know the difference

LLC vs S-Corp: What’s Better For Your Business?

LLC vs S-Corp: What’s Better For Your Business?

Written by Luke Frye

Can you save money setting up your business as an LLC? Should you elect to be treated as an S-Corp?

I get asked these questions a lot by clients who want to maximize their tax savings. I wish there was a one-size-fits-all answer. But the honest the answer is: it depends on a bunch of different factors.

Before you set up shop as an LLC or an S-Corp, here’s a quick rundown of how these two business structures can benefit you and your business.

Top Nine Tax Code Myths and How to Stop Falling for Them

Top Nine Tax Code Myths and How to Stop Falling for Them

Tax filing and small biz accounting are complicated at the best of times. So, as a CPA for photographers and creative biz owners, I spend a lot of time busting tax myths for new clients.

Here are some of the most common tax myths that trip entrepreneurs up. Avoid them all and file a better tax return this year.

Five Things You Thought Your Accountant Was Doing

Five Things You Thought Your Accountant Was Doing

Accountants are smart, hard working, and they basically do everything for you, right?

Well, yes and no.

Typically your tax accountant (maybe you call them an EA or a CPA) is focused solely on filing your federal and state income taxes. This means there’s still a lot of “financial admin” you’ll have to take care of on your own to keep your business running.

Here are five financial tasks you’ll need to get done to keep your business running smoothly.

You’ll need to take care of these yourself or commission your accountant to do in addition to tax filing.

How to Make Money: Focus On Who You Serve

How to Make Money: Focus On Who You Serve

People talk about opportunities like they’re a nebulous, disembodied thing. Like they’re floating around and will land on your shoulder and boom, your life is changed forever. Let’s say they are. Imagine opportunities are all floating around in form of balloons. Every balloon is connected to a string. And at the end of the string, even though you might not be able to see it, there is a person holding the string.

You see, opportunities are not standalone. They’re always connected to a person.

This article is all about understanding who you serve. Who is your ideal customer, target market and what’s your niche?

Understanding Your Mindset Around Money

Understanding Your Mindset Around Money

I really enjoy being married to an interior designer. There are a lot of perks: We spend a lot of our time engaging with the culture in whatever city we find ourselves in. Nearly every industry party is impeccably designed with delicious food. The bins and bins of fabric samples mean I have access to thousands of potential pocket squares. Since so much of my wife's work relies on being inspired, we’re constantly looking for beauty in the world. 

Stop Not Understanding Life Insurance: The Definitive Guide

Imagine a room full of people running the odds on how long a stranger will live or die and then making bets on those odds. It could sound like an interesting scene in a movie, where questionable characters indulge in some casual underground gambling, but what I’m actually describing is a room full of underwriters in the life insurance industry.

When you look at it that way, doesn’t the insurance industry sound fascinating? It’s one of the biggest industries in the world and it’s all based on risks and making bets.

Why You Aren’t Achieving Your Financial Goals

Photo by Jad Limcaco

Photo by Jad Limcaco

Goals are the measurement of the vague things we are chasing in our lives. The goal of success can be boiled down to a certain amount of money you earn a year. The goal of being healthier can be measured by your weight or the amount of miles you can run without stopping.  

Habits are the things that will influence your ability to achieve your goals. The good habits help you reach your goals and the bad habits will hinder you from the sweet, sweet glory of achievement. Ultimately, habits influence our automatic behavior and our automatic behavior influences our day-to-day life.

The difference between habits and goals is the action required for each. For example, you could have the goal of saving $500/month or you could have the habit of saving 5% of everything you earn. Creating a budget for the year is a goal, but implementing a system for sticking to it is a habit.

I’ve watched myself set goals and achieve them. I’ve watched myself set goals, grow exhausted, fight a cruel internal dialogue and ultimately fail at what I’d set out to do. At the same time I’ve watched myself build habits without a focus on goals and it’s amazing what I can achieve when my internal dialogue stops and my habits just kick in.

And for the last couple of years, I've joked that my goal is to have no goals, but the more I spend time watching the clouds and thinking about my life, the more I am compelled to quit having goals. 
 

The Problem with Goals

Goals are flawed to the point that they undermine what they set out to achieve. Goals rely on factors which are outside of your control, they have an endpoint and they require you to try to use your willpower.

There are so many factors outside of your control that impact your finances. The new tax code, a disruption in your supply chain or unexpectedly getting sick are all things that can impact whether or not you achieve your goals.

Goals have and endpoint which makes it easy to revert back to bad habits. Some people reach their savings goal, but spend it all a few months after.

Goals rely on willpower, which cannot be trusted in the long run. Willpower isn’t an automatic behavior, it’s like using a muscle. Overtime if that muscle is working hard, it can get tired. For example, trying to save money by spending less requires willpower and discipline. But automatically having a portion of your income going into savings is a habit that doesn’t require any willpower.

Some studies even cite that goals can cause risky behavior. Some people get so focused on achieving the goal that become blind to anything that appears unrelated to achieving said goal. There can be an overemphasis on short-term thinking or unethical behavior as a result of trying to reach an unrealistic goal.

 

The Power of Habits

Habits make things that were once difficult easy because habits are automatic.

Habits are easy to complete. You’re no longer beholden to your crappy willpower because habits literally rewire your brain. Your brain changes so the habit becomes easier to enact the than not doing so. You don’t have a mental battle about whether or not you’ll brush your teeth in the morning because it’s a habit that’s so deeply ingrained.

Habits can last for life. Our lives are structured around our habits and once a habit is ingrained, it can last for a lifetime. 

Habits can compound. A single habit can have a deeper and wider impact on our lives. Creating a habit in one area of your life can have an impact on behavior in other areas of your life. For example, someone who starts exercising might also eat less processed junk food. If you start automatically saving money in an emergency fund, you might find yourself making better choices when you're shopping.

Sometimes habits naturally allow you achieve more than your goals because of the automatic nature of them. It’s possible to still achieve results by ignoring goals and focusing on habits and systems. For example, a basketball team can still win a championship even if their focus lies in doing their best at each practice and each game. I've never had a goal with my meditation practice and now I'm going on year six of consistently meditating. When I shifted my focus on habitually adding value to my client's lives and businesses each month, I made more money than when I was focused on an income goal alone.
 

Fall in Love with Systems

Goals can be a source of joy when you are able to achieve them. Like so many things, they work until they don’t work anymore. And when that happens they can be a source of frustration. In order to continue achieving your goals, you’ll need to constantly seek motivation and inspiration. You’ll constantly be drawing from the ever-depleting well of self-discipline and willpower. You’ll be exhausted over the long haul.

The self-preservationist way around this is to create systems in your life, especially your financial life, that will remove your chatter-filled mind from the driver’s seat. Create systems for savings and fun spending so that instead of wasting time and energy asking yourself if you can afford this new thing you want but you don’t need, you already know that you’ve set aside money for savings, taxes and fun.

As you think about what it is you seek in your financial life, invest the time to understand what are the positive habits you need to form instead of becoming singularly focused on a specific goal.

What Is a (Business) Line of Credit?

Lately I’ve been working with a lot of small businesses that are growing rapidly. It’s awesome to watch this unfold, but one thing I’m learning quickly is growth comes has a cost. Whether you’re selling products, providing a service or manufacturing something, in order to grow, you need to invest in the business.

As I’m sure you’re painfully aware, business doesn’t happen in a neat timeline. Cash flow timing issues are very real. For example, there’s the furniture designer who is bringing on more staff, expanding to be a bigger storefront and signing new accounts. There’s the retailer who needs to make a purchase from the manufacturing company and the larger order comes at the best price. And then there’s wedding photographer who needs to pay her tax bill during the slow season. A line of credit may be an option to help bridge the gap.

How to Price Your Services

If you work for yourself or dream of working for yourself, I'm sure one of the motivating factors is to make a profit. Making a profit can depend on a lot of different factors. Some of those factors are outside of your control like the market and the competition. You can move the needle on other factors like leadership, management, location and the number of locations. But one of the most important factors that have a direct impact on your profit is pricing. Pricing is how much you charge for your service.

Understanding Student Loan Consolidation

Alright, student loans. These wonderful and horrible tools that allow people who can't afford an education to pay for one by simply mortgaging their future. Ah, the American way. If you're one of the unlucky and you've been avoiding doing the leg work and mental work when it comes to consolidating, this is for you.