Small Business Owners

For most early-stage one-person businesses, starting as a sole proprietor (just you, reported on Schedule C) or a single-member LLC is simplest and cheapest. Once net income clears roughly $60,000–$80,000 reliably, it's usually worth electing S-Corporation status to reduce self-employment tax. Partnership and C-Corporation structures are rarer for small operators and have specific use cases. This conversation is part of the free consultation when you're deciding.

A rough rule of thumb for self-employed owners is 25–30% of net profit to cover federal income tax, self-employment tax, and state income tax. But the right number depends on your actual filing situation, spouse's income, deductions, and state — so the better answer is to run a real projection in the middle of the year so you're not guessing. Quarterly estimates are built around that projection.

Ordinary and necessary expenses of running your business — the classic IRS standard. That includes home office (if you have a dedicated space used regularly and exclusively), mileage for business travel, professional services, subscriptions, equipment, continuing education, advertising, and plenty more. What you can't deduct: personal expenses dressed up as business, commuting miles, clothing unless it's a true uniform, or the value of your own labor. Getting this line clear saves audit headaches.

Depends on entity type. Sole proprietors and single-member LLCs take draws — the business income is yours directly and shows up on your Schedule C. S-Corporations must pay shareholder-employees a reasonable salary through payroll before distributing the rest as dividends. Partnerships have guaranteed payments and profit allocations. The right answer follows from your entity structure and changes how self-employment tax is calculated.

Yes, always. Mixing personal and business transactions makes bookkeeping miserable, weakens your LLC's legal liability protection, and creates audit risk if you're ever examined. Get a separate business checking account the day you start. It's free at most banks for small businesses.

Highly worth considering — self-employed retirement plans let you shelter substantial income from current tax. Options include SEP-IRA (easy, up to about $70,000 annually depending on income), Solo 401(k) (higher limits and Roth option, more paperwork), and SIMPLE IRA (for businesses with employees). The right choice depends on your income level, whether you have employees, and whether you want Roth flexibility. This is part of year-end planning each year.

The big one is worker classification — treating someone as an independent contractor (1099) when the IRS would classify them as an employee (W-2) is expensive when caught. If you have real employees, you need payroll, workers comp, unemployment insurance, and I-9/W-4 paperwork. If you have contractors, you need to issue 1099-NECs annually and verify W-9s. I can refer you to payroll providers I coordinate with.

Keep income records (invoices, bank statements, deposit records), expense records (receipts, bills, credit card statements), payroll records, and any substantiation for deductions. Generally retain for at least 3 years after filing (the standard IRS audit window), 6 years if income was substantially underreported, and indefinitely for anything related to basis of property or investments. Digital records are fine.

Yes — this is a classic year-end planning conversation. Hiring creates payroll tax obligations (matching FICA, FUTA, SUTA), administrative overhead, and fixed cost exposure, but the right hire at the right time often pays for itself several times over. Running the real numbers before the decision is made is the difference between growth and regret.