Thursday, March 6, 2014

Edi Royer, Inc

With each year that I run my business, I learn something new. Lots of new somethings usually. Last year I learned how much I hate to pay taxes! I know it's a necessary evil, but actually having to write a check to the IRS every quarter just plain sucks. So this year, I've been looking for better, smarter ways to run my business without giving my profits to the government. One change I recently made was to become an S Corp. As of February 26th, I'm officially incorporated! Hello Edi Royer, Inc!

I thought I'd share a few things I've learned about becoming incorporated and whether it is right for you. (Tax pros, please correct me if I'm wrong on any of this!)

The first thing I recommend is doing a pros and cons list. Looking at your numbers and seeing if this option is right for you. While there are tax cuts and you can save money, you also have to look at the cost of becoming incorporated. I will be paying roughly $1,000 per year for my monthly statements, quarterly statements and end of year return. As a sole proprietor, I only paid $100 for my personal return/Schedule C at the end of the year. So you need to know that your savings will outweigh your costs.

Your savings come in the form of less taxes. As a sole proprietor, you pay roughly 30% of your profit to taxes. This will depend on your tax bracket, but this is where I fell.
As an S Corp I will still pay 30% on my payroll earnings, but I can make this wage fairly small as long as it's a living wage. I still have to pay taxes on my businesses profits, but only roughly 15%. That change can make a big difference if you're looking at a healthy profit.
I advise sitting down with a tax professional and having them run your numbers to see if this change will save you money.

The biggest challenge for me will be learning a new software program and making sure all my numbers balance. Many people already use Quick Books, but it will be new to me. I'm still learning and just hoping that my numbers balance at the end of the month...fingers crossed! This means stricter book keeping on my part!

Something else to consider if you do choose to become incorporated is your corporation's name. My financial adviser through the name Edi, Inc out there and I just liked how it sounded. When we went to register the name, it was already taken...bummer. So I went with Edi Royer, Inc. You should choose a name that can be used for another business if your current one happens to close. I will still be Doing Business As (DBA) Memories for Life, but my corporation is Edi Royer, Inc. This way if I ever own a flower shop or a Radio Shack, I can keep the same corporation and just DBA a different entity.

If you stuck with me though this whole post, I hope it was informative and helped you with your business :)

20 comments:

  1. When I started on Etsy, this whole tax thing never even occurred to me! What a learning curve it has been. The sales tax angle has given me the most headaches. I hope other find this useful info you've provided for them!

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  2. Congratulations! And an excellent summary.

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  3. great information. concise and to the point emphasizing some key strategies. thanks

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  4. Thank you for sharing Edi! This is something I have not thought about yet but will be starting to pay my taxes quarterly at the end of the first quarter this year. I was considering starting a SEP IRA which allows self employed individuals to contribute a large percent of income each year and ultimately reduce taxable income. So much to think about!

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  5. This information is SO helpful. I'm still set up as a sole proprietor, but I'm going to talk to my accountant about incorporating in a couple of months when the new site launches. I HATE paying quarterly taxes, and I always end up owing at the end of the year. It's amazing how much you can save by putting yourself on the payroll. I never would've thought of that, so I'm glad you did!

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  6. Great info Edi! Incorporating isn't for everyone but it certainly is a great idea for you and I'm so happy your accountant has been so helpful through all this! Quickbooks is easy so you'll pick it up quickly.

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  7. That is a great savings! Thanks for sharing the differences between the two.

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  8. Thanks for sharing this info, Edi! I'm not there yet with my business, but if/when I ever get there (haha) I might send you an email to ask some questions since it sounds like it has worked out well for you. :)

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  9. Absolutely wonderful post! I am now a follower and can't wait to check out the rest of your blog as well as new posts!

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  10. Very helpful! I'd love to get to the point where incorporating makes sense for me.

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  11. great advice, and congratulations Edi Royer Inc!

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  12. Huge change, but congratulations on figuring out what works for you!

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  13. I love success stories like yours! Becoming Inc. is super cool :)
    Congrats, Edi!!!

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  14. Thanks so much for sharing this info! I have my first round of tax season with an Etsy shop on the horizon, so I'm sure there will be lots of things to improve upon.

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  15. I'm not at this point yet, but it is very interesting info! Right now, during my Sabbatical, I am pondering just how big or small I want my business to be, since I am "on in years." ha ha! I know, I am not old, but I do have a large family to divide my time with!

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  16. Congrats on becoming Incorporated Edi! It sounds like a great way to grow your business and save some money in the process.
    Valerie
    Everyday Inspired

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  17. great information!
    Best of luck with all the bookkeeping!

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  18. Well, paying taxes is definitely a chore we all hate to do, but it's something that has to be done. It's a headache we all hate to bear, but we should comply nonetheless. Anyway, thanks for sharing those tips. Quarterly taxes are really painful to do, but that information can clear up any more headaches it should provide. All the best to you! :)

    Norma Schneider @ Mash Accounting

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