Managing Your Business Financials from the Start with Adam Hodson
Creating a business is not always an easy task, and if you want to ensure your success, you must properly establish ways to manage your financial responsibilities. On February 7th, our sales meeting featured guest speaker, Adam Hodson, Certified Public Accountant (CPA), presented The Easier Way, a method of financial management designed to make managing your business finances simpler and less time consuming while also providing additional tax benefits down the road.
The Easier Way consists of three simple steps that encourage you to keep your finances in order and make the most of your business potential:
Step 1: Form an LLC for Liability Protection
The first step is to establish a Limited Liability Company (LLC) to protect your personal assets from any business liabilities. If you are serious about your business, you must establish an LLC from the start. By forming an LLC, you can gain additional tax benefits in the future. For real estate agents, this means that the name on your license must match the name on your LLC. Use the name you listed, then add LLC to the end.
Step 2: Open a Separate Business Bank and Credit Card Account
The next step is to open a separate bank account and credit card for business expenses only. This step has its own set of guidelines to follow:
Deposit all earnings into the company's bank account.
Make certain that all business expenses are paid with this business bank account or credit card.
MOST IMPORTANTLY, no personal transactions are permitted from these accounts.
*For married couples, if both agents receive commission checks, you will need two LLCs because you will not be able to deposit into each other's accounts.
Step 3: Use a Money Tracker
Mr. Hodson strongly advises using a tool to track your finances automatically, such as QuickBooks Online. It will track payments to vendors to generate 1099s for those vendors, file them with the IRS, and send them to the vendor representative for you so you don't miss the annual deadline.
*Try out the QuickBooks mobile app. Take a photo of your company receipts, and the app will scan, match it to related transactions, and store it for you. Additionally, the software allows you to keep track of your mileage, which is the biggest expense you can deduct as a
write off. In order to write this off, you are required by law to keep a timely log of your business travels.
When using Adam Hodson's three-step method you will receive simplified tax return preparation, aid in required compliance tasks, assistance in calculating estimated taxes, and reduced stress, allowing you to use more advanced tax strategies. The best tax strategy is to manage your transactions proactively.