MyCorporation CEO Deborah Sweeney offers effective ways that can help save your business money well into the future.
All businesses, no matter how established they are, want to save money. But for start-ups, having some extra cash on hand makes a world of difference. There are a lot of unforeseen, slightly unpredictable, expenses at the start-up stage, like upgrades to an office you want to rent, or legal work you need done to stay compliant with state laws. A small business owner can just take out more loans to cover these costs, but bootstrapping remains, in my opinion, one of the best options for a cash-strapped new business. Learning how to stretch your dollar as far as you can will be one of the best things you do to aid your business’s success. Here are three tips to help you save money.
Begin Using the SBA
America loves small business, and the Small Business Administration is proof of that. Woefully underutilized, the SBA has tons of programs, courses, and seminars designed to help new small business owners figure out how to successfully run their company. Many of these courses are comparable to college classes – the only difference is these are free. Every state has a few SBA-affiliated offices that offer these courses, so do a search and see what type of free assistance is provided. If you meet certain criteria, you could also qualify for a federally-funded grant. Keep in mind, though, that these grants are not given out to help start a business, and companies that qualify have to provide some sort of return to the taxpayer. Most small businesses will not qualify for a grant, but it never hurts to look. [pullquote]S-Corp and LLC allow you to typically pass profits through the business directly to you, avoiding double-taxation. [/pullquote]
Write down all renewal dates
Running a business is always hectic, especially when you are just starting out. Along with being the boss, you probably also serve as your company’s secretary, tech support, marketer, and salesperson. It’s important to stay on your toes at all times and if you don’t pay attention to important filing deadlines and dates, your business may end up falling out of good standing with the state or being hit with noncompliance fines. Even something as small as forgetting to renew your business license with the city could wind up costing you thousands, depending on where you do business. Make a point of writing down the renewal dates for every piece of regulatory paperwork – licenses, insurance, annual reports, etc. If you get into this habit early on, you won’t miss important deadlines, and you’ll be able to hold onto more of your money.
Consider a different business structure
There is no way around it – you are going to have to pay your taxes. But how much you pay can be impacted by your business’s legal structure. A sole-proprietorship, which is sort of the default structure, is not taxed at the level of the business. All of profits and losses go to you, which you then report in your 1040. However, a sole-proprietorship doesn’t afford you much fiscal or legal protection. You can be sued directly and, if your business goes under, your personal assets could be seized. But incorporating your business turns it into its own legal entity separate from you, so it is responsible for its own debts and lawsuits, which is why so many companies choose a set legal structure for their business. Unfortunately profits earned by a standard corporation, which is called a C-Corp, are taxed twice – once at the level of the business in the form of corporate tax, and again at the levels of the business’ directors, all of whom derive income from corporate profit. You can avoid this as a small business in two ways; filing for S-Corp status or by forming an LLC. Both allow you to typically pass profits through the business directly to you, avoiding double-taxation, and provide with the same type of protection. There are significant differences between S-Corps and LLCs though, so make sure you research the laws and regulation affecting each structure before choosing one.
These three tips are, of course, not simple money saving measures like using less paper, or turning off the A/C. But by following them you will develop habits that, in the long run, can save you a lot of money. You avoid fees and fines, you can take useful, free courses that help you learn how to run your business properly, and you can separate your personal assets from your business’s debts. This is type of long term thinking is vital to maintaining your business’s viability, and to helping you to sustain your livelihood.