April 2024 Ask Me Anything: Pay Day but How Much, Newsletter Move to Beehiiv, Your First Hire

good morning Welcome to our April AMA I'm going to go ahead and get started uh I'm Jill James I'm the CEO and founder of the Jill James um and each month I host a live AMA for my subscriber base um so I want to start out at the top this week um or this month with going over some reminders um today we're recording on April 11th um we always do this on the second Thursday of the month at 10:00 a.m. so hey Heather um so uh this month in particular for April we have a whole bunch of deadlines coming on Monday um and so I wanted to start just by reminding folks um who may be watching this later um just of April 15th deadlines uh for US taxes that we need to be aware of so going pull up my list make sure I don't miss them okay so Monday um your final 2023 tax returns are due or you have to file an extension um that's also true in States so your state tax returns are due or you have to file an extension um regardless of whether you file an extension you need to have be within either your Safe Harbor limit or 90% of your tax due to avoid penalties so just because you extend doesn't mean you don't need to pay something in by Monday to make sure that you're kind of within the range of avoiding a penalty on your taxes um Monday is also the first estimated payment for 2024 um it's kind of a mean double whammy but um the IRS does double up as du States and as by April 15th that you look at your q1 close and see if you were significantly profitable that you make an estimated tax payment um if you are uh also under withholding or something like that you need to like make it up so if you're new to self-employment um and you haven't been making estimated taxes before this is probably something you should check in on if you are you know highly profitable if you're making a good deal of money every quarter um and then uh the final one for those of you in California if you are an LLC um you need to file your um Franchise Tax Board $800 annual payment by Monday um you can go onto the FTB website and do it pretty much in real time um pull from a bank account or um use a credit card so uh that something is due Monday no extensions you have to pay your $800 each year um let's see other things that kind of lock out on Monday one of them is personal IRAs so if you intended to use a Roth IRA or a traditional IRA for 2023 before you file your taxes or by Monday that money has to be on its way to your brokerage um so uh just in case you're not familiar with it the max you can put in is $6,500 you can do less but up to $65 00 or if you're over 50 $7,500 in a personal Ira whether traditional or Roth um Roth does have some income restrictions so if you are single and making 153,000 or less you can do the max um and if you're married or head of household uh 228,000 for household income uh so that's you know again just something to consider if you're going between traditional or Roth IRA which one do I contribute to um and then uh for business aray is for seps um if you take an extension it extends your contribution deadline um but uh for 2023 you can contribute up to $66,000 if you have employees uh make sure to talk to your accountant about whether maxing out your 401K or SE means that you also need to make contributions for other people um if they are participating in your plans or if they're eligible to participate in your plans um you'll need to do that uh to stay in compliance relatively quickly after you make your own deposits and certainly before you file your taxes um so lots of money moving today uh lots of lots of deadlines in the next few days um let's see Heather just popped in the chat um if you're an estate that requires business personal property taxes on assets 415 deadline yes um let's see our yes that's our property tax deadline in California is um or most counties yeah also early April mid April um just so much money all the money going out the door um so lots on taxes um if you do have other tax questions or points of concern please feel welcome to pop them in the chat um let's see okay so that's all the reminders I'm going to jump into uh the first question that I I've gotten um and if you have questions along the way please feel welcome to raise your hand pop them in the chat um and we'll take questions in real time um from the folks who are on on the uh on the call as well okay so the first question is how do I decide how much to pay myself so I've been thinking about this question and I'm actually going to write about it in the newsletter next week because this is too nuanced it's several different things so uh I'm not going to be able to explain them all or this would I mean it could be our entire hour here uh but there's a lot of nuance around how you pay yourself so the big picture is how much can you pay yourself right if that's the question you're trying to decide um some folks use what's called The Profit first model where they look at um this is the total amount of sales or Revenue that I have I'm going to owe this much in taxes and then I want to pay myself this much that leaves everything else I need to run my business so in a profit first model you would take your money out first or the allowance that you want to have for yourself and then the allowed amount you would stay within that budget for the rest of your business expenses um if you're not familiar with profit first and you're new to running a small business it's a good model to help you kind of just understand what's flowing through your company what you could pay yourself um there are lots of resources online or yeah it's a long-standing book you can get it from your public library or you know lots of Recaps from different accountants on on how profit first Works um the other piece to think about and I think the one that I see missed a lot is what do you want your total compensation to be so we often when we're coming from a job we think about we just get our wage and salary well as a business owner there are a bunch of other things that you get as benefits um and and can benefit from and ways to pay yourself in a smarter way so in thinking about what you might like your total compensation to be I would look at things like um what qualified business expenses can the business pay for you and do you want to run those through the business so that might be things like your car um your mobile phone your internet um if you're you know traveling for work and then you stay a couple extra days um for personal stuff you know a portion of that can be written off through your business um so there are things that you would pay for post tax in your normal life that you will benefit from by paying through your business that are qualified business expenses so understand you know what qualified business expenses you are you do want to run through your um your business and then look at those you know within your total compensation because that brings down money that you have to pay yourself to pay those bills but you are benefiting um another one uh is to think about retirement savings um so you know I I just kind of recapped the amount ounts that you can put in but you know a SE or 401K in a given year um next year it'll be $669,000 uh or for this year I'm sorry for 2024 it's almost $70,000 um so is a big amount of money right when you were an employee you probably got maxed out around 2022 depending on the year now there's a big big overhead that you can um kind of defer from taxes by putting into a retirement account so if you're saving for your own retirement that's compensation for you granted you can't touch it right away um minus couple of exceptions but um it's a way to kind of differ from tax and save it for yourself so retirement savings I would certainly look at within your total compensation and so take you know kind of what you want to pay your bills and compensate yourself in real time um what you're running as qualified business expenses what you're saving for yourself in retirement and look at the big picture of of what the business is doing for you in your total compensation and figure out then again what are you paying yourself week to week month to month um and what other benefits are you getting um and then then we get into the nuances of how you pay yourself so depending on how you're legally organized there were some rules around um how how you can pay yourself so if you're a sole proprietor LLC taxes a so proprietor or um partnership or again this is where we start get into Nuance that I don't want to miss your specific case um so I will write about this in more detail in the newsletter um but basically you're going to take draws um so you take some of the profit of the company and you just move it from the business account into your personal bank account um you will owe payroll taxes on that so just keep that in mind um but you just you know you you pay yourself directly um if you're an LLC member you can't have a W2 salary so um unless you're classified as an escort again all kinds of nuance here um if you are an es Corp then you are required to make yourself a a W2 employee um so you will have a reasonable salary that you're required by law to pay yourself and then you can take uh distributions on top of that of profit so again lots of different ways once you figure out how much you want to pay yourself then the other piece is how do I pay myself and what kind of hidden fees taxes compliance go with that um so again I'll write about this next week in more detail so that we can get into more of those nuances and provide some um resources if you're kind of looking for more about how to do this um you can also always talk to your accountant um hopefully you have one of those it's April 11th I hope you have one um but you know talk to your accountant based on like how you're organized and kind of what your personal needs are about smart ways to pay yourself and the total amount that you can and then again what you're going to need to set aside based on how you're paying yourself okay so and I apologize that I can't I don't know the specifics of the person that submitted that question so I can't answer it for you specifically if you want to follow up with me um with a strategy session or uh send me a message um I can go into the specifics for you uh but that's kind of the in general right what's you're total compensation how do you figure that out and then how do you actually pay yourself and again I'll cover that in more detail in next week's newsletter okay um next question um so lots of us use 1099 contractors or even International contractors in our business now um so the question that I got was one of my contractors is taking a really long vacation how do I manage contractor time off so the really simple answer on this is you don't you don't have rights to tell that person when they do and don't work that's the downside of using contractors now in your contracts with that person you can set you can set out expectations in your s so um that they have signed on for we expect you to be available at these times we expect you to bake these meetings these deliverables are due by these dates as long as that person is meeting the agreements that you set out in your contract you don't have a say about when they do the work when they show up when they're available to you because they're contractors once you start to do that you put yourself at risk that they could be reclassified as a W2 employee and that includes your foreign workers that they could be classified as um needing to be salaried workers and then that creates a whole bunch of other headaches for you um so just make sure like when you bring someone on as a contractor with 1099 in the US or outside the US you just understand the limits of what you can ask them to do and make sure in your contracts you're very clear about the expectations of when they are available and how they work but if they come to you and say hey I'm taking a 3-we vacation and it doesn't compromise any of your deliverables you don't have a right to say you can't take a three we week vacation or you can't take a medical leave or any of that because they're not your employee um so I know this is a really hard one for a lot of um a lot of Founders to just not have that control but if you do need that control you need to hire W2 employees um whether they're you know seasonal or parttime um there are lots of ways to hire people that are not full-time employees but they are W2 um so again if that is a point of control that you need you need to have W2 employees and you need to establish time off policies but if you start doing that for people who are contractors that can get you in a lot of trouble and have a lot of back tax costs um so I know that is not an answer that a lot of people like but uh this is again a place where knowing um what you can put in your contracts and writing a good s so for the contractor with expectations that they've signed off on um that will cure for a lot of this uh upfront about like what your expectations are for their availability okay um our next question why did you move your newsletter to beehive oh so if you got this week's newsletter um I moved over to a new platform um called beehive um which is kind of in the substack medium beehive kind of product newsletter thing um so for those of you who you know make content media other things like there are a number of ways to monetize um I for the last six years have been writing my newsletter just as a hey sign up for my list if you want to hear from me sometimes kind of thing and it became a regular thing um and where I've been writing most weeks for six years and uh I decided this year that um I wanted to separate that from just purely a marketing vehicle and cultivating with um potential clients um because I realized there are a lot of people who are reading like as I'm traveling and talking to people they're like I'm going to start I I follow you because I'm going to start a business someday or I I want to learn about this and so it it's become more than just hey here's what I do here's some stuff we could work together on um I want to just be able to write about what's right you know for folks that you know that come on here and ask questions like I want to be able to answer those questions without consideration of are we going to work together in the future what does that mean so um I separated the newsletter into its own product line within my business business um and I decided to move it over to beehive because they have um a lot of good monetization features and reach um they have a referral program also uh some of the speech policies on the other platforms uh I was not on board with um particularly for substack um just not aligned with my business in terms of um the kind of people that I work with um not supported in substack um they're taking a very libertarian stance on hate speech and that's just is not okay with me um so I took a while to review lots of platforms um there are other that I thought were very good just that because my newsletters already established I needed something more robust um so that's why I moved to beehive um I've gotten a couple of questions already in DMS about why I chose it and how it works and other things so if you do have questions about that uh you know why I chose it or or how we got set up on it um please feel welcome to reach out so thank you for that one and I hope you'll enjoy one of the things that I am most excited about um my old provider didn't have an archive um so if you missed a week or you didn't open the email or you know kind of when you came on there was nothing previous that you could look at um so we've moved all the newsletters from 2024 into a beehive archive which I just put into the chat um so if you miss a week or there's like I know she wrote about this where is it um you can go into the archive there and uh that's just open right so you don't need to be a subscriber you can you can look at the archive anytime uh but uh those are on delay so if you want the latest newsletter you'll still need to subscribe if you don't mind waiting a few weeks to get the back catalog then you know that's great too okay um other questions um and if you have any questions if you're on live please feel welcome to pop them in the chat um I don't have a ton of questions today because I think a lot of things that have just keep coming up are around taxes tax deadlines IAS uh which we covered at the top so um I don't want to get super redundant on that um let's see okay here okay um oh here's a good one okay um I have been reluctant to take credit cards uh because of the high service fees I'm starting to get more offers from companies and seeing things online about low fee credit card processing should I move I don't know maybe you should um I I would need to know which specific processors that you are thinking about using um there are a variety ways to go about this right so Banks can act as processors thirdparty fintech companies can act as processors um so you know companies that maybe you've never heard of can sign up with a merchant Network and offer processing Services there are a lot of people out there and so to be competitive some are you know some newer processors are offering lower rates um the things I would consider one is it a promotional rate like that this will expire they're just doing it to get you to move from your existing processor over to a new one and then you know six months down the road the processing fees will go up but you aren't going to want to move again right so they're getting you to lock in on the software or lock in with the merchant um so look at like whether the the service that you're considering has a promo rate or it's actually like your permanent rate and what are their rights to change that in the future because they may just be doing this as an acquisition tool or an acquisition marketing play um another I would look at do does the serer plug in easily to um a lot of the online services that you use where you would need to have um need to have processing right so something like Shopify works with tons of different processors but some um you know smaller software players uh may only work with a handful with a automated API where it's just simply like oh you work with them log into your account we'll bring it over now you're on this other um other service or like there may be custom programming that you have to do you like you may have to really uh get into the weeds and work with this new processor in order to make it work with some of your software so make sure before that they support all the key platforms that you have right so some things to look at are like if you have e-commerce right are they linked into your e-commerce platform if you're using cenly and letting people pay for your time can kly support it um I know I use pipe drive you know pipe Drive can link into your service provider and like send quotes so you know look at the places where it's important to you to be able to get paid um and make sure that that servicer works easily with it or there may be a long delay or some um hidden fees around like what it costs to get up and running um and that is one of the benefits of a lot of the you know kind of simple TurnKey fex that's why a lot of people stick with square or stripe or squar space at a higher rate because it's plug andplay it's very easy you don't have to do anything technical um but the trade-off of that is you know until you're selling 780 $90,000 a month you don't get a breakpoint um if you're not familiar with breakpoints you can call your servicer at any time and ask what what their break points are um it's where you get a reduction fees for having a certain volume of payments every month run through their platform um so some s Serv breakpoints have really gone up a lot in the last couple of years like they're much higher levels um but if you are processing like large fees um you know not doing $4 cups of coffee um if you have larger fees um sometimes they will give you a break point if most of your transactions are larger in size because they're not processing very many transactions and they're high higher value um so it's always worth just checking with the processor you have around can you get a breakpoint um so I know that's uh clear as mud should you or shouldn't you um but uh it really is dependent on kind of your technical capability and what you need for your business um whether you want turn key flat rate um you want to follow a table and whether it integrates with what you already have okay I missed my escorp election deadline am I out of luck for this year um this another maybe there all maybe questions today sorry um so if you missed the escorp election deadline or you've realized um that you're you will be more profitable at some point in the year um than you than you thought you were going to be you want to try um you can try to do for a late escorp election it's not guaranteed and you do have to start behaving as if just in case you're approved um but there is a box on the form where you elect es Corp where it says like if it's after the 15th of March tell us why you didn't do this on time so you're you know you can write in like talk to my accountant bit we didn't get the paperwork done on time or you know whatever um I've seen lots of different reasons in there in that box written by accountants so you know just talk to your accountant about like what a reasonable explanation is for why you didn't make the deadline um and you can submit it and see if you're approved um so a lot of the time I mean for most most of my clients who have done this it does come back with an approval in some odd cases um they may say you can start on the first of the year next year but you wouldn't get the benefit for this year um and that is kind of the standard processing so it's possible but not guaranteed um you certainly can try it I would again talk to your accountant about the pros and cons of of trying to do it within this year and um kind of what your obligations are um should you want to try for that because it can take a few months to be processed it's not an auto it's not an autom IC thing where you submit the form and like they real time look at it so um you may not get an answer for a few months and you know if that kind of limbo is uncomfortable for you um it may not be the best idea um but if you want to go for it if it's a significant savings it's certainly worth trying so um talk to your accountant about how to file a late ESC Corp election and the pros and cons and risks around that and make sure that it's right for you okay um I don't have a lot [Music] more all right this is my last one yeah that's what I have um so if you if you do have any questions from uh and you're on live please pop them in the chat I'll I'll get to those but otherwise we'll do this one and we'll wrap up um let's see here I'm hiring my first employee what kinds of things do I need to do okay what's a 81 um so for your first employee if you are not an escorp and have not already set yourself up as a W2 employee you will need to file with your state um Department of Labor or simar um and to become an employer so uh you also if that person is not in your state you'll need to apply in their state to become an employer um so you need to get registered with the Department of Labor in the state where that person person is um to have an employment ID um and and start to get your rates for unemployment tax or unemployment payments um and also for withholding for them through through payroll you're probably also going to want to start to use a payroll company um so you know kind of look at um a lot of small businesses choose to work with gusto it's pretty straightforward um there's a link to it in my resources page if you want to check it out um that that's a good you know kind of way to set uh you need to set a payroll depending on if they are hourly or salaried your state might have a frequency that you have to pay the person on um a lot of states have if someone's being paid hourly they might have to be paid as as often as uh weekly no longer than bi-weekly um so you know check the rules about how frequently the person has to be paid um do you have to keep time cards uh or are you paying them on a a salary or they um you'll need a letter clarifying uh what you're offering in employment um with one employee it's nice if you can make the decision to decide how your paid leave is going to work um like are you offering sick time anything like that um you're not obligated to do it um except for in a handful of places where people are guaranteed sick time um so again check your local regulations and make sure that if you need to have a mandatory sick time policy that you're you're kind of communicating that because that is your obligation from the first day um so those are the big ones you know register with your state make sure that you're registered in the state that they live in because that's a big one that people Miss um you have to be both in your state and their state um let's see uh look for a payroll provider you know understand that you know what what your contributions are for unemployment taxes for payroll taxes um it's uh if you are using a payroll provider service they will walk you through a lot of these things um so there are a lot of compliance the risk of of missing things and compliance and that's one of the benefits of of using a um kind of TurnKey onboarding HR payroll system um that's geared to small business because there will be checklists of hey these are these are things that we don't have in our system yet so we can pay this person so would you like us to help you do that or send you you know kind of a this checklist of with links of who you contact for your area um so that can be very helpful um there are also lots of small business resources for hiring um in your probably in your county in your state uh you can call uh Economic Development board um they have a lot of programs for helping you get up to speed um in terms of making hires because of course they want you to hire people because it helps their tax base um so there are if you are confused about it um you know again look for resources talk to your accountant um go through the steps on on the payroll provider that you choose um but hiring an employee does it takes a little bit to get them up and running it's a it's a little bit of um you know a compliance task and uh understanding the rules so that you stay on the right side of whatever local state and federal requirements that you have for that employee okay um that is all the questions that we got in for this month um any from the crowd I'll I'll wait just a second um I will pop in here um I updated our at an event here over the calendar our next uh Event in May is on here so if you haven't yet added the amas to to your calendar um you can click on the link in the chat um that will put the rest of the Year's events in with the zoom link included uh noticed last month that that wasn't the case so you were only able to get it if you um join or you know had it from the email so now the zoom link will be in all of uh in your calendar if you if you use the ad calendar link okay um well I oh we've got um so I hope you have a great April um good luck with all the tax filings and money movements that need to happen in the next few days um certainly take advantage of that extension if you need it get it filed on time um and uh we'll be back here on the second Thursday in May at 10:00 a.m. um can kind of count on that that one for the rest of the year and uh submit your questions as we go and I'll see you next month thanks for joining

Channel: thejilljames

Views: 15

Keywords: business, small business, small businesses, self funded, self funded founders, entrepreneurship, small business finance, small business operations

Id: MoX9DKW2YVQ

Length: 28min 38sec (1718 seconds)

Published: Tue May 07 2024