You do not want to use schedule C, the unincorporated business tax is a killer. Chapters S or LTD
Some good tips and write off with a Chapter S....
SEP retirement plans allows you to save 25% max of you payroll income, tax deferred until you withdraw at retirement age, take full advantage of this. This has the other advantage of lowering your tax bracket. Another tax saving can be distributing "profits" at the end of the year; certain taxes are not levied on profits.
In NY, you can not collect workers comp or unemployment, so if you are a corp share holder you do not have to have workers comp insurance. This saves paper work and a small percent of payroll. Best to notify the state in writing (government form). Unemployment insurance is collected even though you can not apply for it.. no way out of it.
Have two phone lines, one line have a unlimited local (cheapest plan) for "personal use", the other line is the business line, unlimited. Make most of your calls on the business line. Write off your high speed INTERNET connection. You need the second line to write the business line off. A cell phone is considered a line
Setup an office, if you have a house or rent, maintain an office. The government allow you write off rent/mortgage, electric, heat, cleaning, repairs etc for the square footage you use. You are supposed to only use the area for business.
Write off ANYTHING you use for business. Car, Craftsman tool set, coffee makers, microwave, VOMS, test equipment, servers, laptops, desktops, fire extinguishers, furniture, anything which touches your business; one can be creative in this area, legally.
I use Quick book payroll service, there are cheaper services. The monthly fee are a bit much but they guarantee all forms get to the government. This is a necessity, if you screw up a quarterly or yearly report, or have a late tax payment expect the penalties to be in the hundreds, also expect an audit. Quickbooks pays for an fines and interest, due to any mistakes or forms not received by the local and Feds; payroll services are like insurance. Having an outside firm do the payroll also increases the protection of the corporate vail. Maintain the minutes, and corporate meetings.
Audits.. I had a client mark a W2 for non-employee services, as an "award" instead of non employee compensation. A simple check mark mistake, which did not affect the taxes. It took me 5 trips to Manhattan to straighten this out, basically a good part of 5 days. It took three trips to find out what was wrong, as the IRS could not find out any info on problem, absolute nonsense. Another reason for an accountant. Avoid accounts which are too creative.
Maintain your tax folders for many years. Forget the required 3 years. If the government thinks your cheating them, and you do not have the tax tax returns for many years, you are guilty; they proceed to make up arbitrary amounts, compound the interest and penalties. Interest runs around 18%. The agencies will wait for 3 years to send the bill. Does this sound like loan sharking ?
Leave very little in the corp or LTD at the end of the year. I have never been sued, but in this day of ligation mania, leave nothing for the lawyers. This could also stop an impending law suit, as lawyers will not pursue and empty entity. If you become rich doing this, secondary incorporations are useful to shield assets; an example of this would be if you purchased a house or office building, you would do so by forming another corp, and placing the purchase in the secondary corp.
Get a cheap corporate tax software package. Necessary to know your approximate taxes before the tax year ends. Get an accounting package, I use Quickbooks. I am not an account and can not stand using all the feature, I only enter the invoices and payments, I would go crazy if I entered everything I purchase daily, I do not have the time or energy. Twice a year I sort all the receipts, and tally them up for the accountant. I use an Excel spread sheet for the tallies. Before the year ends, I know within a small amount, my tax liability.
In the third quarter of the year, you can chose to not bill until the next year. This can have a definite advantage if you want to push income from a high income year into a year which income may be less.
“I know being an Admin, that there are certain things I WILL NOT do because I did not appreciate it when it happened to me. "
Listen to your gut feelings, they are almost always correct....
When I first jumped ship to go out on my own, a recession hit about 5 minutes after leaving my very secure job. Well, I would try to accommodate any client requests ( spend the least), poor move. If you run into situations which will jeopardize your reputation or cause lost time in the future, refuse the work. Do not let clients build networks due to their money concerns, and lack of knowledge... they generally dig graves large enough, for themselves and you. Resist the temptation
Do not let the bill grow exponentially before collecting. Though I have been beat of only a few hundred dollars in 20 years, I came extremely close to losing $ 40,000. a couple of times. Allowing a bill to grow empowers possible dead beats and clients. On Staten Island, a few techs get together, and we formed a list of people who's purpose in life is to not pay for services. Dead beats are very rare, but they exist.
Maintain your power. In my years in business I needed to walk away from a couple of clients; large outstanding billing is not conducive to a necessary “walk away”. Never let the bill grow to the point where you can not walk away ,or cause you to have sleep problems. For the most part my clients are great, rarely do I worry about being paid.
Get ready for respect, and moments of being placed at God level reverence. Nothing like resurrecting data or getting the accounting department back on line, for being raised to superman status.
Incorporate, or LTD it. In the US, incorporation has some really nice tax breaks and protection. If you own anything of value or have savings, you need an entity for protection.
Get a good accountant. I did my corporation taxes for years, but if the Irish government is anything like ours, any form mistakes become a field day for penalties and interest. Photocopy everything you send to the government, pay your taxes with money orders. With New York State, if you do not send all correspondences by certified mail, and paid by money order, the forms and payments disappear. Three years later they send a bill with big fines and compounded interest. Accountant are also great at fielding government audits, often they can cut an audit down to 15 minutes versus 5 days. Never cheat on taxes.. if your tax people are like ours, they bring mobile crosses with them to crucify you on the spot...they use rusty nails.
Take full advantage of any write off you get, another good reason for getting the right accountant. Choose the accountant carefully. Some are useless.
When really busy, it is better to work late then have work build up ahead of you. Emergencies have a habit of occurring in multiples; keep your plate clear for those times.
Expect to work a couple of 36 hour days a year in emergency situations, your reputation rides on your client's uptime.
Try your utmost to build the best quality networks, with the most reliable hardware… your sleep and love life my depend upon it.
Train yourself no to react to "clients in panic". The pressure is somewhat different than when you work as an employee, as new clients do not know you well.
Tis better to charge a bit less then full fledged shops, as you have little overhead… better for repeat clients. Find out the going rates
Once your established you will find a financial security you do not have as an employee. After awhile you will not worry about money coming in..one of the reasons client invoicing is not taken care of..
Remember to write off your camera equipment.
In the U.S, we can hire the wife and kids.
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Chernobyl disaster..a must see pictorial
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