Small Business Tax Tips: Insights from Aimee LaLiberte | Ep. 65
In This Article
Welcome to another installment of Money Talk With Tiff, where host Tiffany Grant unravels the mysteries of business finance and personal wealth management. This episode, featuring renowned profitability advisor and owner of My Virtual CFO, Aimee LaLiberte, is a treasure trove of valuable advice specifically tailored for small business owners. Whether you're an aspiring entrepreneur or a seasoned business veteran, there’s something here for everyone. Let's dive into the essential insights shared in the episode.
The Importance of Identifying Financial Support Needs
Pinpointing Your Financial Requirements
Aimee La Liberte emphasizes the critical importance of identifying your specific financial support needs. Do you merely require bookkeeping services, or do you need strategic planning and financial advice from a fractional CFO? Recognizing the distinctions between these roles can save you time, money, and a lot of headaches down the road.
The Role of Different Financial Advisors
- Bookkeepers: Handle daily financial tasks, ensuring everything is accurately recorded.
- Fractional CFOs: Focus on the bigger picture, helping with strategic planning and scaling.
- CPAs: Specialize in tax matters and compliance.
- Financial Planners: Look at long-term financial stability, including savings and retirement planning.
Choosing the Right Tools: QuickBooks Online
To efficiently manage your business finances, Aimee highlights the utility of QuickBooks Online for handling payroll and basic bookkeeping. Simple yet effective tools like this can significantly streamline your financial processes, making it easier to stay on top of your money game.
Embracing the Profit First Methodology
What is the Profit First System?
Adopting the Profit First methodology by Mike Michalowicz can be a game-changer for how you manage your business's cash flow. This system advocates creating five separate bank accounts for:
- Income
- Profit
- Tax
- Owner’s Pay
- Operating Expenses
Implementation Strategy
Regularly distribute your incoming funds into these accounts based on preset percentages. This ensures you are always setting aside money for crucial expenses and maintaining profitability. By prioritizing profit allocation before expenses, you can guarantee a more structured and profitable business operation.
Overcoming Resistance to Multiple Bank Accounts
Many people resist setting up multiple bank accounts. Aimee advises making the experience enjoyable by treating yourself, thus boosting your confidence and clarity in managing business financials. Tiffany was particularly enthusiastic about implementing this system immediately to improve her business budgeting strategy.
Business Structure Recommendations
LLC vs. Sole Proprietorship
One of the essential topics discussed is choosing the right business structure. Aimee recommends:
- LLC (Limited Liability Company): Ideal for separating personal and business assets, providing legal protection, and signaling a serious business commitment.
Tax Structure and S Corp Election
- Default Tax Status: An LLC is considered a disregarded entity by the IRS and must report income and expenses on the owner's personal tax return.
- S Corp Election: When profits increase, transitioning to an S Corp can offer significant tax benefits. As an S Corp, business owners can pay themselves a reasonable salary, thus reducing self-employment taxes.
The Importance of Paying Taxes
Paying taxes isn't just a legal obligation; it's a positive indicator of a profitable and healthy business. Tiffany and Aimee discuss the societal benefits of taxes, such as supporting infrastructure and research. Embrace taxes as a marker of your business's profitability and societal contribution.
The Right Time to Outsource Financial Management
DIY to Delegation
Managing finances can get overwhelming quickly. Here’s a roadmap for when you might need to outsource:
- Initial Stages: DIY with courses or basic accounting setups.
- Growth Phase: Use accounting software like QuickBooks or hire a bookkeeper.
- Scaling: For more substantial operations, consider a fractional CFO.
- Large Scale: For operations grossing $5-$10 million, creating an in-house finance department becomes crucial.
Conclusion
This episode of Money Talk With Tiff featuring Aimee La Liberte provides small business owners with the framework needed to take their financial management to the next level. By understanding your specific financial needs, choosing the right tools, and adopting proven methodologies like Profit First, you can create a sustainable and profitable business. Don’t forget to reframe your perspective on taxes and view them as a positive indicator of your business's health and societal contribution.
FAQs About Small Business Taxes
What Is the Difference Between a Bookkeeper and a Fractional CFO?
A bookkeeper handles routine financial tasks, while a fractional CFO provides strategic financial guidance and helps with scaling your business.
Why Should I Create Multiple Bank Accounts for My Business?
Using multiple bank accounts helps effectively manage cash flow and ensures funds are allocated for various crucial aspects such as taxes, profit, and operating expenses.
When Should I Consider Switching from an LLC to an S Corp?
Switching to an S Corp becomes beneficial when your business profits increase, allowing you to take advantage of tax benefits related to payroll and distributions.
How Can QuickBooks Online Help My Small Business?
QuickBooks Online can streamline your payroll and basic bookkeeping processes, ensuring accuracy and saving time.
What Are the Advantages of Paying Taxes?
Paying taxes signifies a profitable business and contributes to societal needs like infrastructure and research. It's a responsibility that's also a marker of your business's success.
About Our Guest
As the owner of My Virtual CFO, Aimee is a trusted profitability advisor to six and seven-figure business owners who are tired of being behind in their books and are ready to uncover blind spots, course correct, and ultimately get more profitable. Aimee also is a certified life and money coach and works with business owners who seek greater confidence and unwavering drive to attract and build wealth in their businesses and lives.
Connect with Aimee
Website: https://myvirtualcfo.co/
