December 4, 2024 • 16 mins
THROWBACK EPISODE! OLDIE BUT GOODIE :)
If you started a business and didn't file any paperwork, what type of business are you??? Do you know???
The IRS will automatically classify your business as a sole proprietorship and that you will file the business income and expenses on Schedule C of your personal tax return. So not much will change except for your tax return!
If you filed an LLC, you can still be classified as a Sole Proprietorship. You will have some additional filing requirements for the state you filed the LLC in.
In this episode we discuss:
-Do you need an EIN for your sole proprietorship?
-What expenses can you deduct (i.e. save $$ in taxes)?
-How do you file your business taxes?
-What other filing requirements do sole proprietors have?
-Can you be an LLC and a sole proprietorship?
If you are new to owning a business, this episode is a perfect place to start educating yourself on paying taxes as a business owner!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The confusion here is usually people file an LLC for
their business and they thinkthat that is their business tax
entity and they are completelyseparate things.
Welcome to what your CPA Wantsyou To Know a podcast for
(00:20):
business owners and thoseplanning to make the jump into
entrepreneurship.
If you're thinking, I've got agreat business idea, but what's
next?
This podcast is for you.
Speaker 2 (00:33):
I'm Carson Sands.
Speaker 1 (00:35):
And I'm Taryn Sands, and together we started our CPA
firm.
We've grown exponentially overthe past six years.
Speaker 2 (00:44):
I'm a CPA with over 10 years of experience helping
people start and grow theirbusinesses.
Speaker 1 (00:50):
And I'm an MBA with a specialization in marketing and
entrepreneurship.
Speaker 2 (00:54):
Follow along as we share the ins and outs of
running a business while keepingyour family and sanity intact.
Speaker 1 (01:02):
And how to save tax dollars without breaking any IRS
rules or triggering a painfulaudit.
Speaker 2 (01:09):
We're here to share everything your CPA wants you to
know in a fun and easy tounderstand way.
Let's get started.
Speaker 1 (01:17):
Let's do it.
Today we are talking about soleproprietorships.
It's a big word.
If you have a small businessthat you just started and you
really don't even know what taxentity you are, you're probably
just a sole proprietorship.
That is where most people startout and it is the easiest type
(01:40):
of business to start First.
Let's start by explaining whatexactly is a sole proprietorship
.
Speaker 2 (01:47):
I'm going to read the definition from our new
business guide.
A sole proprietorship is abusiness with one owner or
husband and wife owners.
The income made by a soleproprietorship is filed on
Schedule C of the owner'spersonal tax return, which is
their Form 1040,.
Most new business owners chooseto begin as a sole
(02:08):
proprietorship and then switchto a different business entity
when the business becomes moreprofitable.
Speaker 1 (02:14):
So I think it is important to say here that when
you first start, you probablydon't know that the IRS has four
different tax entities tochoose from.
Know that the IRS has fourdifferent tax entities to choose
from.
Now, if you don't choose one,then you're automatically just
going to be a soleproprietorship until you make a
change.
Speaker 2 (02:37):
And you can go back to episode six the best tax
entity to choose for yourbusiness.
If you want to hear about allfour types of business entities.
Speaker 1 (02:42):
Yes, that's going to go in much more detail about
each one, why you would pick oneover the other and how each of
them are taxed, because it'sjust a tax entity to tell the
IRS how they're going to taxincome from that business.
So one of the very firstquestions that we get about sole
proprietorships is do you needan EIN for them?
Speaker 2 (03:04):
You don't have to have one.
Whether or not you get onedepends on a few factors.
If you want to have a businessbank account, then a lot of
times they require that you havean EIN for your business.
It's really easy to get one.
But if you're just receiving alittle bit of money on a 1099,
technically you're a soleproprietor and you might not
(03:25):
necessarily need a separate EINfor your business.
Speaker 1 (03:30):
So it's really just up to you.
You can choose to get one ifyou just want to mask your
social security number and justbe operating under an EIN
instead.
But sole proprietors can usetheir social security number
even to send out 1099s andthings like that.
Speaker 2 (03:47):
Yes, taryn, hit the nail on the head.
The other reason you would needan EIN besides for banking
purposes, would be that you aregoing to issue 1099s to
subcontractors or some other taxform, and you don't want to
just issue those using yoursocial security number, so the
whole world has access to that.
You could get a tax ID number,an EIN or an employer
(04:09):
identification number and usethat to put on all the 1099s
that you send out tosubcontractors.
Speaker 1 (04:15):
So you definitely do not need one if you're a sole
proprietorship, Like you wouldneed one for these other tax
entities.
So it's up to you.
But they are very easy to get.
I would just suggest gettingone.
You can get one on the IRSwebsite in just a few minutes.
Speaker 2 (04:32):
So the next question we get a lot how does a sole
proprietor file their taxes onSchedule C and what is the due
date?
Speaker 1 (04:40):
So you touched on this a little bit earlier when
you read that definition fromour book.
But a sole proprietorship isone of the easiest businesses to
have because you just file thatbusiness income on your
personal tax return.
So you're basically just addinganother form.
It's called Schedule C andthat's where you will put your
income from the business and allof your expenses.
Speaker 2 (05:02):
And what is the due date for that?
Speaker 1 (05:04):
Since it's your personal tax return, the due
date does not change.
You still file that by April15th every year.
It is important to know, ifyou're using a CPA to prepare
your tax return, that if you gofrom just a simple 1040 to
adding a business, you shouldexpect to pay a little bit more
to have that business on yourtax return because it requires
(05:25):
more work.
Speaker 2 (05:26):
So the next question is what can you deduct?
Speaker 1 (05:30):
A great rule of thumb when you're trying to decide if
something is deductible or notis anything that you need to
generate the income that you'remaking.
But we always get questions andit varies a lot.
The IRS rules are verycomplicated, but I did want to
read the list that's in our bookso that you have a good idea of
the things that are deductible,though with your specific
(05:53):
business there may be more.
So here's a list of deductibleexpenses Employee meals,
advertising and marketinginsurance, both business and
health insurance forself-employed individuals, bank
fees, business mileage on yourcar, depreciation, continuing
education costs, home officeexpenses, interest, legal fees,
(06:16):
accounting fees, moving expensesfor the business, rent licenses
, various taxes, business travel, phone and internet software.
The list just goes on and on,but most businesses will have
these things and they aredeductible.
This next question comes up alot and it generally confuses a
(06:38):
lot of people but can you be asole proprietorship and an LLC?
Speaker 2 (06:44):
Yes, definitely.
The LLC or limited liabilitycompany is a filing that
businesses use in order toprotect themselves from
liability.
It protects the personal assetsof the owner in case the
business gets sued for somethingthat happens.
In that case, ideally, ifeverything's working properly,
(07:05):
only the business assets are upfor grabs in a lawsuit and the
personal assets of the owner arestill safe.
The LLC, if you're still a soleproprietorship, would still
file on a Schedule C on yourpersonal 1040.
Speaker 1 (07:20):
The confusion here is usually people file an LLC for
their business and they thinkthat that is their business tax
entity and they are completelyseparate things.
So if you want more informationabout LLCs and if you should
file one for your business, wedo have an entire episode about
that and it is episode numbernine.
Speaker 2 (07:42):
And just one more quick point on that.
While your federal filingrequirements don't necessarily
change just because you filedfor an LLC, your state filing
requirements almost alwayschange.
They definitely do in our stateof Texas and I know most of the
other states that I work in.
The same thing.
You know you have a filing youhave to do every year in order
(08:03):
to maintain that LLC, but it'susually still much less
complicated than filing aseparate federal tax return is
in the case that you were one ofthe other types of entities.
Speaker 1 (08:14):
This is a big question that we love to answer,
and that is should you stay asole proprietorship forever?
Speaker 2 (08:22):
Probably not.
Hopefully, your business willgrow to the point where you're
making more than $50,000 inprofit, in which case you're
hitting that level where itmakes sense to convert to an
S-corp, so you can convert yourLLC if you already have one, or,
if you don't, you can file foran LLC and choose to be taxed as
(08:43):
an S corporation.
Speaker 1 (08:45):
So that was a lot of information.
But the answer to the questionis that if your business starts
making over $50,000 in profityou can see that right on your
tax return then it's going to beworth it to convert it to an S
corporation, which is adifferent type of entity.
The reason you would do that isto save money in taxes.
Speaker 2 (09:05):
And, once again, episode six of the podcast talks
about the different entities.
S corp is one of those types ofentities, so you can find out
more by listening to thatepisode.
Speaker 1 (09:16):
At that point.
If you're an S corp, then yes,you would just stay as an S corp
.
After that, you wouldn't needto convert to anything else.
So one of the reasons that welove the S-Corp is that they do
not pay self-employment taxes,but sole proprietorships do.
So since today we're talkingabout sole proprietorships, it
is important that you know whatself-employment taxes are.
(09:38):
So, carson, can you pleaseexplain what self-employment
taxes are?
So, carson, can you?
Speaker 2 (09:43):
please explain what self-employment taxes are.
Unlike W-2 employees, who haveSocial Security and Medicare
taxes withheld from theirpaycheck, a self-employed person
doesn't have anybodywithholding those taxes for them
.
Now IRS really doesn't want youto miss out on the joy of
paying Social Security andMedicare tax, so they came up
with self-employment tax, whichis 15.3%.
(10:06):
It's actually exactly equal tothe amount of payroll tax that
you pay if you're a W-2 employee, so that 15.3% tax is taxed on
your profit from your business,and so that's your net income
after you take all of your salesand you subtract all of your
business.
And so that's your net incomeafter you take all of your sales
and you subtract all of yourexpenses.
Speaker 1 (10:27):
Now it is very important to know that that tax
is on top of the normal incometax that you already pay, so
that's a lot of taxes.
Speaker 2 (10:36):
It can be really high .
If you're in the 24% taxbracket, like so many people are
, and you add in 15.3% forself-employment tax, you're
looking at upwards of 39.3% taxtotal on the money that you're
bringing in.
And that's another reason itmakes sense to look into the
S-Corp whenever your profits areabove $50,000.
Speaker 1 (10:58):
Now it is important especially hearing that super
high number that you are settingaside money to pay those taxes.
So if you just started or ifyou're getting yourself into a
bind every single year and owinga lot of money, you need to
make sure that you're looking atyour profit and that you're
setting aside a little bit eachmonth so that you can pay those
(11:18):
taxes those taxes.
Speaker 2 (11:25):
Your CPA should be able to tell you a pretty good
rate that you should be settingaside to cover self-employment
taxes and income taxes on yourself-employed income.
Speaker 1 (11:31):
And that's going to be different for every single
person.
We can't just give you ablanket number to set aside and
that would cover everyone,because your tax return is going
to look different than everyoneelse's, you're going to be in a
different tax bracket and yourspouse might be making
additional income, so there's alot of variables.
We can't just tell you setaside this much.
Speaker 2 (11:52):
Right.
For example, if you're making$40,000 from your self-employed
business on your Schedule C andyou're not married, then your
income tax will be very low, andso the amount you need to set
aside is different than if,let's say, you're married and
you're still making that $40,000, but your spouse makes $400,000
a year.
Well then, you're going to needto set aside a lot more money
(12:14):
to cover your tax bill.
And at the very minimum, nomatter what your profit is, you
are going to be paying that15.3% of self-employment taxes
and then income tax of either 10, 12, 22, 24, 32, 35, or 37%.
Speaker 1 (12:32):
Fun stuff, we just deliver all.
The best news on this podcast37% Fun stuff, we just deliver
all the best news on thispodcast.
Okay, some other exciting newsthat we need to talk about is if
you have a sole proprietorshipwe already talked about saving
that money and that you're goingto file every single year on
April 15th that's when you'regoing to pay those taxes Do you
(12:53):
have to make estimated taxpayments if you have a sole
proprietorship?
Speaker 2 (12:59):
It's a really good idea.
There's not necessarily a rule.
I mean, I guess there is aloose rule that you have to pay
in quarterly.
You could be penalized slightlyif you don't pay in quarterly
estimated tax payments, but wealways advise it, just because
it's too easy for a businessowner to set aside the money and
then accidentally spend it onsome really important business
(13:22):
thing that came up.
So, yes, pay in your estimatedtax payments, and if you want
the details of how much to pay,how to calculate what that
number is and when those are due, listen to episode 23, where we
talk about estimated taxes indetail.
Speaker 1 (13:40):
So the very last question that we get is are
there any other filingrequirements or paperwork or
anything like that that you needto know about if you are a sole
proprietorship?
Speaker 2 (13:52):
If you are a sole proprietorship that has filed
for an LLC, then, yes, there'ssome additional filings that
you'll need to do at the statelevel, but other than that, no,
there's really nothing elsespecial that you need to do for
your sole proprietorship, exceptfor include your Schedule C in
your 1040 each year.
Speaker 1 (14:11):
And if you're just getting started, there's no
paperwork that you need to fileunless you're filing the LLC.
Otherwise, the first year inbusiness you'll just file that
income on your 1040.
That will alert the IRS thatyou have a sole proprietorship
and that's really all that youhave to do as far as paperwork
goes is make sure you're filingthat every single year on
(14:32):
Schedule C of your 1040.
So that wraps it up for today.
I did want to mention, if youare just getting started in your
sole proprietorship, we do havea new business guide that we
referred to earlier.
That has so much informationthat we talked about here in
detail and also gives you somevery important steps along the
(14:54):
way.
So if you want to hire someone,what would you do?
How to do your bookkeeping, howto work with the CPA it's
really packed with so much goodinformation.
Now, if you go to our websitethat link is in the show notes
you can enter code podcast andthat will give you a discount on
our new business guide, whichwill knock it down to like 65
(15:16):
bucks.
So you're getting so muchinformation from a CPA for less
than the cost of just onemeeting.
Speaker 2 (15:24):
And if you want to hear from some people that used
our new business guide, go backto episode 20 and listen to Nate
and Sky from Olive Coffee Carttalk about how they use the new
business guide to make the mostboring part of their business
really easy kind of like hittingthe easy button.
Speaker 1 (15:42):
Yeah, that's such a great episode that shows how you
can actually buy the guide andimplement that in your business.
Speaker 2 (15:49):
That way, they can spend less time on accounting
and more time making awesomecoffee for people.
Speaker 1 (15:54):
Exactly so until next time.
Speaker 2 (16:00):
thank, you so much for listening to what your CPA.
Speaker 1 (16:02):
Wants you To Know.
Podcast.
Speaker 2 (16:07):
This podcast is intended to provide accounting
and tax information foreducational purposes only.
All tax situations are uniqueand should be handled with the
assistance of a tax professional.
The confusion here is usually people file an LLC for
their business and they thinkthat that is their business tax
entity and they are completelyseparate things.
Welcome to what your CPA Wantsyou To Know a podcast for
(00:20):
business owners and thoseplanning to make the jump into
entrepreneurship.
If you're thinking, I've got agreat business idea, but what's
next?
This podcast is for you.
Speaker 2 (00:33):
I'm Carson Sands.
Speaker 1 (00:35):
And I'm Taryn Sands, and together we started our CPA
firm.
We've grown exponentially overthe past six years.
Speaker 2 (00:44):
I'm a CPA with over 10 years of experience helping
people start and grow theirbusinesses.
Speaker 1 (00:50):
And I'm an MBA with a specialization in marketing and
entrepreneurship.
Speaker 2 (00:54):
Follow along as we share the ins and outs of
running a business while keepingyour family and sanity intact.
Speaker 1 (01:02):
And how to save tax dollars without breaking any IRS
rules or triggering a painfulaudit.
Speaker 2 (01:09):
We're here to share everything your CPA wants you to
know in a fun and easy tounderstand way.
Let's get started.
Speaker 1 (01:17):
Let's do it.
Today we are talking about soleproprietorships.
It's a big word.
If you have a small businessthat you just started and you
really don't even know what taxentity you are, you're probably
just a sole proprietorship.
That is where most people startout and it is the easiest type
(01:40):
of business to start First.
Let's start by explaining whatexactly is a sole proprietorship
.
Speaker 2 (01:47):
I'm going to read the definition from our new
business guide.
A sole proprietorship is abusiness with one owner or
husband and wife owners.
The income made by a soleproprietorship is filed on
Schedule C of the owner'spersonal tax return, which is
their Form 1040,.
Most new business owners chooseto begin as a sole
(02:08):
proprietorship and then switchto a different business entity
when the business becomes moreprofitable.
Speaker 1 (02:14):
So I think it is important to say here that when
you first start, you probablydon't know that the IRS has four
different tax entities tochoose from.
Know that the IRS has fourdifferent tax entities to choose
from.
Now, if you don't choose one,then you're automatically just
going to be a soleproprietorship until you make a
change.
Speaker 2 (02:37):
And you can go back to episode six the best tax
entity to choose for yourbusiness.
If you want to hear about allfour types of business entities.
Speaker 1 (02:42):
Yes, that's going to go in much more detail about
each one, why you would pick oneover the other and how each of
them are taxed, because it'sjust a tax entity to tell the
IRS how they're going to taxincome from that business.
So one of the very firstquestions that we get about sole
proprietorships is do you needan EIN for them?
Speaker 2 (03:04):
You don't have to have one.
Whether or not you get onedepends on a few factors.
If you want to have a businessbank account, then a lot of
times they require that you havean EIN for your business.
It's really easy to get one.
But if you're just receiving alittle bit of money on a 1099,
technically you're a soleproprietor and you might not
(03:25):
necessarily need a separate EINfor your business.
Speaker 1 (03:30):
So it's really just up to you.
You can choose to get one ifyou just want to mask your
social security number and justbe operating under an EIN
instead.
But sole proprietors can usetheir social security number
even to send out 1099s andthings like that.
Speaker 2 (03:47):
Yes, taryn, hit the nail on the head.
The other reason you would needan EIN besides for banking
purposes, would be that you aregoing to issue 1099s to
subcontractors or some other taxform, and you don't want to
just issue those using yoursocial security number, so the
whole world has access to that.
You could get a tax ID number,an EIN or an employer
(04:09):
identification number and usethat to put on all the 1099s
that you send out tosubcontractors.
Speaker 1 (04:15):
So you definitely do not need one if you're a sole
proprietorship, Like you wouldneed one for these other tax
entities.
So it's up to you.
But they are very easy to get.
I would just suggest gettingone.
You can get one on the IRSwebsite in just a few minutes.
Speaker 2 (04:32):
So the next question we get a lot how does a sole
proprietor file their taxes onSchedule C and what is the due
date?
Speaker 1 (04:40):
So you touched on this a little bit earlier when
you read that definition fromour book.
But a sole proprietorship isone of the easiest businesses to
have because you just file thatbusiness income on your
personal tax return.
So you're basically just addinganother form.
It's called Schedule C andthat's where you will put your
income from the business and allof your expenses.
Speaker 2 (05:02):
And what is the due date for that?
Speaker 1 (05:04):
Since it's your personal tax return, the due
date does not change.
You still file that by April15th every year.
It is important to know, ifyou're using a CPA to prepare
your tax return, that if you gofrom just a simple 1040 to
adding a business, you shouldexpect to pay a little bit more
to have that business on yourtax return because it requires
(05:25):
more work.
Speaker 2 (05:26):
So the next question is what can you deduct?
Speaker 1 (05:30):
A great rule of thumb when you're trying to decide if
something is deductible or notis anything that you need to
generate the income that you'remaking.
But we always get questions andit varies a lot.
The IRS rules are verycomplicated, but I did want to
read the list that's in our bookso that you have a good idea of
the things that are deductible,though with your specific
(05:53):
business there may be more.
So here's a list of deductibleexpenses Employee meals,
advertising and marketinginsurance, both business and
health insurance forself-employed individuals, bank
fees, business mileage on yourcar, depreciation, continuing
education costs, home officeexpenses, interest, legal fees,
(06:16):
accounting fees, moving expensesfor the business, rent licenses
, various taxes, business travel, phone and internet software.
The list just goes on and on,but most businesses will have
these things and they aredeductible.
This next question comes up alot and it generally confuses a
(06:38):
lot of people but can you be asole proprietorship and an LLC?
Speaker 2 (06:44):
Yes, definitely.
The LLC or limited liabilitycompany is a filing that
businesses use in order toprotect themselves from
liability.
It protects the personal assetsof the owner in case the
business gets sued for somethingthat happens.
In that case, ideally, ifeverything's working properly,
(07:05):
only the business assets are upfor grabs in a lawsuit and the
personal assets of the owner arestill safe.
The LLC, if you're still a soleproprietorship, would still
file on a Schedule C on yourpersonal 1040.
Speaker 1 (07:20):
The confusion here is usually people file an LLC for
their business and they thinkthat that is their business tax
entity and they are completelyseparate things.
So if you want more informationabout LLCs and if you should
file one for your business, wedo have an entire episode about
that and it is episode numbernine.
Speaker 2 (07:42):
And just one more quick point on that.
While your federal filingrequirements don't necessarily
change just because you filedfor an LLC, your state filing
requirements almost alwayschange.
They definitely do in our stateof Texas and I know most of the
other states that I work in.
The same thing.
You know you have a filing youhave to do every year in order
(08:03):
to maintain that LLC, but it'susually still much less
complicated than filing aseparate federal tax return is
in the case that you were one ofthe other types of entities.
Speaker 1 (08:14):
This is a big question that we love to answer,
and that is should you stay asole proprietorship forever?
Speaker 2 (08:22):
Probably not.
Hopefully, your business willgrow to the point where you're
making more than $50,000 inprofit, in which case you're
hitting that level where itmakes sense to convert to an
S-corp, so you can convert yourLLC if you already have one, or,
if you don't, you can file foran LLC and choose to be taxed as
(08:43):
an S corporation.
Speaker 1 (08:45):
So that was a lot of information.
But the answer to the questionis that if your business starts
making over $50,000 in profityou can see that right on your
tax return then it's going to beworth it to convert it to an S
corporation, which is adifferent type of entity.
The reason you would do that isto save money in taxes.
Speaker 2 (09:05):
And, once again, episode six of the podcast talks
about the different entities.
S corp is one of those types ofentities, so you can find out
more by listening to thatepisode.
Speaker 1 (09:16):
At that point.
If you're an S corp, then yes,you would just stay as an S corp
.
After that, you wouldn't needto convert to anything else.
So one of the reasons that welove the S-Corp is that they do
not pay self-employment taxes,but sole proprietorships do.
So since today we're talkingabout sole proprietorships, it
is important that you know whatself-employment taxes are.
(09:38):
So, carson, can you pleaseexplain what self-employment
taxes are?
So, carson, can you?
Speaker 2 (09:43):
please explain what self-employment taxes are.
Unlike W-2 employees, who haveSocial Security and Medicare
taxes withheld from theirpaycheck, a self-employed person
doesn't have anybodywithholding those taxes for them
.
Now IRS really doesn't want youto miss out on the joy of
paying Social Security andMedicare tax, so they came up
with self-employment tax, whichis 15.3%.
(10:06):
It's actually exactly equal tothe amount of payroll tax that
you pay if you're a W-2 employee, so that 15.3% tax is taxed on
your profit from your business,and so that's your net income
after you take all of your salesand you subtract all of your
business.
And so that's your net incomeafter you take all of your sales
and you subtract all of yourexpenses.
Speaker 1 (10:27):
Now it is very important to know that that tax
is on top of the normal incometax that you already pay, so
that's a lot of taxes.
Speaker 2 (10:36):
It can be really high .
If you're in the 24% taxbracket, like so many people are
, and you add in 15.3% forself-employment tax, you're
looking at upwards of 39.3% taxtotal on the money that you're
bringing in.
And that's another reason itmakes sense to look into the
S-Corp whenever your profits areabove $50,000.
Speaker 1 (10:58):
Now it is important especially hearing that super
high number that you are settingaside money to pay those taxes.
So if you just started or ifyou're getting yourself into a
bind every single year and owinga lot of money, you need to
make sure that you're looking atyour profit and that you're
setting aside a little bit eachmonth so that you can pay those
(11:18):
taxes those taxes.
Speaker 2 (11:25):
Your CPA should be able to tell you a pretty good
rate that you should be settingaside to cover self-employment
taxes and income taxes on yourself-employed income.
Speaker 1 (11:31):
And that's going to be different for every single
person.
We can't just give you ablanket number to set aside and
that would cover everyone,because your tax return is going
to look different than everyoneelse's, you're going to be in a
different tax bracket and yourspouse might be making
additional income, so there's alot of variables.
We can't just tell you setaside this much.
Speaker 2 (11:52):
Right.
For example, if you're making$40,000 from your self-employed
business on your Schedule C andyou're not married, then your
income tax will be very low, andso the amount you need to set
aside is different than if,let's say, you're married and
you're still making that $40,000, but your spouse makes $400,000
a year.
Well then, you're going to needto set aside a lot more money
(12:14):
to cover your tax bill.
And at the very minimum, nomatter what your profit is, you
are going to be paying that15.3% of self-employment taxes
and then income tax of either 10, 12, 22, 24, 32, 35, or 37%.
Speaker 1 (12:32):
Fun stuff, we just deliver all.
The best news on this podcast37% Fun stuff, we just deliver
all the best news on thispodcast.
Okay, some other exciting newsthat we need to talk about is if
you have a sole proprietorshipwe already talked about saving
that money and that you're goingto file every single year on
April 15th that's when you'regoing to pay those taxes Do you
(12:53):
have to make estimated taxpayments if you have a sole
proprietorship?
Speaker 2 (12:59):
It's a really good idea.
There's not necessarily a rule.
I mean, I guess there is aloose rule that you have to pay
in quarterly.
You could be penalized slightlyif you don't pay in quarterly
estimated tax payments, but wealways advise it, just because
it's too easy for a businessowner to set aside the money and
then accidentally spend it onsome really important business
(13:22):
thing that came up.
So, yes, pay in your estimatedtax payments, and if you want
the details of how much to pay,how to calculate what that
number is and when those are due, listen to episode 23, where we
talk about estimated taxes indetail.
Speaker 1 (13:40):
So the very last question that we get is are
there any other filingrequirements or paperwork or
anything like that that you needto know about if you are a sole
proprietorship?
Speaker 2 (13:52):
If you are a sole proprietorship that has filed
for an LLC, then, yes, there'ssome additional filings that
you'll need to do at the statelevel, but other than that, no,
there's really nothing elsespecial that you need to do for
your sole proprietorship, exceptfor include your Schedule C in
your 1040 each year.
Speaker 1 (14:11):
And if you're just getting started, there's no
paperwork that you need to fileunless you're filing the LLC.
Otherwise, the first year inbusiness you'll just file that
income on your 1040.
That will alert the IRS thatyou have a sole proprietorship
and that's really all that youhave to do as far as paperwork
goes is make sure you're filingthat every single year on
(14:32):
Schedule C of your 1040.
So that wraps it up for today.
I did want to mention, if youare just getting started in your
sole proprietorship, we do havea new business guide that we
referred to earlier.
That has so much informationthat we talked about here in
detail and also gives you somevery important steps along the
(14:54):
way.
So if you want to hire someone,what would you do?
How to do your bookkeeping, howto work with the CPA it's
really packed with so much goodinformation.
Now, if you go to our websitethat link is in the show notes
you can enter code podcast andthat will give you a discount on
our new business guide, whichwill knock it down to like 65
(15:16):
bucks.
So you're getting so muchinformation from a CPA for less
than the cost of just onemeeting.
Speaker 2 (15:24):
And if you want to hear from some people that used
our new business guide, go backto episode 20 and listen to Nate
and Sky from Olive Coffee Carttalk about how they use the new
business guide to make the mostboring part of their business
really easy kind of like hittingthe easy button.
Speaker 1 (15:42):
Yeah, that's such a great episode that shows how you
can actually buy the guide andimplement that in your business.
Speaker 2 (15:49):
That way, they can spend less time on accounting
and more time making awesomecoffee for people.
Speaker 1 (15:54):
Exactly so until next time.
Speaker 2 (16:00):
thank, you so much for listening to what your CPA.
Speaker 1 (16:02):
Wants you To Know.
Podcast.
Speaker 2 (16:07):
This podcast is intended to provide accounting
and tax information foreducational purposes only.
All tax situations are uniqueand should be handled with the
assistance of a tax professional.
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