In this episode, Erica Whatley, owner of Taxes BY Erica Tax & Financial Services LLC, shares her expertise on tax planning for businesses at various stages of growth. Erica dives into crafting tailored tax strategies for startups and expanding companies, highlighting the importance of understanding LLC taxes, building a proficient financial team, and staying ahead of tax law changes.
Watch the full episode here: https://www.youtube.com/watch?v=1bsIydTwPc0
Join Erica as she offers practical advice and strategic insights to help entrepreneurs optimize their tax planning and achieve long-term business success. Key points: tax planning, LLC taxes, financial team, tax strategist, tax law changes, financial research, networking, and balancing personal vs. professional financial goals.
Tax Planning Strategies for Entrepreneurs and Business Owners
Here is the transcript of Erica’s conversation on tax planning strategies for entrepreneurs and business owners.
Claudia Pilgrim:
If you’re done with the fluff and ready to execute on the how, then visit shebuiltsuccess.com for the tools you need. It’s time to push go and dive into real strategies, genuine understanding, and concrete steps to create both more in business and life. Head on over to shebuiltsuccess.com for access to exclusive downloads, resources, and bonuses. Because moving boldly forward is not just a destination, it’s a multi-layered journey. Let’s grow and build your success together. Today, we have Erica Watley, who not only is my tax strategist, but also a friend.
Not only does she know her way around the tax law and what you need to do to get your business correct and in order, but she loves to be able to share her knowledge with her community and with me, of course. Welcome to another episode of She Built Success. So, well, Erica, welcome.
Erica Whatley:
Thank you for having me.
Claudia Pilgrim:
Absolutely. I’m excited to get into this.
I really look forward to just unpacking for our listeners a little bit about where they are in their journey of building a business. They might have just started, so they’re in that starting entry-level phase, about under $100K. And then we have those who are in the middle of their shifting. They’re looking for resources. They’re looking for ways to expand their business. They’ve hit that $100K mark, but they know that there’s more, and they want to be able to understand what they need to do to get into that tax strategy and have the right pieces in play. And then we have those listeners who are on the scale side of things, and they’re like, OK, I’ve been around the block a couple of times, but there’s something. There’s something at that next level that I may not be prepared for.
And so I want to look at unpacking what tax strategy looks like for companies that are in all three of those spaces so that they can start thinking about, if they don’t have a tax strategist, get with Erica, just saying, put the plug right there. But if they do, what are the things that they should be considering or looking at to be able to put their business in a good light, whether that’s to continue to grow or sometimes to stay where they are for that season?
Erica Whatley:
A startup company, $0 to $100,000 a year.
So for a company like that, the first thing I would tell them to do is make sure that their foundation is set. You want to make sure you understand why you’re setting up an LLC, why you want to consider electing to be an S corp, and understand what the compliance requirements are for that. Next phase I would tell them to do is understanding what qualifies as a business deduction for your company.
Claudia Pilgrim:
OK, and this is still startup?
Erica Whatley:
This is still startup. What qualifies for a deduction?
If you’re starting a knitting company, there’s no need for you to think about buying a G-Wagon for depreciation. So the other part of that is for them to learn to research for themselves. Why do you feel your business needs to take this deduction?
How does this deduction affect your business, but also your bottom line? And then two, every year during tax prep, they need to be getting educated. This is how much money you had come in. This is how much money went out, and here’s your difference.
Claudia Pilgrim:
And who does that education?
Erica Whatley:
I always tell people you have to self-educate as well, but also talk to your tax preparer or your accountant and just make sure they have a keen understanding of your business. What’s the purpose of your business? What do you need to run your business? And you move forward from there. Let’s say that person has exceeded that phase. We’re now 100K to $800,000 a year. This is when tax planning gets really fun.
Claudia Pilgrim:
Fun for you or fun for them or both?
Erica Whatley:
Both. So now we’re talking about tax planning with putting yourself on payroll, possibly putting your kids on payroll. Depending on your industry and the type of business that you have, you could actually purchase a vehicle for your business. We start looking at different structures of retirement plans, SEP IRAs, Roth IRAs, Augusta rules, renting out your home and paying yourself for renting out your home. So that’s really the fun phase of it. Again, education is still needed. And I would say during that phase, you probably want to do your tax planning once a year.
Claudia Pilgrim:
During the scaling phase?
Erica Whatley:
Right. Now, as you get closer to that 800K, you may want to start looking at every six months, looking at your tax plan, looking at do I need to pay estimated tax payments? Do I need to purchase more equipment, maybe depreciate that equipment? You get kind of deep into it at that phase. Over 800,000, I’m a keen believer in checking it every three months.
Claudia Pilgrim:
And that’s, is it because things can shift quarterly in the business or is it because tax rules or regulations could shift quarterly also?
Erica Whatley:
All of the above, all of the above. I would say more so because things start to shift monthly within your business. And sometimes you’ll be able to catch those shifts within that month, but at least every quarter you can always catch up. You can now say, okay, this is what happened last quarter. This quarter we need to pay out bonuses. That could be a structure. Or this quarter we need to go ahead and plan our business retreat. You start paying more and more attention to it. Goal is for you to not owe them and they don’t owe you.
