Business Growth By Design

Design a business you can live with

Archives for March 2019

Tax Tip: Independent contractors

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You work hard for your money. Why waste it on costs and penalties?

In this article, we will focus on what every business should know about the secrets of hiring an independent contractor.

Many businesses would rather pay someone as an independent contractor rather than an employee to avoid extra payroll taxes. Other benefits may include not having to pay for workers compensation, vacation, sick leave and other costs.

The IRS has a 20 factor test on what constitutes an independent contractor.

The problem with this test is that the factors can be ambiguous and apply to both an employee as well as an independent contractor. How is a business supposed to know what to do?

Of the 20 factors, I believe the critical three factors that determine whether a person is an Independent Contractor are as follows:

1. Realization of profits or losses.

People who track profits and losses from doing work are independent contractors. Employees do not recognize profit or loss from doing work. They get a paycheck and if they mess up they still get a paycheck unless they get fired of course.

2. Working for more than one firm at a time.

If people perform services for a number of unrelated persons at the same time, they are usually independent contractors although I do understand that people may have 2 even 3 jobs but drawing a paycheck is different than submitting invoices to get paid for the work you perform.

3. Making services available to the general public.

Independent contractors make their services generally available to the public meaning they get a business license, they have a business card, they have a website, they go to networking groups and they market their services.

In my view, this last factor also is a key determiner that the government agencies use in focusing on deciding whether a person is an independent contractor.

No business license, no business card, no website, makes it a bit difficult to argue that you are holding yourself out as a business.

Saving money is as good and maybe better than making money. Knowing how to classify the people you use in your business can save you time and money.

Are You Taking All of the Deductions Available for Your Business?

Take action by creating a long-range plan for your business that will help you keep more money in your pocket rather than the government’s.

Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.

Or you can contact us >>HERE<<

Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.



Wealth Preservation: Equity

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Equity is what is left over after you figure out what you own less what you owe.  This is called your balance sheet.

You don’t really own your home until the mortgage you pay is fully satisfied.  If you don’t believe me, remember back to 2008. How many people bought homes and lost those homes.

The banks didn’t come in and say gee you are a nice person you can stay in the home awhile until you can pay again.  The banks took the homes.

What you own are your assets.  What you owe are your liabilities.  Assets minus liabilities is what you have left over.  It has nothing to do with your cash flow or how much you make or how much you spend.  

How much you make and how much you spend is more about whether you have money or are broke each month.  

As you may have guessed, preserving wealth is about building your equity.  Building and preserving what you have left over.

What you have left over can’t be taken from you because you don’t owe anyone.  Once your car is paid off, once your copy machine is paid off, once your home is paid off, it is yours to do with as you please.  No one can tell you what to do.

How many of you like people telling you what to do?  How many of you would like to be in a position where you can’t be told what to do?  

The only way to do that is to build equity and the only way to build equity is to get rid of debt and put money away.  We will discuss putting money away a little later.

Get out of debt.  Credit cards are evil.  

You say to yourself oh I will buy this nice drill set or microwave or stereo on credit.  I will pay it off next month. Next month comes and you see the credit card bill. Except that your son had to go to the doctor suddenly because he broke his arm or your daughter had an unexpected dental bill.  I don’t have $300 to pay off the credit card. Oh, look. I only have to pay $20. I can do that and so you do. The next month the statement comes and the debt is now $282..80. Wait a minute, I thought I paid off $20.00.  Well, you did but the interest on the $280 remaining was 10% per year so 1% of $280 is $2.80. That’s $2.80 that you now have to work for and you received nothing from it.

Suddenly your hours get cut and now you can’t pay the credit card at all.  

Except you used the credit card to pay for your car repairs, your gasoline, your frappe latte, your hairstyle, your new pants, your subway sandwich and now the credit card is $2,000 and it is costing you $20 per month in interest.  Failing to pay the bill the banks (the really nice ones that like you) hike the interest to 20% so now the interest is costing you $40 plus the late fees and penalties of another $40. Suddenly your $300 dollar microwave, drill set or whatever is now over $2,500 and it keeps going up.  

You are working for nothing.  How much could you do with an extra $40, $60, $100 per month.  Get out of debt.

How do you build equity toward your wealth preservation?  

You have to save and put money away.  When you save and put money away then you start letting that money work for you and grow without you having to work for it.  Owning rental properties is a great way to build equity. You buy a property (yes it is not yours yet). You rent the property and the rental income you make goes to pay the debt so it costs you nothing.  When the property goes up in value you get the benefit of that increase and you didn’t have to work for it. That’s building equity on your way to fortifying your wealth.

Our vision is to enhance the way people think and talk about wealth not only in money but in values, beliefs and traditions.  Our mission is to show people how to strengthen their business and fortify their wealth through 5 simple steps. Survival to make ends meet;  Security for business and family; Affluence in enjoying the fruits and benefits of the hard work put in to make money; Influencing others through clarity of purpose and vision; and Legacy of how you will be remembered and the impact and difference you can make in the world.

Thank you for being a part of our Straight Talk community.  What step of wealth are you in? What can you do to get to the next Step?

Tax Tip: Home Office Deductions

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More and more business owners are working from home.

Grab a laptop and off you go. No rent to pay. No traffic. A short commute from the kitchen to the home office.

What could be better? A Tax Deduction. That’s what could be better.  

Normally personal expenses like the home telephone, the home computer, the home utilities and more cannot be used to lower your income and your taxes. However, when you work for yourself you can take advantage of deductions for a home office that you wouldn’t normally be able to take. What a deal!

This article uncovers the secrets of the home office deduction for you to take advantage of..

Home office deductions can be very beneficial for a business owner.

The key to the home office deduction is that you are reducing business income which can be subject to double taxation. In the case of the home office, if you use part of the home say 200 square feet and your total home space is 2,000 square feet, you will be able to take a 10% deduction for mortgage, property taxes, utilities and other expenses right off your business income which can save you a fair amount of money.

For sole proprietors, this can mean thousands of dollars in tax savings.

The home office deduction has a couple of key rules.

Home Office Deduction Rule #1:  

First, the home office must be used regularly for a trade or business. That means you want to log in time working in your home office on a regular basis, especially if you have a second place where you conduct business.

Home Office Deduction Rule #2:  

Second, the home office must be used as a place which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business.

If you are an employee of a business and your employer requires you to have a home office for the employer’s convenience, then an employee also can take a home office deduction.

For many home-based businesses such as those selling health care or skin products, internet business and others, the requirement of meeting customers or clients is pretty straightforward.

There is no question that telephone calls made, appointments set and even meetings with prospective customers can be established and proven to justify the home office deduction.

However, in cases where a person has a regular place of business outside of the home, it will be rare for the home office deduction to be permitted.

The home office deduction is an IRS favorite of mine for business owners.

It can be perilous or it can be a real treasure. Contact us with your questions we’re glad to assist you!

Are You Taking All of the Deductions Available for Your Business?

Take action by creating a long range plan for your business that will help you keep more money in your pocket rather than the government’s.

Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.

Or you can contact us >>HERE<<

Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.







Wealth Preservation: Verify

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W. Edwards Deming once said you can’t improve what you don’t measure.  

So think about a goal you have.  

Are you verifying the progress towards that goal?  Oftentimes we set a goal as the end result and forget about verifying the progress along the way.  

I am sure many of us have heard the age-old adage, success is the progressive realization towards a worthy ideal.

Verifying progress simply allows you to focus in on specific areas of improvement that need to be made in your business, your website, even your health and nutrition plan.  

Did you know that a space shuttle is off target 99% of the time?

It’s constantly making slight adjustments based on the feedback that the measurement systems are sending into the computer. Verifying progress simply allows you to know where you came from where you are so that you can determine where you are going.

Another example of this idea is to trust but verify.

Strategic and collaborative partnerships are established between people who have common interests and objectives. One of the single most important points to do when collaborating with others is to define the roles and responsibilities of each person.

More importantly, is to verify that the other person is actually fulfilling what they are supposed to do so that the overall success of the project is assured.

Our vision is to enhance the way people think and talk about wealth not only in money, but in values, beliefs and traditions.  

Our mission is to show people how to strengthen their business and fortify their wealth through 5 simple steps.

Survival to make ends meet;  Security for business and family; Affluence in enjoying the fruits and benefits of the hard work put in to make money; Influencing others through clarity of purpose and vision; and Legacy of how you will be remembered and the impact and difference you can make in the world.

Thank you for being a part of our Straight Talk community.  What step of wealth are you in? What can you do to get to the next Step?

Are You Paying Tax Twice?

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In this article, I share the pitfalls that many small business owners face:  Paying taxes twice and what you can do to avoid this trap.

Let me share the story of Monica…there are lots of business owners just like Monica who start a business and end up paying tax twice.  

Monica was a Masseuse. Monica worked hard, she was passionate about what she did, but her net worth didn’t reflect her efforts. Like most business owners Monica went to school. After school, she started working for a Massage company.

She was trained in the different muscle groups and manipulations and she became really at good at doing massage. One day Monica looked in the mirror and she didn’t like what she saw. Here was a woman in her mid 30’s working long hours, taking orders from a boss, who wasn’t all that bad and tired of being told what to do.

Monica had the romantic ideal that she could start her own massage business.

She would be independent, in control and keep 100% of the revenue for herself.  What Monica didn’t realize was this thinking was a false perception. Just because Monica understood the doing of the business didn’t mean she understood the business of business.

You can never keep 100% of the revenue because you have to pay the business expenses which is what the company that Monica worked for was doing.

At the time Monica didn’t realize this truth. In any case, Monica went home, she talked to her husband, she talked to the dog. The dog gave her permission and poof she gave hers notice, took her knowledge and skills, opened a bank account, got a business license found a location and started her own Monica’s massage business.  

Monica’s romantic ideal quickly ran into the brick wall of reality.

She had no customers, she hadn’t thought about the structure of her business. She was unaware of the legal and financial aspects of business and she was unsure about her goals. To make matters worse, Monica was now working for someone who demanded more hours, more sales, less profit, less family time and 9 jobs instead of one.  

For the price of independence and control you sacrifice 14 hour days, 7 days a week, wondering how you got into this mess, you are overworked, overloaded and overwhelmed, you see the dream getting farther and farther away.

To add insult to injury, you can end up with two types of taxes.

I get this question from business owners like Monica all the time:  how come I am paying so much in tax and what can I do to stop having to pay so much?

Principle Number 1: Double Taxes

When you are self-employed operating your company as a sole proprietorship you are paying payroll taxes.

That means as an employee of your own business you pay roughly 7.5% on your net income or profit from the business. In addition, your company, the sole proprietorship, also has a responsibility to match the 7.5% and pay it over to the government.

Therefore, you have to pay 15% in payroll or self-employment taxes.

There is nothing you can do to avoid paying this tax. There are no deductions or credits like there is on the income tax side to reduce the self-employment tax.

Principle Number 2: The S Corporation

To avoid the double tax we recommend that at a certain point in time the business owner should consider becoming an S corporation.

The profit of an S corporation is not subject to payroll tax. There are many factors that need to be considered before just going out and setting up an S corporation.

At Business Growth By Design, we have expertise in tax law and can guide and advise you correctly on whether the time is right to become an S corporation, the advantages and disadvantages and if it is right for you.

Are You Taking All of the Deductions Available for Your Business?

Take action by creating a long-range plan for your business that will help you keep more money in your pocket rather than the government’s.

Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.

Or you can contact us >>HERE<<

Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.






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