Episode #034 – What ‘Year End’ Activities Should I Do For My Business?

This week’s question comes from Jack, who asks, “I took my nickel and dime side hustle to full business with legal papers the second week of January last year. Doing business with full transparency wasn’t as difficult as I thought it would be, but it did slow down some processes and limit some chances to make potential revenue. So my ‘real’ business did not pull in as much cash as I did with the informal side-hustle. What can I do to prepare for next year?”

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Congratulations on making it a year in business business. The hardest part of running your own thing is getting started, and the second hardest part is keeping it maintained. The side-hustle proved the concept, getting your business legal standing is the real start, and now, you want to help it grow and expand. 

According to the Small Business Administration, about 550,000 small businesses close each year, with their average lifespan about eight and a half years. The report is dated, cited February 10, 2005, information is consistent. Giving your business a 50/50 chance of seeing its next birthday is giving very generous odds.

And the best way to ensure it survives another 365 is to plan ahead. So as you close out 2018, with just days until 2019, take these last few days to do a few actions that will set up for a good fiscal year start, and save you from April 15th headaches a few months in.

There are plenty of money moves to make at years end that will benefit you and the public right now. It’s Christmas time and a great time to upgrade equipment while the stores are offering discounted gift prices on everything. Electronics, furniture, accessories, and various services are doing exactly what you are doing. They are preparing for the next year by trying to gather as much cash as possible and clear out as much excess inventory. Buy some new computers. Schedule a doctor’s appointment. Update your furniture. Take advantage of holiday prices and keep receipts.

You can also contribute to charities. Dollars given for a good cause are tax deductible. There are plenty of worthy and not-so-worthy causes fighting for your attention, so do some due diligence before you write that check. And keep receipts.

The greatest charity you can contribute to is yourself. Putting some money in an IRA is a great way to save on personal taxes. A traditional IRA contribution is tax deductible with aftertax-money applied, and grows tax-deferred until it is withdrawn at retirement. A Roth IRA doesn’t give you the advantage of a tax deduction because withdrawals at retirement are generally tax-free. You can actually contribute to an IRA through Tax Day 2019 and still get the benefit of the deduction in2018, but the sooner you submit your cash, the better the return you can receive in the end.

Alternatively, you can make estimated payments for your 2018 tax to save yourself some of the burdens or writing a large check in April. This is an especially good practice if you are filing as an individual taxpayer and you expect to owe tax of $1,000 or more when you file your federal income tax return. These are usually done on a quarterly basis (so they call them quarterlies) and sent in with a federal form1040-ES. Start sending in your quarterlies now, and turn this into a regular three-month activity. You are putting all this work into making your business look good on paper and is making you good paper. Don’t let the cut the government wants from you keep that from happening. Paying taxes means you made money. Making money and paying all those involved in the process their fair portion is a good thing.

This Week’s Business Questions Asked Here: How Are You Getting Your Business Affairs In Order In Preparation For The New Year? (answer in the comments)

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