Over the years, my team and I have worked with thousands of entrepreneurs. We’ve seen light bulbs turn on and have witnessed many ‘aha’ moments. And frankly, that’s almost magical.
We’ve even had people come to us with business ideas they are over the top excited about…until we work through the numbers. Leaving the office slightly deflated, true entrepreneurs always come back. It may be a few years later, but they come back with another idea that works. Why? Entrepreneurs are just wired differently. They are resilient, and they have a high tolerance for risk. They are goal chasers and dream catchers, and our role is to empower entrepreneurs to achieve their goals, evolve as human beings, and enjoy every step of their journey.
As a new business owner, or even if you are just beginning to formulate that perfect business idea or consider buying a business, there are three common roadblocks to be mindful of up front. These roadblocks are all avoidable. We see them over and over again. They are easy traps to fall into and messy to climb out of. Here is what you need to know to start off on the right foot and bypass these roadblocks.
3 Common Roadblocks
Entrepreneurs never fail. They evolve. There is much to be learned both from your own setbacks as well as from those who have traveled the entrepreneurial path before you. Start by making sure your house is in order for these three key areas, and you’ll save frustration, money, and potentially your business.
1. Make the right decisions about how you classify your employees.
In most cases, all employees can’t be 1099 employees. If they are not classified correctly, the IRS can make adjustments which can be very costly. Carefully consider the difference between the two classifications.
Self-employed, independent contractors receive 1099s at the end of the year. They are responsible for remitting and reporting their own taxes.
For W-2 employees, you must report, collect, and remit payroll taxes.
If you have questions or concerns about how to classify your employees, your CPA can help you avoid potentially significant liabilities.
2. Pay, file, or remit payroll taxes on employees.
From the minute you hire W-2 employees, you are responsible for collecting, filing, and remitting payroll taxes. There are a variety of ways you can manage this, one of which is simply setting up a separate account that you move payroll taxes into each pay period. Again, your CPA can help you make the best decision for your business.
The key takeaway when it comes to payroll taxes is this: payroll taxes must be accounted for up front…not just when they are due. My team and I have seen many businesses make the mistake of floating the payroll taxes and then panicking when they are due because the money just isn’t there.
3. Put enough money aside for taxes.
So you’re starting to get some revenue, and it feels gratifying. Your hard work is paying off! The money in the bank looks a lot like your money, but don’t forget to put aside the right amount for Uncle Sam. The best practice is to be diligent about this up front and put the same amount of money you take home into a separate tax account.
We discuss more best practices for managing this as well as managing personal and business spending in our free downloadable resource you can access here.
Getting behind on business can be a crushing mental strain on an entrepreneur.
As you begin your journey…
Avoiding these roadblocks will put you in a solid starting position to move your business ahead the way you envision. Building and growing a business is hard work, but you don’t have to do it alone. Partnering with the right financial team can empower you to be able to think strategically and more importantly, it can establish a clear path for you to jettison ahead financially. As an entrepreneur myself, I also believe that a business owner needs to prioritize enjoying the journey. By giving yourself every advantage early in the process and aligning with a financial partner who holds you accountable, you are about to embark on the most rewarding journey of your life.
