Running a small business comes with its set of financial challenges, from deciphering tax codes to making pivotal decisions about how you pay yourself and plan for the future. In the latest “Business by the Numbers” episode, Hunt rolls up his sleeves to tackle the questions you’ve been asking in what he’s titled “The Mailbox Episode.” Hosted by Hunt Demarest, CPA with Paar Melis and Associates, this episode is based quite literally on what has kind of questions have been landing in Hunt’s inbox!
And here are the questions:
- Government Budget Deal: The government recently avoided a shutdown and passed a 1.2 trillion budget deal might seem distant from day-to-day business operations. However, this could have profound implications, particularly for small businesses. While the extensive document will take time to fully analyze, it’s important to stay abreast of any changes that might affect your business, whether it’s in taxation, regulations, or subsidies that could benefit you.
- Paying Yourself as a Business Owner (Alex in Pennsylvania): One of the most common questions I get is, “what’s the best way to pay myself?” The answer can get complicated and depends significantly on your business structure. For S corporations, the mix of salary and dividends is crucial for tax purposes, balancing between taking a reasonable salary (to avoid raising IRS red flags) and dividends (to minimize self-employment taxes). Sole proprietors and partnerships, on the other hand, face different considerations, since their business income directly affects their personal tax situation. Understanding these nuances can lead to substantial tax savings and financial efficiency.
- Smooth Succession Planning (Jim in Florida): Passing your business to the next generation or a chosen successor is a big step that requires careful planning. One big choice to make is between stock sales and asset sales. An asset sale, for example, can be beneficial for the buyer in terms of tax deductions, whereas a stock sale might be simpler and potentially more tax-efficient for the seller. Knowing the ins and outs of these options can help make a smooth transition and protect the financial interests of both parties.
- Choosing the Right Accounting Method (Andrew in Canada): The choice between accrual and cash accounting can dictate how you see your business’s financial health. Accrual accounting can give a more accurate picture of your financial status by matching revenues with the expenses incurred to generate them, regardless of when the cash transactions happened. Accrual accounting can provide deeper insights into your business operations and offer you as the business owner more informed decision-making.
- Understanding Overtime and Bonuses (Joe in Pennsylvania): Calculating overtime correctly (especially when bonuses are in play) is not only a legal obligation but also a complex accounting task. The distinction between discretionary and non-discretionary bonuses affects how overtime rates are calculated, sometimes doubling the effective hourly rate! Understanding these details can ensure you are compliant with labor laws and fair compensation for your employees.
Check out the full episode here for detailed discussions on each topic. Let’s keep the conversation going – share your thoughts and experiences in dealing with these financial challenges in the comments below. How do you navigate these aspects of your business, and what strategies have you found effective?
Let’s Connect: Your insights and questions could inspire our next episode. Engage with us, share your thoughts, and let’s create a thriving community of informed and empowered small business owners.
