with Mir Kamin
I'm a freelance writer and mother of two working from home, which theoretically means I can set my own schedule so as to best accommodate my family. In reality, "flexible hours" often equals "working too much." Yes, I'm my own boss; no, that doesn't mean life is easy. It's hard to leave the office when you live there. But I love what I do and feel very lucky. And not just because I get paid to work in my pajamas.
To learn more about Mir, check out her profile on Work It, Mom! or visit her blog at http://www.wouldashoulda.com/
I’m a little ashamed to admit this, but sometimes I’m not quite as on top of things as I ought to be. I know! I was shocked, too. (Just pretend to be shocked. For fun.) And so, yes, six months have passed since I told you about my decision to incorporate my business, and it didn’t all get finalized until last month. My accountant and I discussed it, and I gave him some money, and he told me to call him after tax season. I maybe didn’t get back to him right away, and then I got back to him and he didn’t get back to me right away, and, well, you know how this sort of thing goes, I’m sure. But it’s done now.
I have officially formed a Limited Liability Corporation, and I have a shiny new EIN to show for it. In fact, I have an entire folder of… ummm… unintelligible legal jargon and paperwork that certifies that it’s all official and I own a business in the eyes of the law and the IRS.
And for all of the reasons I discussed in my prior post, this is a Very Good Thing. Or it will be. But right now I feel like I’m on sort of a steep learning curve.
The primary motivation for incorporating was taxes; although there’s additional money I’ll be spending, now, theoretically it’s outweighed by what I’ll be saving over self-employment taxes. I still don’t completely understand all the expenses that will be involved now that I’m an LLC, but I did have the following conversation with my accountant:
Him: So let’s set you up an appointment for December so that we can do your payroll.
Me: My what, now?
Him: You have to do payroll. Quarterly.
Me: But it’s… just me.
Him: I know, but that’s how it works once you’re a corporation. It’s paperwork you’ll need for your taxes. You’ll come in and I’ll show you how to do it, and then after that either you can pay me to handle it for you or you can do it yourself.
Me: Is it hard to do?
Him: Not hard, no, just kind of tedious and annoying.
Me: I am not a fan of tedious and annoying. How much would it cost for me to have you do it?
Him: I’ll have to look over your books and see, but probably not very much. Maybe $150?
Me: A quarter?
Me: Is that tax deductible, if I pay you to do it for me?
Me: Would it be less if I brought you cookies?
Him: Sorry, no.
Me: What if they’re really good cookies?
This is one of those things that I’m terrible at: Basically I need to figure out how long it would take me to do the necessary payroll paperwork, then compare that to my typical hourly rate, and compare that to what my accountant charges, and then make a decision. My guess is that he’ll be able to do in an hour what would take me three or more hours, which means it’s actually more cost-effective for me to pay him to do it. But it will cause me to die a little on the inside because I hate paying for stuff I could (theoretically) do myself. But again—if I can pay him for one tax-deductible hour of his time vs. three hours of aggravation on my own, that’s the better choice. We’ll see.
I also spent an hour down at my local bank, converting my business checking account to a Small Business Account. Previously, my account was actually a personal one, but under my business’ DBA. Now it’s officially a business account, which has zero benefit to me (so far as I can tell), but does completely screw up my former bookkeeping method. See, when it was still a personal account, I could see it in my online banking and move money between that account and my regular (read: bill-paying) checking account at will. Now that it’s An Official Business Account, there’s a separate login and a separate online interface, and it’s no longer connected to my personal account.
Pain. In. The. Ass.
I realize this isn’t a huge deal in the grand scope of things, but it means that my choices are: Go to the bank all the time to move money around (no thank you), or set up a regular transfer of funds from my business account to my personal account. The latter is what I’ll do, and it’s a reasonable option, but let’s not forget that I’m a freelancer. In other words, I don’t make the same amount of money every month. Ever. So I’m going to have to guess a conservative amount to use as my monthly transfer, and hope like heck that I actually make that much each month, and/or that the better months will even out the leaner months.
Okay, so far being a corporation is kind of annoying. Here’s hoping I find it a whole lot less onerous come tax time….
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