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Patreon’s #OwnYourGrowth workshop sequence explored actionable methods for creators to scale their inventive companies. We did deep dives on matters like taxes, medical health insurance, and outsourcing to freelancers, with skilled recommendation from our model companions and Patreon creators. We’ve created recaps of those crash programs to develop your thriving creator enterprise and discover methods to spice up your bodily, monetary, and psychological wellbeing everytime you need.
As you develop your inventive enterprise, you would possibly see your revenue fluctuate. That’s completely regular. But it surely’s vital that you recognize your numbers and have a transparent image of the long run to get by means of these rockier intervals. We invited Karat Monetary‘s Noa Rodriguez Hoffman and Manuel Godoy, President of Black Sands Leisure, to share their recommendations on establishing your online business for long-term success, making a monetary security web, and balancing the books that will help you scale and keep away from burnout. Right here’s a recap of their recommendation on proudly owning your monetary wellbeing.
Need to dig even deeper? Take a look at the complete #OwnYourFinancialGrowth occasion recording.
The significance of preserving enterprise and private funds separate
While you’re first beginning out and proving your online business, it’s okay to make use of your private account for funds. However as quickly as you begin making a revenue, arrange a separate checking account. Utilizing a private account to make enterprise transactions has its downsides. It’ll complicate your tax processes and name for the additional work of going again by means of all of your accounts, which might get costly, too. “It could additionally result in tax submitting errors and even set off tax audits,” explains Karat’s Noa Rodriguez-Hoffman. “And no one needs to take care of a tax audit!”
It’s tremendous simple to arrange a devoted checking account for your online business — you’ll want your deal with, enterprise identify, business sort, and an EIN (a nine-digit quantity issued by the IRS to maintain monitor of a enterprise’s tax reporting). In case you’re a sole proprietor, you should utilize your social safety quantity. Though it might not really feel vastly vital, your future self can be eternally grateful for creating a transparent line between enterprise and private funds.
Streamline your accounting to cut back workload
Now that you’ve a separate checking account for your online business, you’ll need to join it to accounting software program to avoid wasting time and keep on prime of your funds. There are a ton of various choices; QuickBooks is a typical one, though there are inexpensive choices equivalent to Freshbooks or Xero. They share lots of the similar options, however the primary distinction is that FreshBooks doesn’t embody any accounts payable options, however it does allow you to ship invoices, settle for funds, and handle your bills.
Ensure you’re categorizing all of your transactions accurately from the start, as a result of the system will begin studying and auto-categorizing for you. “This lightens the admin load, so that you’re not compelled to categorize each single enter manually,” says Rodriguez-Hoffman. “Ultimately it begins to study your patterns and categorize them for you.” Accounting software program also can ship out invoices and pay contractors robotically, which implies you’ll receives a commission on time, with no need to chase anybody.
Categorize your transactions with a tax skilled if attainable, as a result of they’ll know the fitting tax deductions for you. An accountant solely is aware of the knowledge you inform them, so be sure to inform them of any transactions accomplished outdoors of your online business account, too. Give them as a lot clear data as attainable to allow them to run correct reviews.
The best way to discover an accounting skilled for you
- Use your creator community and friends to supply referrals.
- Be a part of Patreon’s Discord group to attach with different creators.
- When you’ve gathered particulars for just a few referrals, join to debate their companies.
- Earlier than you meet, create a listing of inquiries to ask: what’s their expertise with creators, or your specific business? Have they got any specialties? What’s their charges breakdown and the way do they convey with purchasers? Make certain they perceive your online business, to allow them to present recommendation on probably the most up-to-date tax methods and maximize your deductions.
Now you can work nearly with professionals everywhere in the United States — so the world of accountants is your oyster!
Consider present monetary well being
To get a grasp in your present monetary well being, you’ll need to work with the next three reviews:
- A revenue and loss assertion (P&L assertion) particulars your revenues and bills for a time period: a month, 1 / 4, or a yr.
- A money stream assertion, which is extra of an instantaneous image, tracks how a lot cash got here into the enterprise and was paid out throughout a time period.
- A stability sheet, or assertion of economic place particulars your belongings, liabilities and fairness (web price). Sometimes banks will ask for this once they’re deciding whether or not to present you a mortgage or credit score. Some would require two years price of statements, plus tax returns.
Understanding the connection between your P&L and money stream assertion can inform vital strategic enterprise selections, together with one of the best ways to pursue development. Any accounting system or accounting skilled ought to be capable of get you these statements. If in case you have “poisonous money owed” (aka money owed between $25,000 and $100,000, with a 6-18 month time period and an rate of interest of 8-12%), work on paying them off first after which put aside some cash to start out funding your online business.
Beginning a enterprise with poisonous debt isn’t going to set you up for fulfillment, as a result of it’s going to simply snowball. Discover a good medium the place you’re paying off these money owed and get a plan collectively to place some cash away for your online business. Bear in mind sweat fairness — all of the issues you are able to do for the enterprise your self with out spending a dime.
Execs and cons of enterprise entities
Now it’s time for the massive remaining query: to include or to not incorporate? “Sometimes individuals bounce to establishing an LLC first,” says Rodriguez-Hoffman. “However there’s no level establishing an LLC if you happen to haven’t turned a revenue but.” Holding on prime of your numbers will allow you to decide the kind of enterprise construction you want. There are professionals to establishing an LLC, versus a sole proprietorship, together with authorized safety. If your online business will get tangled in authorized troubles or is sued, the plaintiff or creditor can solely go after the enterprise’s belongings, not your private belongings (so long as you set-up the enterprise accurately, have stored good data, and haven’t commingled funds). You may as well make some critical tax financial savings by choosing the proper enterprise entity.
When you attain a sure degree of revenue, you’ll be able to elect to be taxed as what is named an S corp. That is your method of telling the IRS that you really want your online business to be taxed as an organization, versus a pass-through which is a sole proprietorship. When you attain $75,000 in annual income, you can save as much as $6,000 in taxes simply by electing to be taxed as an S corp.
Patreon Creator Manuel Godoy’s Recommendation
Our workshop co-host, Patreon creator Manuel Godoy of Black Sands Leisure, provided his personal framework for rising your inventive enterprise sustainably. And at its heart is a transparent roadmap and a dedication to “by no means stray from the mission.”
Manuel prioritized “dominating” Instagram, turning into an issue skilled in his area of interest and sharing his experience broadly, spending cash on high quality content material manufacturing to face out from the competitors, being approachable to his followers, and following what his tried-and-tested Golden Rule, The 1,000 Rule. When you’ve accomplished every milestone beneath, transfer onto hitting the subsequent one.
Every step of Manuel’s 1,000 Rule takes effort and time, however they’ll all allow you to come out on the opposite finish as a financially sustainable creator.
“This isn’t a quick course of. By the point I hit quantity 5, I used to be most likely 4 years in. However by the point you hit objective quantity 4, you can be 100% financially unbiased as a creator.”
Manuel Godoy, President of Black Sands Leisure and writer of Black Sands, the Seven Kingdoms
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The place are you in your monetary journey? Why not join with like-minded creators and members of the Patreon group on our Official Patreon Discord? Head to the #Personal-Your-Progress channel to maintain the convo from this workshop going.
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*This publish is meant to summarize and spotlight materials offered as a part of Patreon’s #OwnYourGrowth workshop sequence, and isn’t supposed as monetary, enterprise, or authorized recommendation from Patreon.
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