How do you save for taxes?
I have a separate account at my bank that I funnel money into each month for my estimated tax payments! I try my best to do my bookkeeping monthly…admittedly, it’s usually quarterly…but I always have a good idea of the right amount to send in for estimated taxes each quarter.
Fun story: the first year that I filed taxes for my business after going full-time, I didn’t realize that Self-Employment Tax (for Social Security and Medicare) is a thing, which is about 15% of your net income. I owed a pretty penny and it was a very stressful couple of months! Since then, I’ve always been very liberal in what I save/pay in taxes, because I never want to be short again.
Did you set up bank accounts specifically for your business when you first started?
We didn’t do this when we first started, but it was done shortly after we realized it was more than just a little side hobby!
How do you get properly licensed and insured to run your business legitimately?
This varies from state to state, so I’m not going to answer in detail. My absolute best piece of advice is to find a small business lawyer or someone who has experience in getting a business set up in the state you’re living in to guide you in the process. While you may be able to find a lot or all of the necessary information on the Internet to DIY it, I still recommend having a professional double check it to make sure you’ve covered everything!
Do you do your own taxes/bookkeeping?
I do my own bookkeeping throughout the year and pay my estimated taxes on my own, but use a small business accountant to file our year-end taxes for us! Because I have two businesses that I owe taxes on, plus Mike’s information, there’s no way that I could navigate that on my own. What’s been great about working with a small business accountant is that he knows all the tax credits, filing procedures, and everything else to help me get the best outcome for my tax return.
I use Quickbooks Self-Employed and love it!
How do you set up a website? How did you move from Etsy to your own site?
I did a whole lot of googling things and reading up on how to use Shopify, which is the e-commerce platform that EA is hosted on. I started working on the website several months before officially opening it to the public, because I wanted to make sure all my ducks were in a row first. I submitted test orders, made sure the layout of the site was working well, etc.
How does insurance/retirement/etc. work when you’re self-employed?
Everyone probably does it differently, so I’ll just be speaking to what I do here. Insurance is just paid out of pocket. When Mike is employed full-time after grad school, I look forward to getting on his insurance! Retirement is also on me to save for! We have a system in place that allows for saving, which is working well for us right now. The umbrella answer: it’s on the individual to be responsible and figure out the best system for saving that works for them!
How do you decide to pay yourself?
This will certainly look different for everyone and every business, but I take out what is available to me, after expenses, setting aside for taxes, and keeping the cushion that I like to have, on hand, for future business expenses. It can look different each month depending on my precise income for that month, but I have a general idea of what to expect.