“I love taking courses, but it’s hard to know which ones will benefit me in the long term. How do I know what to prioritize in my spending?”
The good news is that many types of continuing education can have a tax benefit to you or your business. However, as to whether it’s the best use of your money? It depends.
If you are in a field where continued education is necessary to keep a license up to date (attorneys, financial planners, CPAs, doctors), then prioritizing spending in those areas is important. If you simply like to keep up with industry trends or expanding your skill sets, then it becomes a matter of budget.
The better question is: Is this expense within your budget or financial plan? This is where a program like Profit First can really come in handy.
Let me share an example. The AICPA, American Institute of CPAs, puts on one annual conference that is everything CPAs need for continuing education for that year. It combines networking and education in a fun location, and it’s really expensive. Upwards of $4,000 per person. For a firm like ours with several CPAs, that can add up. How do we decide? Well, we use Profit First as our guide.
If we can attend the conference and still stay within our Profit First percentages, then we go. If we can’t, then don’t go this year, but I can create a separate account to cover this particular event for next year and start saving now.
Bottom line: You can take all the classes you like if you plan for them, and it fits into your budget!
“How does startup funding work? Is it a good option for my new business?”
When you’re a new company with a new EIN, you have limited resources when it comes to funding. We usually advise clients to start with the bank you do business with or look into SBA loans. With a few years under your belt, your funding options will expand, especially with a solid growth record or steady financials. However, if you need an influx of cash to get a product roll-out off the ground, you may need to be a little more aggressive.
Startups typically fund themselves by raising money from outside investors, and each time they do, it’s called a funding round, or Series A, B, C. Each round or series represents another stage in the startup’s life—Series A is for an initial launch, Series B is for expansions, and Series C is often for established businesses who want to upscale or make acquisitions.
Many businesses are having initial success with Kickstarter campaigns, which can also be known as pre-seed funding or seed funding. It’s a manageable way to develop interest in your product and attract “investors” who want to see you succeed without a requiring a huge ROI. Just remember, Kickstarters are income and it is taxed as such. Bank loans are not.
If Kickstarter is your Pre-seed or seed funding round, your funders aren’t professional investors, just friends or family who want to see you succeed.
Series A is typically product launch time. You’ve achieved proof of concept, and investors (a.k.a. venture capitalists) are analyzing data on what you achieved with past investments.
Series B occurs when you need to expand. Perhaps you need funds to explore new markets or grow teams surrounding an already successful product or business.
Series C usually occurs after you’re an established business, but you want to scale, develop new products, or even make acquisitions.
The terms of each of the rounds will be unique to the investor(s). Just watch any episode of Shark Tank and you’ll see a myriad of ways this “funding” will need to be paid back. Taking on investors can seem exciting and a great way to build your business, but it does come with its own unique challenges.
“What type of tax planning agenda do you recommend for a service industry that is an S Corporation?”
No matter how your company is structured, tax planning is incredibly important—whether you are an S Corp making $100,000 or $5,000 in profit. That said, there is no one-size-fits-all strategy to share. Every business owner will have different objectives for both their business, their investing, and ultimately their personal lifestyle.
At Go Figure, we want our clients to be looking ahead proactively, not just spending money to offset taxes—which is an old way of thinking—but making good long-term decisions for the health of your company. So our ideal tax planning agenda is a year-long endeavor, monitoring income and expenses every quarter and making pivots and corrections as needed. For example, does your company need to buy equipment? If yes, we work with the numbers to see if it’s more beneficial to take the full deduction in the current year, the following year, or depreciate it over time. Do we need to divest assets to offset capital gains? Will the business be adding new employees? Is it time to revisit your company’s retirement programs? In fact, retirement planning can offer significant tax benefits, both at the owner level and the corporate level. S Corp tax planning is all about making strategic decisions for the health of your business while managing the taxable flow into your personal income.
