INTRODUCTION

A Letter from Eva Rosenberg to You, the Business Owner

Dear Entrepreneur,

(Yes, you. If you’re starting a business, please start thinking of yourself right now as an entrepreneur.)

Since this book was first published in 2004, TaxMama has received many letters from business owners with two themes:

1.  I wish I had read this book before starting my business. It would have saved me a fortune in time, money, taxes—and errors.

2.  Even though I’ve been in business for many years, this book has helped me cut my taxes and increase my profits. It’s my new business bible.

Why are people saying things like that? Because Small Business Taxes Made Easy is a book you can use on a day-to-day basis to keep your business on a path to profits and success.

Many books on the market tell you how to organize your business records, prepare your tax returns, even how to make decisions or choices. Some are excellent.

So why does the world need yet another book on small business taxes? Because even the best books focus primarily on the record-keeping or legal aspects of small business taxes. For your business to succeed, you must also understand how the reporting requirements can be used to improve your business management, provide better decision-making tools, and increase your profits. Providing that information is what makes this book different.

With all the resentment and resistance toward paying taxes and toward the flood of reporting requirements, you’ve got to see what’s in it for you. What do you get from your investment of time and money? It doesn’t only benefit the IRS and your state and local governments.

While each chapter of this book explains tax concepts and responsibilities, it also helps you understand how you benefit from following those guidelines.

You’re not in business to supply a flood of paperwork to the government. Nor are you sweating blood trying to meet your business, financial, and family obligations in order to buy your tax pro a new BMW.

You’re in business to have more control of your life and time; to earn more money than you could on a job; and to build a future—and a legacy—for your family and future generations.

Otherwise, why work so hard? Just go back to your traditional nine-to-five job. Seriously, there’s more to running a business than appears on the surface. Some people make it appear effortless—and they often go out of business quickly as a result. Others make it seem a gargantuan burden—and they end up hating every minute of it. They destroy their family and relationships in the process, blaming everyone else for their failures.

Then there are those people who start up, and everything goes right. Life is good. Family and social relationships remain solid, and they maintain balance in their lives. That’s what I want for you.

Listening to the news, you often hear when large businesses fail. You’re probably still shaking your head over the whole dot-com bust several years ago, wondering how all those businesses failed after raising millions of dollars in venture capital or through their initial public offering. Well, the venture capitalists learned a hard lesson from that, too. And they are far more discerning about how they invest their funds these days. So, if you want their investment in your business, you will need to show well-thought-out structures and planning.

The businesses that failed went wrong in one, or all, of three ways:

1.  They didn’t have a realistic business plan.

2.  They didn’t plan for success.

3.  They were run by immature and inexperienced people who simply blew all the money without looking for reasonable returns on their spending.

You’re buying this book to avoid all those mistakes. Use this book to learn from others’ failures and successes. Please, make a commitment to devote all the time and resources needed to make your business work.

Otherwise, put this book back on the shelf. It’s not for you.

Using This Book

I didn’t write this book to bore you, bully you, or enable your failure.

If you can’t make a serious commitment to create your business plan, set up and use a proper accounting system, and be ethical in tax reporting—please don’t start the business. You’ll earn much more, with less effort, less stress, and less risk, with a job working for someone else. Really, you will.

Let me tell you a story about a very successful and brilliant film editor. Marie was at the top of her industry, earning a healthy six-figure income. She was popular with the filmmakers and knew she could attract clients if she went out on her own. In fact, her own employer was willing to subcontract to her. Sounds good, right? And it was, at first. Marie always had enough work to support the costs of several editors and other staff members. Unfortunately, she hired a good friend as her office manager and bookkeeper. Sally did a great job. Until she didn’t. Sally was an alcoholic and, well, let’s say she got distracted. Bills weren’t being paid. Worst of all, payroll taxes weren’t being paid. By the time Marie called me, in a panic, she needed to cover close to $50,000 worth of delinquent payroll taxes! Fine—I had a good friend managing a bank, and we got her a quick line of credit to get her out of trouble with the IRS and State of California. But from then on, she was never able to get the right administrator—and stressed out for years, with one business problem after another. Marie learned that she just wasn’t good at running a business, with all the myriad of administrative nonsense. But she was great as an editor and team manager. Finally, she decided to leave the bureaucracy to someone else and got re-employed. Since then, she’s had the opportunity to be the head of the production team designing visual effects for an Academy Award–winning film, edit many TV shows with which you are familiar, and create compelling trailers for many films.

So be honest with yourself. If you’re not a capable administrator, maybe you should just renegotiate your compensation or position at work—or look for a better job, if you’re unhappy at work.

But if you still want to start or be in business, here’s your next important consideration. Take into account how much you could earn on a job or on the money you’re investing to get this business going. Even if you borrow the money, think of how many hours of work it will take to pay it back.

Those are called “opportunity costs.” It’s important to understand what you’re giving up to start your business. When I started my business, I knew what I was getting into. I relish the independence and the lack of office politics. I love my clients, the people I work with, and the people whom I consult. And I am free to turn down clients when my instincts suggest they will be trouble (whether professionally or personally). Despite being constantly behind in my workload, I rejoice in the flood of new work and fresh ideas that comes pouring in each day from friends and readers.

Here are the two most important things I want you to know going in:

•  Love what you do.

•  Don’t delude yourself into thinking your goal is to pay the least amount of tax possible. Your real goal is to end up with the highest disposable income possible—and to be in great physical and mental health when you get there.

That’s what I’d like to help you achieve.

You’re about to learn how following the IRS’s rules for small business owners will make you richer, happier, and less stressed.

TaxMama’s warning: Although I can make changes at the IRS, I can’t change grammatical rules. So wherever you see web addresses (URLs) in this book that seem to have colons, commas, or periods as the last character, ignore that final character when typing them into your browser.

Comparing a Job and a Business

Be sure to understand these distinctions between a job and a business. People starting out on their own rarely realize just how many things they’ve taken for granted on a job. These are the things that just happened invisibly, in the background, taken care of by your employer’s infrastructure. Even if you felt as though you were doing most of it for him or her, when you’re on your own, the sidebar will show you just how many more things you’ll need to oversee—things that will drain your time, patience, and resources.

One of the biggest complaints from people working for others is that they do not have control over their income. Their bosses can cut their commissions, territories, or bonuses at will—and often do. When you’re in business for yourself, if you earn it, you reap the rewards.

Be sure to read the lists to understand the additional demands that owning a business places on you—and your family. Think deeply how all the extra time you spend working will affect your relationships with your parents, spouse, children, and friends. Will you miss the important moments in your children’s lives? Or will your business give you the freedom to be present? Before you tackle a new business, visualize how your life will look and feel once you’ve embarked on this challenge.¹

Remember to use the downloadable To-Do Lists at http://www.YourBusinessBible.com to help you stay focused and organized.

If you’re still prepared to go forward, if I can’t talk you out of it, if you’re getting really excited about your business—then let’s get to work. You’re going to do great!

Join me for your adventure in building a business—and a legacy.

Best wishes,

Eva Rosenberg, EA

Your TaxMama

1  Robert MacPhee, Manifesting for Non-Gurus, 2010.