For many, the thought of being self-employed is living the dream. Unfortunately, if you don't take the time to get the numbers and the finances right, your dream could turn into a nightmare. There is so much that goes into setting up a business the right way. You need to understand what income and profit really are. You also need to minimize your taxes and protect your assets.
Tatiana Tsoir is a speaker, coach, and accounting expert. She is the CEO and founder of Linza Advisors. She has spent the last 15 years helping small businesses stabilize cash flow, become more profitable, and pay less taxes. She's also the host of the Anything Would Work podcast and Talk to Tiana. She is super excited about her new book Dream Bold, Start Smart: Be Your Own Boss and Make Money Doing What You Love.
In this episode, she shares her extensive knowledge on setting up your business right, when you should have an LLC, and when you should have an S corp. We talk about some of the pitfalls that happen if you don't take the time to set things up right. We also talk about the emotional aspects of business, finances, and numbers that relate to money.
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Tatiana Tsoir thank you so much for being here!
Remember, you might be in business FOR yourself but you are not in business BY yourself.
Be your best self. Be proud and keep changing the world.
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[02:32] Tatiana's new book is coming out soon. She has high hopes that it will help change the world. Her tax business is also booming.
[03:36] The emotional connection between dreaming boldly and understanding financial fundamentals. Many entrepreneurs have bold dreams but have neglected to address the financial side.
[04:24] Dream bold is the vision and spark that business owners have. Tatiana wants to help them start smart.
[06:19] The back office of the business. It's where the work behind the scene happens. You have to take care of the back office which includes things like pricing and accounting.
[08:42] Gross income is the top line or what you get for your product or service. It doesn't include the expenses that allowed you to get there. Not looking at the bottom line is an approach to failure.
[09:43] Gross profit is your sales minus direct cost. What's your cost of sales, equipment, and labor? If you're not selling any product, you shouldn't be incurring any cost.
[10:47] Income minus expenses is net taxable income. The amount of some deductions will vary.
[13:45] Making your first million is really just a number. How much of that did you keep? Profit is separate from your salary. This is your reward.
[17:51] The separation between business and personal and using a legal entity for your business. It's critical to separate the two. It's easier for accounting and audit proofing. Commingling funds can make expenses seem personal. Open a second bank account.
[23:30] An LLC can provide legal liability protection. Without an entity if you get sued, they can go after your personal assets. With an LLC, they can only go after your business assets.
[25:03] You will see the most tax with an LLC, but you can easily convert that into more tax-friendly things.
[26:53] An S corp is a corporation. There is entity tax and the tax on the money you take out of the business. There is a way to create a pass-through entity. Doing this will allow you to pay less taxes. New York City doesn't recognize S corps. You need to beware of local regulations.
[30:35] Start with an LLC and see how things go. Once you hit $50,000 of net profit, become an S corp.
[34:46] Financial stability helps you wake up with confidence. There's a direct connection between being confident in your numbers in the future of your business. This will help you be emotionally calm and live the life that you want.
[39:57] Tatiana looks at her numbers daily. Learn more in the Rapid Round!
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Host Jeffrey Shaw is a Small Business Consultant, Brand Management Consultant, Business Coach for Entrepreneurs, Keynote Speaker, TEDx Speaker and author of LINGO and The Self Employed Life (May 2021). Supporting self-employed business owners with business and personal development strategies they need to create sustainable success.