. $7,900 and I wonder how many people get to sit at home and collect on that. It is what it is. I had been holding back more than I needed and still dumping some into savings. This quarter I over estimated by around $4k. I am going to write myself a nice end of the year check if I keep it going. It's definitely been quite the learning experience. The one that baffled me is I had to put an ad in a local magazine for two consecutive weeks announcing my business. What a waste of money. It is the government though.

Wait until your CPA tells you that you doing so well, that you now support 2 or 3 families each year by way of your NE taxes.


I still remember the Mrs. after that Omaha meeting years ago.
She told the CPA that although she didn't require it or even want it, a thank you note woulda been nice.

It's wonderful. You get to pay into Unemployment Compensation but are not eligible to collect a dime. It's basically work or starve for you while many live off of what you pay in. You get to match your employees SS deductions but will never see a dime of those contributions.

When first starting out you get to work 12-16 hours a day and act as boss, labor, secretary, bookkeeper, regional sales guy and estimator.

Seriously though, I enjoy it and wouldn't trade it for anything I can think of.

Federal income tax, state income tax, school and property tax, sales tax, excise tax. In the end approximately 50% of GROSS income will support our gouvernment.

Are you still in the medical field Wade? The hospital where the little woman works is paying a $750 bonus per shift to get nurses to work nights on weekends in a cov** unit. That's some real money! I've heard the same is going on in Ft Smith Ark.

When I went out on my own back in the 80's I was nearly overwhelmed by all the IRS/Michigan tax paperwork. I'd always done my own taxes, but that QUICKLY changed and I got a "tax man"! I went through several of them before settling on a CPA from a big firm in a downstate city. It was pricey, but holy crap did that guy save me a bunch of my own money. I just kept track of the "in" and "out", and recorded what each "out" was spent on.......the CPA took my notebook from me when I got there and we talked hunting and fishing while he clickity-clicked away on a computer/adding machine type deal. After about an hour he would tell me how much each check was (or refund) to be made out for and where to sign his paperwork and I was soon on my way! I still pay the guy to do my and the Brides returns.

I hope it all works out for you Wade! Owning your own business brings its own challenges, but for me there is nothing better than being your own boss and the freedom that comes with it. Yes, we typically work longer hours than most, but if I want to take off on a Friday and go fishing, I do it.

Many nurses down here are leaving their hospital jobs and becoming traveling nurses; they are saying that they can make as much as $4500/week with this change and also don't have all the long and overly demanding hours. On the news daily they are talking about how hospitals are strapped and there are no ICU beds available. The reality is that there are beds available, but the hospitals don't have the nurses to staff them as a nurse can only handle so many beds. Lot of talk about these issues going on right now on the local news, and not real sure what is actually causing the nursing shortage.

I wish you the best! Chancey

Luckily Lugnut I am in the medical field so I have a pretty set schedule. I don't have any employees I am the only employee. It is weird writing yourself a check every two weeks but I have to make sure the government has a record of their cut. I do have a little book keeping I do generally it's mileage and saving my gas receipts. The other expenses are pretty standard and I can factor them in pretty easily. I worked for 12 years in the emergency department or overseeing the hospital I previously worked at. Now I've dove into primary care and I can honestly say I've never been happier. I work 8-330 Monday-Thursday and I am off at noon on Fridays. I am employed by an S-CORP but they offered no benefits and pay me straight cash so it was a no brainer to start an LLC. It was quite a culture shock taking on a practice with over 3k patients but it's been a heck of a ride.

My wife is sole proprietor of our business, and it has been the best decision we have made. I still work full time for the Feds, as I have too much time invested. She quit her job, and works full time from home on the business, and raises our daughter. She has taken off multiple times to go on vacations with her family, something she wouldn't have been able to do if she was still working for someone else. Yes, it sucks paying so much in knowing you'll never see a dime of it returned. However, we make exponentially more having our own business, allowing us to save more than if she was still working a regular job. And yes, we do work longer hours. But they are hours that are convenient for us. Good luck on your venture.

Federal income tax, state income tax, school and property tax, sales tax, excise tax. In the end approximately 50% of GROSS income will support our gouvernment.

That statement in most cases is grossly wrong.
Example 300K of income 240K of expenses (including the sales tax on purchases and RE tax) leaves a 60 K profit. SSI is 12.95 % as you get a credit or roughly $7,800 with 27,000 for itemized deductions your taxable income is 33K federally or at 12% about 4K. Here in WI we have a 7% state tax or about $2,100 then add in the sales tax and RE say 5% on all of the 240K which makes 22,000 with 10K of RE or a total of roughly 32K or about half of your net not half of your gross. If you are paying 50% of gross you need a new CPA

As to being self employed why do all who own a business still want to compare their work to those that work by the hour? The whole idea of being self employed to me is about getting out of that rut. So you work harder that is the decision one makes. Thank God we have millions who take the risk and provide us services and don't look at the rest who don't as lesser.
Bryce

I sure am Gary, I've gotten away from the wild medical field and am enjoying relaxing primary care. There is some serious money involved when you're facing Covid every day. They're earning it. Here locally I've heard new graduated nursing staff making $30 an hour base with sometimes as high as $20 an hour more for shift differential if they pick a shift up (on top of the overtime made) and they have a referral bonus of $5-10k I can't remember which. The healthcare system in hospitals is definitely taxed right now. I talked to a physician at the ER I used to work in that called every hospital in Nebraska, Kansas, and Iowa to find an ICU bed one night as they were full with no ICU beds. That patient spent a night in the ED as an ICU patient. The problem is going to be when this levels out everyone is going to be used to those wages. It won't last forever.

Yeah I should have said net. Used to a business with little expenses. Gross, net, and net net. lol
Cash is king!

It's really fun when the city I have a contract with suddenly after 31 years requires me to have a Workers Comp policy, even though I'm not required by the state to have it since I don't have any employees. As the business owner, I can't even use it.

Now the Workers Comp folks are doing an audit on my policy, and it's been going on for weeks. They'll ask for this, I'll send it, then they'll ask for something else, and I provide it, then it's something else. I'm about ready to drop this small contract. This is pure stupidity.

My CPA is worth her weight in gold. She's got access to my business account and does all of the payroll etc. I just have to look over the numbers and give her the okay to make the necessary changes. She also isn't cheap but in the long run including what I factor in the time it would have taken me to do it all I am clear ahead.

Been in business since 1983 and was fun until recently when no matter the pay people just aren’t interested in working especially hard. Why should they I guess.

Paul. I do work for one of the largest road contractors in the interior. Every job they get that possibly needs our service I get a contract, Alaska requirement. I then have to provide a certificate of insurance and sign the contract. I may not do any work though so all that for no compensation. Not all jobs are that way though. My wife and I are a S Corp. And every year we have to sign a waiver to NOT be covered under Workmans Compensation.

The CPA I have used for years used to fly Heimo Korth back and forth to his cabin for years. He is also an avid fisherman. Being a great CPA and from a pioneer family takes time to visit.

When we first opened our business I was shocked at the cost of payroll tax.

Owning a business is fun but it’s hard not to feel like the deck is stacked against you

I know the road too... but try to make the most of pre-tax spending. When you own a small business, many things you never thought about are part of how you make your business.

Funny how Google and the likes can run fancy restaurants on their campuses and write it all off as an expense, yet when I buy a sandwich and try to eat it in my store, then get up to help a customer, I can't do the same thing.

Good luck,

Pete

Awesome , carry on.

Welcome to the business world huh

Luckily Lugnut I am in the medical field so I have a pretty set schedule. I don't have any employees I am the only employee. It is weird writing yourself a check every two weeks but I have to make sure the government has a record of their cut.

I run a small residential construction and remodeling company and also a property management company. When something needs repaired or remodeled in an apartment building I manage, Ludwig Property Management calls (figuratively) Ludwig Construction. I do the job, Ludwig Construction invoices Ludwig Property Management and I pay myself instantly via bank transfer between the accounts associated with those two entities.

It's a pretty sweet arrangement.

I was only half serious in my previous complaining, i really do enjoy running these businesses, especially now that I'm well-established and have a large customer base. Also, as someone above mentioned, there's a lot of freedom involved with being your own boss.

Workers Comp is the worst. I have been audited several times. It's the main reason I scaled way back on the amount of employees I used to have and now use sub-contractors for a lot of jobs.

Some of the largest corporations and businesses in the USA don't pay any federal income or corporate taxes, so there must be ways to limit the tax cost. I did small business taxes for 35 years and it is amazing how much one can use for deductions to lower taxable income. We found ways to employ family members etc. that lowered total costs and increased spouse income and family revenues. No need to hide or cheat when the codes are on your side. I had several business owners that rarely bought items for their children. By employing the kids and paying wages and the SSI tax the kids could buy their own bikes, clothes etc. and monies could be put in 401 Ks at an early age let alone college funds etc. Just because one totally dislikes the system does not mean one should just say screw it and pay or cheat. We have to remember that tax codes were created and modified by persons who want to not pay anymore than they have too. Those who earn wages, pay SSI, and work for wages are subjected to the least mechanisms to avoid taxes. It is interesting to read the comments about how much businesses pay in labor, benefits, UE etc. and then complain because no one is willing to show up and work. With an attitude toward labor like that maybe they don't want to work for a firm that feels they are a drain.

Bryce

best day of owning your own business is when you sell it.
be ready for the taxes you pay tho.
I had to write a check for the high 6 figures.
After all those years of working well over 60 hrs/wk, providing employment for several people and paying taxes for every conceivable reason when you final cash in big daddy Gov't puts a gun to your head and robs you one last time.

bblwi your post makes a lot of sense. You lost me on the labor part.

I just got off the phone from a contractor from Florida building a Holiday express. I had to turn down the work he needed done due to a small crew and one sick employee. He said he hears about people not wanting to work all the time. Something has happened to the work force in the last couple of years.

Restaurants have closed here, reduced hours, auto repair shops are a month out due to lack of help, EVERY business that I see and communicate with has the same problem.

I gladly pay over 4 times minimum wage, cause our work is 90% Davis Bacon scale. I pay weekly and pay overtime over 8/40.

If you can come up with the answer to put people back productive you would be the MAN!

I never considered my employees a drain. Their labor along with my management and continual investment into machines and equipment is what allowed me to sell the place and retire early.


Trouble with the vast majority of employees is the lack of an idea what it costs to have them work for you.
I spent the time to track all the costs and benefits I paid to each employee besides their wages.
Needless to say they were surprised about how much a month it was.
Approx 1/4 to 1/3 of their wages was paid by the business for benefits.
I covered Health Ins 100%, when the Ins. went up 20-30% I adsorbed the cost. The employees never paid a dime in health Ins yet wondered why they didn't get as big a raise as their buddies down the road who paid a couple of thousand a year for ins.
I also paid out a bonus to all employees at the end of the year which my competitors never did. They gave out turkeys, I gave out on average $2000 to each employee. I gave out bonus strictly one how good of an employee I considered them.

Biggest divide between owners and employees is the work ethic and drive. Yes, there is maybe 20% of the employees that care and put in the effort but the other 80% don't.
Another is an employer that asks something of them which he is not willing to do himself. I made sure I always did more than my employees did. I was the first in and the last out. I took considerable less time off then they got. I would jump in and help do any job to get things done. especially the crappy jobs that they didn't like. I used my time as constructively as possible. I didn't waste my time.

I had an employee back the truck into the shop while forgetting to close the drivers door. The steel bollard bent the door back so it couldn't be closed. Cost me over $2000 to fix it. It was the source of alot of laughs and jokes around the shop.
That is till I told the employees that the money it took to fix it is coming out of the bonus money pool. That amount of money divided by the number of employees was about $250 ea. They did think the guy screwing up and costing them $250 was funny anymore.

Most employees don't have a clue what it takes. Most don't care and most just care about themselves. Its no wonder most employers have a bad attitude towards labor.

If anyone is to blame for the labor/employer divide its the gov't who forces the employer to carry a much larger financial burden when employing labor. Employers have lots to loose if things don't work out, employees have very little to loose.

I am so much happier working by myself without any employees . The admiral does the paperwork for the most part and I just fix and drive boats around for one week per month. Wont get rich like this but not going to get any ulcers either.

A lot of truth Dirty D! I have a life time of employee horror stories and could write a book. Still fun though seeing the 20% benefit!

X2 dirty D

bblwi, as far as paying family members to reduce your tax burden, that isn’t going to help anybody with their income taxes. Im not sure this thread is about bashing employees vs whining about taxes. Business owners spend much more time on work than w-2 employees and should be paid more

All of that's true, even the last sentence.

One of the reasons the employers pay most of the benefits and not the government is that almost all businesses that pay into the lobby funds don't want the government to take over HC and other aspects of employee costs because as much as many dislike having to offer or pay those costs they don't want to give up the control that having a lot of bargaining power gone when hiring and promoting employees. The recent passage of the ACA further shows that today. I realize that most lower level employees or entry level and part time rarely have those benefits provided even partially. People would rather complain about the high cost of labor and perks then pay the taxes that would probably be needed to have many of those benefits provided through some form of state and or federal government. Our SIL owns a mechanical contracting business with 60-85 employees depending upon the projects at the time. He does not want to give up the option of being able to negotiate wages, perks, etc. as he uses those to find and keep skilled workers, engineers, CAD staff etc. Yes I followed the total cost of employees and in most cases the percent of non wage costs were much larger for the lower end workers and thus finding ways to not pay those costs and deal with more turnover was more economical and this gives more resources to work with the higher skilled employees.
One of the real surprises many business owners get when they sell their business is all the depreciation claimed on equipment and depreciable property is due in recapture of depreciation in the year of sale even if the business and facilities are sold over time. I helped a lot of business owners do an equipment plan if they developed a plan which saved them a lot of taxes if they were willing to develop a plan and follow it.

Bryce

Federal income tax probably will not be lowered but there are a lot of long term benefits for paying wages to family members, like starting the quarterly SSI earnings, having them manage income, plus any 401 k monies paid in are deductible to the business. Also HC can be put into a spouses name and can be deducted directly by the business.

Bryce

The benefits that I've seen so far have outweighed the negatives. My CPA is ambitious she's talking of trying to get my taxes down to 12-13%. I've historically paid around 18% and I've been holding back at least 25%. I find some of the write offs quite interesting. I need a computer to work every day, and a brand new lap top is 100% able to be written off. I've considered renting a room to myself in my house as my office as I do have to do some book keeping regarding the business. I'm just touching the surface of everything and I am sure as I go on I will find other options. All up front and not illegal, just using the tax laws to my benefit. I haven't even dove into the family members as employees etc. although she had mentioned it. The time I've been at home with my kids has definitely been the ultimate reward of not letting an organization dictate my life.

Paul, I'm wondering if the local city employees are correctly informed or if your state is different than Indiana. My company carries workman's comp..... If I had no employees, I would send down state and apply for a waiver. I am 100 % sure of this .

The city is aware of the state regs saying it's not required of businesses with 3 employees or less, but they want the extra insurance. They're paying for it, but its this danged audit that's eating up so much of my time, and it's really irritating me. They keep moving the goal posts.

No, the reason businesses end up paying all the benefits that benefit the employee and not the employer is cause it was easier for daddy sugar bucks (Gov't) to pass all the laws/benefits when someone else has to pay for them.
There is another person who could pay and logical should pay for workman's comp, the employers 1/2 of SS and other costs. That is the employee. I'll bet if you asked a majority of employers would gladly have someone else deal with all the benefits.
Why should the employer pay for the employees benefits? if the employee wants workman's comp, health Ins and what ever else why doesn't he pay for them? They are no benefit to the employer, the guy who pays for them.

I'll remind you that health Ins was started as a benefit during WWII as a way to offer more to employees when wages were frozen by the Gov't. Again the gov't is at the root of our problems.

In a perfect world a employer should only pay a wage to his employee for his labor, nothing more, nothing less. An employee should be able to get and pay for workman's comp, unemployment ins, health ins and ss if he wants. If he wants to roll the dice he should be free to. When one is young it would beneficial to pass on all the benefits and get a big nest egg faster to allow one to get a home, family and other things that benefit society as a whole. then when older buy the ins and benefits.

Lets also admit how lousy our Gov't does at everything it does. An individual would be well ahead just investing money in the market vs paying into SS.

If you think the UE is high now just quit providing HC insurance and see what happens. If the private sector would really get behind moving HC to the government level it would have happened decades ago. To me it would make more sense for an employer to say instead of paying say $25 per hour and providing %10 plus worth of benefits he could pay $33 per hour and the employee could buy their own benefits, but that is not happening in many places where the employees make enough in wages to even consider buying their own benefits. I know one person who is a professional engineer that is doing that and both he and the firm like the way things are working. Not all the other staff persons are paid in the same way.

Bryce

My son is a commercial building contractor in a fairly large family business. Whenever he bids on a job at a Native American reservation, when the bids are opened, any native American whose bid is within a certain percentage of the low bid, gets to see the low bid and change their bid. If my son wins the bid, he must employ some Native American sub contractors (and do their paperwork for them).

It's really fun to claim zero and single all year and still have to pay in and if it's a really good year make quarterly payments or get fined.

I should have had more kids lol.

If you’re not making quarterly payments, that’s not good.

Our local hospitals fired all the nurses and dr.s who didn’t get the covid vaccine. Now they’re all “full” a self inflicted problem.

Staffing issues can be a big issue depending on choices. That’s not the only reason around here though. I know I sent one patient to the ED for respiratory distress. He was trached and on a ventilator. I followed his hospital stay and he spent three nights in the ER before he was discharged home on hospice. He never even made it to a hospital bed. When I’ve spoke with those ER physicians they constantly have 10-15 ER patients waiting for beds on the floor (essentially someone to die or get discharged).

I spoke with a floor nurse that passed out during her shift. Was found to have a kidney stone, received fluids, and had to go back to her shift. She said they’re so short you are either dying or you aren’t and you go to work. So it can go both ways. If you’re young and ambitious now would be a heck of a time to get into the medical field. Can make some serious money in a short time. I’m done with the 60-80 hour work weeks myself.

What about workmens comp? My self employed employer said he was paying it .....50 percent,,,,,,well yea technichally he was paying it but the way I saw it was money he could have paid me.....or at least split with me. I never made a claim and yes- I did get hurt many times....just not bad or long enough to make a claim......hard for me to explain but felt I got ripped off by workmens comp many times over and I was just on payroll at that time.

Lugnut. your talk of using "contractors" made me smile. I had at least 5 newspaper routes in my life, off and on, from age 12 to probably 34. When delivering papers was mostly a kid thing, there wasn't any real talk of being a "contractor", although technically it probably was already true at that time. But when I had the 4th and certainly the 5th paper route, all the carriers were adults, and many "full-timers" were doing multiple routes to make even modest coin. The largest newspaper in South Dakota treated all their carriers as "contractors" and thus paid no benefits or any employee payroll tax for them. The editorial staff were always some of the most liberal people in this state. I wonder if they ever thought about making their carriers, who usually drove old, well worn or semi-broken down cars, "contractors" ever crossed their minds...? Probably not, most are hypocrites when if comes to coin. "Do as I say, not as I do"...

I remember tagging along on my uncle's paper route when I was a kid. His son was recruited to help him during the summer. We'd leave a 3:00 or 4:00 in the morning and pick up stacks of newspapers. My cousins job was to tightly roll the papers and sling them out the car windows onto the porches as my uncle drove by. Bonus points for banging one off an aluminum storm door! LOL

Many construction companies, even the larger ones, in my area have gone the subcontractor route due to the exorbitant cost of carrying workers comp and the annoying practices of the providers.

My subcontractors have to provide proof of liability insurance with my company named as additional insured which I keep on file.