Quick START: Business Setup, Accounting & Taxes For Freelancers | Alex Winkler | Skillshare

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Quick START: Business Setup, Accounting & Taxes For Freelancers

teacher avatar Alex Winkler, Consistency is king

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

20 Lessons (1h 48m)
    • 1. Intro

    • 2. Class Project

    • 3. K.I.S.S

    • 4. Quick Start Companies (2)

    • 5. Sole Proprietorships

    • 6. Partnerships

    • 7. Business License and Names

    • 8. Sole Prop and Partnership Summery

    • 9. 4 Types of Companies

    • 10. LLC

    • 11. S Corporation

    • 12. C Corporation

    • 13. EIN

    • 14. Nonprofits

    • 15. Company Types Overview

    • 16. How To Do Accounting

    • 17. QuickBooks SE vs Online

    • 18. 4 Tax Saving Tips

    • 19. When To File Taxes

    • 20. Final Words

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About This Class

Spend less time on bureaucracy and more time creating!

If you feel overwhelmed with all the thoughts regarding (accounting, tax, company structure or rather lack of.. Stop right now and take this course. In no time you’ll have an understanding of all the important moving parts and what you should do now to start saving money and being ready for tax season.

Your mentor, Alex Winkler, has spent almost a decade starting his own businesses and always being a freelancer on the side as well. Alex knows first hand what works best and is eager to share his simple approaches with you. Have your accounting in check and be ready for tax season while saving time and money.

In this class you’ll learn: 

  • How to automate your accounting
  • Best legal structures for your business
  • Be ready for tax season
  • What questions you should always ask yourself
  • How to save time and money in the process

You'll be ready to start or optimize your accounting and taxes and be able to ask questions during this course.

Even if you do not yet have a company, this course can help you prepare for when you are ready. Ignorance is NOT bliss in the finance world so having a basic understanding will set you apart and save you a massive amount of time and money down the road.

No past knowledge or specific software is required. However, we will be using referencing QuickBooks as one of the tools to help save time.

Pro Tip: Get involved with the course, ask questions and do the course project. You'll learn more in the course project video.

Meet Your Teacher

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Alex Winkler

Consistency is king


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1. Intro: Hello everyone and welcome to this new course. My name is Alex Winkler and I'm going to be your instructor. I'm really super stoked to have you here. I think we're gonna be flying through this course together. We're going to take some pretty complex topics, break them down, and make it as easy as possible for you to understand on what you need to be doing for your business, to incorporate your business, saved taxes and do the accounting for it. That's really the gist of this course. And I'm going to try to skip as much fluff as possible and really only give you guys what you need to note. So without further ado, let's go ahead and switch the screen and then go right into a little bit more about this course and about me. So first of all, this is the Quick Start Course for your business setup, your accounting, and your taxes. As a freelancer, we'll talk a little bit more about what that all means in the next few moments here. And also for better or worse, this might be one of the last time that you guys are going to see me in video unless I pop up a little bit later, but there's a lot of stuff on the screen, so I'm going to try to put myself out of the way for now. I figured a good place to start is probably with a little bit of an about me. So you guys know what kind of credentials I have to be talking about this. So first of all, this is a picture of me and my family in the south of Germany. This is somewhere I do spend a lot of time, but I thought it would also be kind of good to mention. I think a lot of you guys are probably freelancers, maybe working from home or working, traveling. And what having my own business allowed me to do was exactly that. Spend more time in different places all around the world. And this is just one example. This is me in the middle and this is my brother and these are my two parents. And if you guys want to follow me on social media such as Twitter or Instagram, you can find me at Mr. Alex Winkler. They handle right above this picture. Now, a little bit about my experience. The first job I've ever had. I was already a contractor. I never really had a W2 job. And W2 is basically anytime you have a you could say your classic job where you get a paycheck every week or every two weeks or a monthly basis, and then you get a W2 form and then maybe at the end of the year you get a tax refund because your employer pays your taxes for you. And then at the end of the year, if they paid too many taxes, you can get some money back. So that's the classic W2 job. I never really had that. My first job, I was working part-time at an auction house and I would do deliveries for the auction house and they kinda hired me separately as a freelancer as a freelancer or independent contractor, you get a 1099 Miscellaneous form like this one. So I was always kind of a contractor since the beginning. I'm 28 years old and when I first originally had that job, I was somewhere in the mid teens saw I've been doing this for well over 10 years. I've started many online businesses, most of which I either sold, merged, closed, or restarted from scratch. One of the oldest ones I have is ends low ink that some of you guys might be familiar with. It does software consulting and we do custom software solutions as well. I did wind that down a little bit as one of my main focuses now is trading and wealth management ends low ink though, is still one of our oldest surviving companies manage my by my brother and I and I'm more or less the defacto CFO. So I do all the accounting, I do all the taxes. And this is a company that is an S Corp. So we're going to be talking about the company a little bit more down the road because it's one of the great corporate structures that you could set up to save some taxes. Anyway, my experience really lies with online businesses. I've done everything from building out coffee SAS sides to affiliate networks of open-source trading tools like a trade journal dot co, and just, I mean, hundreds, literally hundreds of other websites that I personally have done or worked on or consulted on. So it's definitely something that I'm quite knowledgeable about and also passionate about and will continue doing it going forward. One thing I like to think about is that everything in life is a business more or less. And I think once you get into that mindset, things become much, much more easier. You start understanding how everything ties together. You'll see what I mean by that going forward throughout this course. Actually, I like to say that every US citizen is more or less born or inaugurated as a small company. And we're going to talk about what each citizen basically is legally as a business structure, and then how you can kind of evolve from that first business structure into certain future business structures to not just save taxes, but also protect yourself a little bit more legally. One reason I started teaching on the side is because these five points right here. First of all, it's immense my own personal life lessons and I can always go back to that and learn and also adds to the courses. I have several courses now that I've been slowly adding two as I learned more or I get questions regarding certain topics and I found that really, really great. Actually, that's going to be part of the course project we're going to talk about in a second. And I also learn by teaching point number 2. And it requires you to question the process that you've been following. Point number 3, you grow with the community. I find this really, really helpful to grow community. And we're gonna talk a little bit more how you can join the community and grow with us together. Because point number 4, learning from others is just so, so important. And point number five, it makes it all the more fun. This is especially true if most of your friends and family do something else or they have a full time job, it becomes even more important that you have a community doing similar things so you can learn from each other. Not get to detach because that's really important to always have a community. So speaking of the community, There's two ways to get involved and learn more and stay in touch. The first one is through YouTube or channel there. So youtube.com forward slash Alex Winkler. And the second one is our discord, which has over 1000 users now on trade journal dot co. And in the footer of the site you'll see the discord link. We have many different categories in this discord and the relationships we're building there are really, really valuable. So I'm super stoked to be able to share that with you guys a little bit more about this course. What skill level is required for the class? This class does aim at students with 0 knowledge of corporations, which is business, legal structures, accounting, or taxes. If you do have some knowledge, this would be probably more a good refresher. But if you're, let's say stock and you haven't really started. I think this is the perfect course to kinda push you into that because we tried to make it really, really simple to get started and to take action, to add on to that who's his classmate for? I'll just read it here. This class is great for freelancers, side hustlers, or even hobbyist. And I would probably add to that anyone looking to even make a startup or take what they already have, especially if it's turning into a team to the next level. Legally, the skills you learn in this course can save you time and money no matter where your passions take you. And the reason I'm saying that is because accounting, taxes, legal structure and so on, so forth, is one of those areas in life where ignorance is not bliss, trust me, putting off your legal structure or your accounting and your taxes will create a lot of, lot of headaches. Doing a course like this is fundamental in going forward with your self-employment and your business adventures. Now I do want to say we will not be exploring how to use certain accounting softwares. I'll be pointing out, this is what I do, This is what works for me. This is what I would consider if you do XYZ, but I won't be going through like this is how I use QuickBooks step-by-step, because that is just a whole different course in of itself. And right now I want to focus more on the whole structure and everything you need to know to get started. So how can students like yourself apply these skills? Obviously, everything you learn, you can apply right away to your current business or the one you plan to start. And something that I like to consider as well is there's another way you can utilize these techniques and skills. And that's by if you start consulting business in your area, I find this really, really cool. So there's always a business to be made by helping others with their business structure, accounting, and tax needs. Obviously, that is not probably something you could do right away on this course alone. But this course can give you the foundations of understanding what others could use and need help with, especially after you learn how to do it yourself. What are the key takeaways of this class? Well, by the end of this class, you'll understand which you as business type is best for. You know, the best options for your accounting needs, hired or self done and be ready for upcoming taxes by having a modern working and expandable system in place. That's really the important part. You will be ready to go after this course. Sweet guys, I'm excited to get started at that wraps up the intro video and the next video we'll be talking about the class project. I'm excited to see you there. Let's go. 2. Class Project: Okay, so the class project really breaks down into two parts. The first part is I want you to upload a picture of the company structure that you're going to pick. Now we're gonna talk about different companies structures in the next few videos. But I just want you to keep in mind which company you want to kind of form and then take a picture of that, write it down on a piece paper, take a picture of that and then uploaded. And there's going to also be a little description area. Or you can write a little bit of a reason why if you want to, I definitely encourage it, but again, that's up to you. And then part number two is I really, really, really encourage you guys to leave questions below this video or any of these videos. I think all questions that are just in one kind of a little mini forum under this whole, entire course. So definitely, definitely go ahead do that. And once I get several questions together, that would warrant another video. I'm going to package those questions together and then add it to this course. So the more questions you guys leave, the more benefits you and everyone else taking this course. Now, let me talk a little bit more about Part 1 again, basically to do this, just go right below the video, click Projects and Resources and then Create Project. That is how you upload a course project. And that looks something like this. So you can upload the cover image. And for us, the company I chose is S Corp. Obviously you guys can choose any side titled the project S Corp. And then project description I added pass through taxes, work best for our situation and we can switch to C-corp when this is no longer the case. That's why we picked S Corp. We'll talk a lot more about pass through taxes and pass through entities in the upcoming videos. But this is just an example of course, projects giving you guys an idea of how to do it and how simple it is. I guys, I'll see you in the next video. 3. K.I.S.S: Okay, so you might have heard this acronym before, kiss cane, ISS it stands for Keep It Simple, Stupid. And this is something I've really internalized, not just with my life but with my businesses. And basically the simple path or the less complex path is actually usually the best one. And that might sound a little bit counter-intuitive. But if it's with programming or if it's with a trading strategy, usually the really simple idea, a simple concept, this concept you could explain to a five-year-old and they get it is the best one because there's less things that can break a don't over complicated. You don't over questioning yourself and use a really good quote that embodies that concept. And this is from Anthony, the author of The Little Prince. I don't know if you guys read that book and but in the US it's kind of like required reading at some point in time. Anyway, he says perfection is achieved not when there is nothing more to add, but when there is nothing left to take away. Man, I love that. So if keeping that in mind, let's continue to some of the concepts we are going to be talking about in this course and where we're going to start and then go from here. Now, number one, most people do get overwhelmed and push this off for way too long. We've already talked about this. So first of all, congratulations on the first step, because that's often the hardest part. Everything else, you know, just dedicate 15 minutes to 30 minutes a day. And you and you'll be so surprised that, you know, a month, two months, three months down the road, how far you've come, even though it feels like he really didn't do that much. So really just do a little bit every day. And that's the most important part. With that in mind, we're going to talk about companies structures, and there's four main company structures we're going to review. We're going to talk about why I personally use QuickBooks and we're gonna talk about alternatives as well. We're going to talk about tax saving, tips and tricks. And I'm going to talk about when to pay taxes is going to be pretty simple course. It's going to be very practical course. And I hope you guys really understand that the biggest part is going to be the company structures. Because once you understand that everything else you can kinda pick up along the way. But you want to get the company's structure right, but at the same time, don't overwhelm yourself. I've started and close many businesses. And the reason I'm saying that is because it's so simple to do. It's nice when you don't have to, but it's very simple to do so don't overwhelm yourself and don't delay anything just because you don't know where to start. 4. Quick Start Companies (2): All right, So as we mentioned in an earlier video, when you're born or inaugurated as a US citizen, you're instantly accompany in a way, and that's called a sole proprietorship. It's one of the two Quickstart companies that we're going to be talking about. Now really soon we are going to be talking about the four companies that, or legal structures that you can choose to go down for your company. But already having a social security number, your SSN, you already are, is sole proprietorship or you can do a partnership. These two Quickstart companies can be great, but they can also give you problems down the road. And that's what we want to quickly talk about before we talk about those future for legal structures that you want to kind of evolve into. So the first problem here is, like we said, it uses your social security number, which means it's a pass-through entity. This could actually be a good and a bad thing. It really depends on how much your company is making. Corporate tax rate in the US is around 20 to 25 percent depending on who's the President and the latest tax reform, but that's kind of the wiggle room, 20 to 25 percent. So your personal taxes for federal, non Medicare, and Medicaid, non self-employment tax on that stuff. The base rate now is between 10, 37%. So depending on how much money you're making, you might want to pass through entity. Basically you report all profits on your personal income. And we're going to talk about that statement. How about all that looks, just know it's not your company being taxed. There is no company. You are the company you as an individual, which leads me right into the next point, you have full legal responsibility and I probably should have added financial responsibility, but it's kind of the same thing. Basically everything that happens to the company, happens to you as person you are, the company taxes, financial, legal. That's why it's a little bit risky. But by default we are all our own company, which is great. And if you start getting that mindset, you can start saving a lot of money and start planning for the future. Because technically, anything you do that pertains to your business, such as driving, going to a networking event, buying supplies, your office space at home can all be reduced on your tax bill later on. So once you understand that your business, you start thinking in ways, okay, how can I reduce my taxes if it's staying as a sole proprietor and writing off expenses personally or starting a business to save money down the road. So let's keep talking about sole proprietorship. And then in the next video, we'll dive a little bit more into partnerships. 5. Sole Proprietorships: Okay, so moving right along, a sole proprietorship, like we said in the last video, we are all by default is sole proprietorship. Your social security number allows you to instantly start a business at anytime. And that basically happens as soon as you accept money for your goods or services, you start a little online jewelry store and start selling things on eBay or Etsy or locally at the farmers market, booms sole proprietorship, you start mowing your neighbor's lawn. Boom, sole proprietorship started a little shirt company, fooled any money you make, you don't have to start worrying about how am I going to start a company or not? You already have a company. It's your SSN, your social security number. That's where everything's going to be reported. Just like that you're in business. It's pretty amazing. Again, the big downside is you have all the legal and financial risks, all the profits, and the losses will go to you and people if they have issues with your company, they will sue you, knock your business because there is no business, you are the business. So just remember that sole proprietorship, you are solely responsible for everything. And one of the upsides is you have that freedom as any normal business, you could hire employees, freelancers, consultants to help you out in your company. But at that point, I will really urge you to start a official business because like this picture shows, there is no finger-pointing, there's no blaming somebody else. You are solely responsible for everything. There's two tax forms at you're going to have to fill out. Well, actually there's there's one additional tax form that you're going to have to fill out and that's the Schedule C. This is more of an informational tax form that allows the IRS to know what's going on with your business. You have your income, your expenses. It has a little bit of a balance sheet. So it's kind of like a nice little summary for the IRS so they know what's going on. And you can see here with that green arrow, you are adding your Social Security number. Now at 1, you could elect to get an employer ID number EIN, and now we'll upgrade you to an LLC so you can see it's already preparing this form, the Schedule C farmers preparing that you may upgrade in the future so you have an official business. So what's really nice about that is tax-wise, not a lot changes. It keeps it very, very simple, but we're gonna go through this a little bit more in detail later on and talk about software that automates this. So again, don't stress out, I just want to throw this ACU early on so you kind of already see what it looks like. And I'm sure many of you guys already know what it does look like, so let's keep moving on here. The next thing is the Form 1040. Now a 1040 is something that everyone, If you are a business owner or not a business owner, you have to file. It's basically the everything combined. You know, if you if you're a shareholder, if you are an employee, you get W2 form, you basically to 0. If you own stocks, if you own real estate, yada, yada, you take all that information, you fill out all the separate forms into. This is the net at the end, right? This is where you just kinda plug in all that information at the end. And this is what the IRR as they're they're kind of like final form. What you have to pay in where it all came from is on so 1040, you're going to have to file no matter what, all over the place. Always, which again, keeps it very simple. There's great tax software that's going to automate this for you and make it really, really, really simple. So again, don't stress about it. You could fail it, fill it out manually. I've actually only manually filled one of these out once. It wasn't too complicated. But man, it is just so much easier doing it automatically online, so we'll talk about that later on. Now, what I wanted to show you guys as well is the irs.gov website right here. You can see in the URL. And the reason I want to show you guys this is because I want you to start getting in the habit of going to the source directly. Now you can always Google things and look things up and read articles and watch YouTube videos. And I do recommend doing those things as well. But sometimes what I like to do is go through the actual sources themselves. Otherwise, you're always gonna get a derivative, a kind of secondary version, the original source. So get in the habit just going right to the side like IRS, right to the information and at least reading through it once they have a bunch of information about business and self-employed, about tax ID numbers, business tax opening, closing a business that you can have an online learning center as well, which is pretty cool. Large business corporations, partnerships, pretty much everything. We're going to talk about this in this video where I'm gonna give my personal perspective and experience on they have kind of into black and white version as a good reference point. And we're going to be talking about a lot of these different things. Also, what you'll see here is if you are eligible for a sole proprietorship, which if you're a US citizen, you are. They instantly talk about the income tax, the 1040 form that we talked about in the Schedule C form that we talked about as well. So this is always where it can get all that quick and good information. Well, we can do as well as go to these two forms and look at them a little bit more directly to actually talk about these forms in detail here, I'll make sure to talk about any information I think is super relevant. But again, boom here you can see the 1040 in all of its beauty scrolling down here. And then you can also see the Schedule C form in all of its beauty as well. So what we're going to be doing is just using this directly in the futures. Anytime we're talking about forms or anything, we're just gonna go right over to the IRS and find the form ourselves. So again, we can start practicing getting used to the IRS website, and this is just for further personal research. Now remember, I'm always referring to accounting and tax software and that's going to automate all of this, but it is good knowing where it's coming from. You can probably tell I'm putting a lot of emphasis on that because it really, really is the first place you should always start your research, okay, that's the main stuff or sole proprietorships for now. Let's move on. 6. Partnerships: Hi, Yes, partnerships. These can get a little bit tricky, but we'll talk about simple things that you can do to remove any potential future stress or at least reduce it. So keeping it simple, the definition here, when you and someone else start doing business with the intent of making profit, you have a partnership, sometimes referred to as a general partnership or GP. It gets a little bit more tricky with the taxes. But at the end, you still had your 1040 or your report everything to you just have two additional forms instead of one form allows the IRS to get some more information from the partnership, will talk about that a little bit later. The next thing I want to talk right now about is the partnership agreement. This is not something that is required, but it's something that's really, really important. And I've seen a few partnerships personally deteriorate because there is a lack of clear rules and agreements laid out. So let's go ahead and talk about the partnership agreement. So we know the law does not require partnerships to have this partnership agreement. But like we said before, trust me, guys can always benefit from creating a document that clarifies expectations, roles, and so on and so forth. Some examples of what to include our partners will share in terms of responsibilities, in terms of profits and losses, and just their overall roles in the company. And then another thing that often isn't discussed is when and how the partnership can end. I think this is really important and something that kinda gets overlooked because everything kind of comes to a finite point where it moves on or it ends. So something else can start if that's dissolving the whole entire partnership, or if that's moving on and getting incorporated to a formal legal structure, what happens then? Also, it's really good to always plan with the end in mind. More exciting that way anyway, because then you know what you need to get done. A clear plan will make everyone more happy and you know what they say, a bad plan is better than no plan. So whatever you guys have in mind, just put it in writing and then go for it because you can always change it. But at least there's none of that. This is what I thought. I didn't know you thought that. And then people having different expectations, that's always messy. Let's go ahead and look at an example agreement. What I like about this example partnership agreement is the fact that they have, they're clear paragraphs such as paragraph 1, 2, 3, introductory purpose, name, place of business, principal, office duration. Notice how they say this will start from here and will continue until XYZ. That's really, really nice. Initial contributions. Look at that on paragraph seven B, where it says first-party put in, let's say $1000 and the second party put into $1000. Just to keep all these things really, really simple, you don't have to over-complicate this, but whatever you do, do, just put in writing. So at least you can always have a reference point in the future. Remember, like we said in the beginning of this course, K ISS, keep it simple, stupid. There's no need to stress about this partnership agreement. Just put something there and move forward. Now talking a little bit about the tax returns, there's going to be two additional forms that need to add here. The first one is the Form 1065. This is the one that is also more informational on your whole entire partnerships, so the IRS knows what's going on. Again, no stress here. The tax software that we're going to be talking about automates all this for you, and we'll even be reviewing it later on as well. Then we also have the Schedule E form. This is a modified form 1040. Anyone needs to fill out if they have real estate royalties partnerships like the one we're talking about, S Corp, which we'll talk about later on as well, estates trusts and so on, so forth. Most of these are always purely informational. And then at the end, your personal 1040 is usually that final amount that you're going to have to pay that sums everything up in the end, this will provide you a number to add to that later 1040 coming back to the IRS website, Let's see if we can scroll down and what we can find on partnerships. Yes, they have a whole, entire section for it. So let's go ahead and click on that. And here you can see, right in that first paragraph, they nicely describe what a partnership is, is the relationship between two or more people to do trade or business. Each person contributes money, property, labor or skill, and shares in the profits and losses of the business. And I would probably recommend even stopping this video and reading through this a little bit more in detail. Because then when you continue watching this video, you can better ask questions or things will make more sense once you hear them twice, we will try to repeat a few things in this video. But like I said before, nothing beats the original source. So maybe just click on form of partnership and just read through it. Now as you can see, it's quite long, so you'll definitely have your evening reading for sure. Coming back to the main site, I do really like how again, say it's a pass through entity. Now remember, we've already talked about that, a sole proprietorship and a partnership or pastor entities, and there's a few more companies that can't be passed her entities as well. This is just one of those terms. That's a really, really good to know. And now when you go to the irs.gov website or any other website, you already know what a pass-through entity is, and this is why it's really good taking things one step at a time because every little thing you learn will help you learn the next thing. All right, let's keep moving on. 7. Business License and Names: Now this was a tough one for me because I wasn't sure if I should put this section in the sole proprietorship and partners section because this is something all businesses or not legal businesses need or may require, I should say. But I figured it would be good to include it in this section already. We'll talk about it again. As sole proprietor might think they don't need any legal permits or business license because they're not a real company yet, because they're not an official registered company yet. But there's many things you might need a license for. First of all, some towns and counties require all businesses to obtain a local license or permit. This could be depending on the goods or services you provide. You might need a specialized license from government agencies, such as a food handlers permit. This could include a food truck as well, hot water, for example, to sell cannabis, something that you don't necessarily need a legal entity for, but you might need a permit or business license for. There's so many case-by-case examples. So it's best to do your own research here, but I do want to go ahead and let you know for certain things will require a license and they can be sometimes very, very simple. Also, something I would recommend is look into a DBA doing business as sometimes referred to as a fictitious business name. So let's say I started a company like Winkler LLC, but then I had a website called start a business.com and I kind of organized all my information and sold that information under that brand. I should register that brand so I have ownership over it. And the last point I said, check with your secretary of state for more information. And the reason I said that is because if you go to your state department and your state website, you can usually find all the information you need to know. So if we just scroll down here on the Florida one of my Florida.com and also sunburst.org for registration. I can find all the information I usually need. Yes. Let's click on start a business with E filing and then scroll down here. It looks like LOC profit corporation is basically S or C corporation non-profit, and then LLC right here, and then fictitious name registration. And I could do all these things online very, very quickly. Again, irs.gov and then your State Department website will allow you to do most things. And again, this is why I want to go right to the source. So you guys see it for yourself now this is how it looks off or Florida. You'll have to figure out what it looks like for your state. Again, all this information is usually very clear and straightforward and that's why I recommend trying it yourself before you go and hire a lawyer because they will charge literally an additional 500 or $1000 just to click this button for you. And that's why I say ignorance is not bliss for legal or financial things. 8. Sole Prop and Partnership Summery: As a quick recap for sole proprietorships and partnerships, I wanted to highlight the biggest things that you should remember. First of all, neither one of those entities shield the owners from obligations of the businesses. That means creditors can go after you and your personal assets, such as your home BankAccount your car, and any other of your personal assets to pay down the debts of your business. So be very, very careful. Once your sole proprietorships and partnerships really starts growing, The law does not distinguish between you and your business or when your business own something or buys something such as property. So do you, Which means if something happens to that property, something happens to you bringing a lawsuit against your business, even if it's the fictitious name that you registered, it's still yours. So if somebody sues your business, it's the same as somebody suing you and taking that to the next level. If you have a partnership, it can be even more risky because anything that partner does, you might be personally responsible for as well. Now you won't be responsible for everything your partner does. For example, if your partner caused a car accident while on vacation, personal assets would not be on the line to pay for the damage caused by the accident. However, on the same side, if your business is a delivery service and your partner was to crash the business truck while on a delivery to a customer, you might be personally liable. And to me, that would cause a lot of sleepless nights. So anytime you expand, especially with a partnership or employees or anything, I highly encourage you to incorporate. Otherwise, there's way too much risk on the table for sole proprietorships and partnerships. All the taxes go to you. They are pass-through entities. There is no corporate tax. For better or worse, you pay everything or the partners pay everything on their personal tax return. There's additional self-employment tax on your portion of the income. Now we haven't covered self-employment tax yet, but we will in future videos, I do want you to know that there is an additional self-employment tax on top of all your other taxes on your portion of the income. Now there are deductions that you can use, and by default, usually this is cut in half right away. So you can deduct half of your self-employment tax because usually let's say you incorporate, we'll talk about this down the road to a S corporation. You pay yourself as salary for working in the company. And the rest is pass through income which doesn't have self-employment tax. And we're going to talk about this much more. But I just wanted you to be aware that there is self-employment tax on a portion of your income. The IRS taxes sole proprietorships and partnerships, similarly, but the way you report it is different. And we've already talked about this sole proprietors report on Schedule C. While partnerships have two forms, the form 1065 and this Schedule E, I always like to remind myself that schedule C is active and scheduled II is passive. A good reminder is that everything on your schedule C is subject to self-employment taxes, but not everything reflected on your Schedule E. So the partnership is not subject to self-employment taxes. And the obvious reason for that is Schedule C is your own sole proprietorship. You are working in that business, so you pay self-employment taxes on that while Schedule E is a partnership and not all of that is yours in terms, you might just be passively part of it, so you don't have to pay social security taxes on it. Schedule C, active, Schedule E, passive. And then Form 1065 for informational purposes, only. 9. 4 Types of Companies: All right, so now we're going to be talking about the four types of companies. And as a little bit of a fun fact, there's actually only three legal types of companies, and you can probably already guess which ones those might be, because 23 are very, very similar. S Corp and C Corp. The S-Corporation is only a tax declaration, so it's very similar. C Corp in terms of legal structure, it just has a different tax designation. Will talk a lot more about that when we talk about S corporations and C corporations, we'll start off talking about limited liability companies, LLC. They are the most and natural next step for young companies that QuickStart companies that we talked about in the beginning, sole proprietorships and partnerships. And they're also really flexible on how they can be taxed. So the owner or owners of LLCs can decide how they want to be taxed, which is really cool. Let's go ahead and get started and talking about the differences of these four types of companies. 10. LLC: All right. So the limited liability company, LLC. Now, if you remember, when we were talking about sole proprietorships and partnerships, the pros and cons. One of the big con was a lack of credibility. Having an LLC really establishes you more as a business and it's really the perfect next step for sole proprietorship or partnerships because it allows a lot of flexibility and we'll talk about in a little bit. And the tax structure is very similar or can be very similar by default, but can also allow you to save more taxes down the road based on how you want to designate the company. The great part like always is the flexibility, so you don't have to make these decisions right away. You can start the company in always change how you want to be designated via taxes. There can be many owners in a limited liability company. They can be individuals, they can be partnerships, that can be tourists. They can be different corporations like S and C corporations. So it's already going to be much easier to say to look for capital or raise capital. Because now you can give out shares to your company and you can have that transfer ownership that was lacking with sole proprietorships and partnerships. You also get that protection against business debts and liabilities for the owners. And this is so important, this is probably the most important reason on why you'd want to start an LLC or incorporate to a C Corp or an S corporation. If you're a company makes a big accident or all of a sudden you start running into debt because you can't maintain XYZ anymore, you can always close the company. And those debts are those liabilities. Or if somebody sues your company, those things won't spill over into your personal life. They won't be attached to you. Now this could be a pass through entity which means you pay the taxes, all the money the LLC makes, you or the partners or the owners report that profit on their personal income, or it can be sea level. That's the corporation level we'll talk about later. So the company gets taxed. Then you pay out either with a W2 or through dividends to your personal income. This is really, really, really convenient because you can decide what's better for you on your tax level. One thing we're going to talk about a little bit later as well is you can decide to tax it as an S corporation as well, which is a pass-through entity, but you can save more on self-employment tax as well. So keep that in mind. We'll talk about self-employment tax and sea level taxes. The next point is really a big one as well for me, there's fewer state and federal compliance requirements. Have an LLC, I also have an S Corp. And with the corporations, There's definitely a lot more things you don't want to forget about. Here's a list of a few. So first of all, you hold an annual general meeting and AGM for the shareholders and its board of directors. This they even make you have to document the minutes that were allocated to these meetings and when and where. So it's a lot more stuff you have to do for corporations with Alice sees you don't have to do all these things with a corporation. You have to issue shares to investors as owners of the business, you have to point a board of directors, you have to assign certain positions in the corporation. So just a little bit more to think about. While an LLC is kinda like a sole proprietorship, a partnership, there's not a lot to think about. You just file the taxes at the end of the year and you're pretty much good to go. And that really leads me to that last step here or that last point. It's easy setup and maintenance. You follow the articles of organization or incorporation. I'll show you guys that in a second. You pay the state initial fees and any point in a registered agent, which could be you as well. There are certain reasons you might not want to present yourself as a registered agent because you might have to randomly show up somewhere to fill out something. And usually you can get registered agent in your area, very, very cheap, but you can always start off as your own registered agent. Nothing is simple. Google can't fix. And there's a little fun fact here that I thought I'd share, and that is an LLC is a fairly new option in the United States. It first became available in Wyoming in 1977, but most other states did not follow until the 1990s. And then that makes me want to go back to Jackson Hole at places beautiful, but it ain't cheap. Now as you guys know, I love going to the irs.gov website directly. You can just Google IRS LLC or you can just search here and click around. You'll kinda come to this page regardless. And you can see a lot of the stuff is what we already talked about, such as owners of an LLC are called members and most states do not restrict ownership. So members can include individuals, corporations, other LLCs, and foreign entities. Actually the foreign entities part is really, really important because S corporations don't allow foreign entities. And that could actually be a benefit of why you'd wanna LLC. There's no maximum number of members, and most states also permits single-member LLCs. Those having only one owner. Llcs are the preferred business structure of a sole proprietor. Basically, somebody working for themselves and LLC is the perfect business structure coming down here to classification for the taxes. By default, the IRA as classifies an LLC based on the number of members inside the LLC. So let's read a little section here, depending on the elections and made by the LLC and the number of members, the IRS will treat and ALCI as either a corporation, partnership or as part of analyses on our tax return. And this is a beautiful thing. It basically means an LLC can be many things in terms of tax designation, and you can pick what best works for you by default, they'll pick based on the amount of members inside your LLC. But you can always change it by filling out certain forms. And if you come down here a little further, it's easy to learn how that works. The IRS does outline things really nice and Alycia that does not want to accept its default federal tax classification or that wishes to change its classification, uses form 8832 to change it. Very, very simple stuff here. Again, I always recommend reading through the IRS website first experimentally before talking to any sort of tax or legal consultant, just to give you an idea of where they might be heading and a better understanding of what they're talking about. And also allow you to ask the right questions. So if you have a partner or you're going in to business alone and Alice is probably one of the best choices for you. Just to come over to the Florida Department of State again, I want to show you guys how it looks to start one of these businesses. So scroll down here to the sunburst corporations, start a business with E filing and then go down here to limited liability company and then scroll down and then you'll already see file the articles of organization. This is one of those few things that you need to do to start the LLC. You basically fill out the form, you pay and then you've got your organization. It's that simple. Let's go through the process just a little bit together to see what happened. A file, articles of organization, I have read and accept the terms. So they have some terms and disclaimers here. We won't go through them on this video, started new filing. And then here you can go and see what it looks like filing fees, a $125, you have your effective date when the company starts. If we check here, you can actually make your effective date earlier than what the date is. The effective date can be up to five days prior to the date of submission or 90 days after the date of receipts. So you could file ahead of time for something you want to start in three months, or you could do it five days in the past, which can be helpful if you already have a contract on the table, you have your name, your principal address, and your mailing address. Like this site is a little glitchy here. But overall, you guys get the point. This is pretty much everything you need to know and you can always check it out on your state website. I just kinda want to show you guys what it looks like for the Florida. If you've never seen this before, at least you have a nice reference points to start off with. This is for all the managers or vice president and so on, so forth. To write all the names down. And you can always add more of these. And it's pretty much that easy to get started. It's quite amazing. Don't forget to leave any questions below this video. Once we gather a few questions together, or even just one question that's worth of video. I'll be sure to add additional videos into this course. 11. S Corporation: Okay, So company structure number 2, that is S corporation. Now the first S Corp started in 1996. This is a fairly new corporate structure and actually want to address that right away. The classification of an S-Corp isn't actually a new business structure. It's not its own classification like LLC versus non-profit first C-corporation. It's actually just the form of a corporation. Just some form of a C corporation that has a different tax designation. So when you hear S Corp, think, pass through corporation, this is kinda like a sole proprietorship, like a partnership. And what a lot of LLCs opt to do as well in terms of their tax designation, pass through Corporation. And there's two reasons you might want to S-Corporation classification. So let's talk through some of those. First of all, the taxation of S corporations resembles that of a partnership, like we talked about before. Or income is taxed at the shareholder level and not a corporate level. So the shareholders or the partners get tax and not the company itself. That's the first thing. And we'll talk a lot more about C corporation taxes in the upcoming videos. But basically a C corporation gets taxed on a company level. And that's always between well, not always, but roughly training between 20 and 25 percent. And since your personal tax rate might be higher than that, you think, oh, maybe I should leave my money inside of a C corporation because that only gets taxed at 25 percent. Let's say the problem with that is the IRS doesn't want your C corporation just to accumulate a bunch of money. So the S-Corporation, you avoid a certain tax penalties that C corporations have, such as accumulated earnings tax, personal holding company tax. So you can keep as much money inside the S-Corporation as you want. Now, that might be taxed at higher levels at some point, since right now, personal income tax, I believe goes up to around 37 percent in the US. So you always have to try to figure out what's the best for your situation. And then obviously, since a pass-through, corporations are not tax at a corporate level, you avoid that double taxation, which we're going to dive into much more. Just remember, any sort of pass-through entity can't be double taxed because the individual is being taxed directly. The company doesn't get taxed, and then the individual as well for better or worse. Again, it really depends how much money you make at that point. You can figure out which structure is best for you. Now, the best part about that, especially if you're a little confused, if I should be an S Corp or a C Corp or yada, yada is all these things are transformable because you can't adjust form an S-Corp. There's no I'm going to apply to create an S-corp. You've you create a corporation or an LLC and then you apply to get that taxed as an S corporation. And I'll see you guys online in a second what that looks like on the Florida website again, now the one catch with S corporations, which can be a bit of a problem, is there's a few eligibility requirements. First of all, it has to be a domestic corporation, an LLC. You can only have one class of stock. Sometimes companies issue preferred and normal shares. The difference is usually the voting rights. So preferred shares may have more votes than normal shares. There is no more than a 100 shareholders and any shareholders actually have to be US based. So this is a really, really big problem when you're dealing with foreign individuals. That's a whole different topic to dive into alone. But I did want to make that clear later on in this course, I want to show you guys a chart as well as to what points certain income levels of your company makes sense to go through S corporation, C Corp, or even LLC and sole proprietorship. Because if you guys remember as sole proprietorship has the schedule C, which is an active form of reporting your taxes in an active form, pays all the self-employment tax. With an S Corp designation, you only pay yourself a reasonable salary. So a salary that you would also get for that same kind of job. Let's say you are a software engineer or a designer, and that's what you do for your S Corp. Now, what is that worth if you got a job at a different firm? So you can pay yourself a reasonable salary, pay self-employment tax on that salary, and then all the additional income your S Corp makes just passes right through and you don't have to pay any additional self-employment tax on that income, just personal income, which can save you a lot of money. So a sole proprietorship is easy to start, but it can get very, very expensive while an LLC or a corporation with the S-Corp designation can save you a lot of money. Moving right along to the IRS website, you guys knew we were going to check this out at least at 1. I just really love how the IRS updated their website too. And they talked about a few things that I want to highlight again here. To qualify for S Corp status, the corporation must have the following requirements. We talked about a few, these be a domestic corporation, have only allowed shareholders must be individualist. Certain trusts and estates may not be partnerships, corporations, or non-resident alien shareholders. So you can't have a corporation or a form resident being a member of an S-Corporation. No more than a 100 shareholders have only one class of stock, and then there's a few entities that aren't allowed to be S corporations as well. And again here I wanted to highlight this part. In order to become an S corporation, the corporation must submit a form 25, 53, which then they apply for the S Corp status. Another thing here, filing requirements and forms to use, really, really nice and simple, so you could find everything you need to use. Now, remember, we're going to talk about syntax software as well down the road. And that always makes things even easier because you don't even have to think about this. Your tax software will automatically populated based on what you fell out in the tax software. So if you say you're an S corporation, this is your earnings, so on so forth. It will automatically pick all the right forms for you and ask you all the right questions. But it is, again, good to know where it all comes from. And if you did want to do it by hand, what it looks like really quickly. Let me show you guys wooden form 1120 S, looks like here you can see this is the first form you are going to have to fill out. This is more or less your income balance sheet for the corporation and allows the IRS to know what's going on. This is purely informational because again, the company doesn't pay taxes. Irs just wants to know what's going on inside the company and also who is getting income. This is why you have to have your accounting pretty much a 100 point the second you incorporate or goal and LSC route even a sole proprietorship. Because actually sole proprietorships are always scrutinize the most by the IRS. Now what you do have to file earlier and we'll show you guys a chart and a table of all the forms and dates that you guys have to file things by, but it's a scheduled K1 form and this is the form that goes to the partners of the members of the S Corp. I think it's March 15th is the filing deadline. And so that's when all partners of the S-Corporation would get this form. They see how much money was passed through the entity onto them based on their ownership of the company. So if you own 50 percent of the company, 50% of the profits and losses of the company will be reported here. And then you file this on your personal 1040 form and that's at the end, Would you can pay or deduct from your taxes. Hopefully, this isn't getting overwhelming. Just always break it down into little chunks. First, the IRS wants to know what's going on, then you, as a personal individual, needs to know what's going on. So first the 1120 S, this one for the IRS, so they know what's going on and then the Schedule K1 for yourself, so you know what's going on. And then the Form 1040, so you can report all that to the IRS and you better include it because the iron as knows that you should include it based on the 1120 S of the IRS got from the S-Corporation. Now really quickly, let's look at the Florida site as well. So if you go to start a business with E filing, and then we scroll down here to a profit corporation, that is a corporation, S and C corporation. Notice that there is no option for an S corporation because again, as corporation is not a structure, it's not a business structure, it's just a tax designation that you can file with the IRS come down here and you can file or correct parts of your articles of incorporation or organization. If it's an LLC or a partnership, start a new filing, and then you can see the whole entire process here, which again, isn't too bad. And this happens really, really quickly, more or less. How sometimes if you have a lot of names here, this can take awhile, but overall it's completed fairly fast. Those are the main things that are important to know about S corporations. Remember if you have any questions, leave them in the comments below. I'll be happy to answer them and do time. Make additional videos that based on questions, Let's keep going. 12. C Corporation: All right. So usa company number 3 or type of company number 3 is this C corporation. And the easy way I like to put this is that it's any public USA company, so it's any company that's trading, let's say on the New York Stock Exchange or the nasdaq, that is a C Corp. We'll talk a little bit more about why that is and why it makes sense. But I'm sure you guys already understand based on the limitations of LLCs and S corporations with the types of owners. Why C-Corporations simply make sense for being a public company? First, let's start off talking about where these companies came from. Well, the first usa company, the Boston Manufacturing Company, which was established in 1813, and that's because they had shares to give away. That was the first company there is ownership in, at least that was properly documented it. And that's what most historians agree on. The business model was imported from Great Britain, where textile corporations helped spark the first industrial revolution three decades before. And that's because these corporations, these textile corporations were based on the idea of raising capital, get these big factories going, and allowing people to buy into the owning shares. In the USA, they are totally separate entities. It's like its own person. Besides the fact that they can't vote, a corporation can sign contracts, open bank accounts, it could do it all, and they're taxed individually as well. So any C corporation and the corporation that doesn't have that S designation is under the USA federal income tax law, tax separately from its owners. Also, corporations, not owners, are legally liable for their actions and debt. So if you sue a C corporation, you're suing the C corporation itself. You aren't suing anyone involved in the company besides giving protection for the owners as C-Corporations main function is to raise capital. A C corporation has no limit of number of shareholders. It doesn't matter if they're foreign or domestic if it's a different kind of company investing in the C corporation. C corporations are there to take on capital so they can do the projects that they set out to do. And that's why they are the perfect company to go public with. So if you're planning to go public, look into starting a C corporation, also, any distribution from the earnings and profits of a C corporation is treated as a dividend, your classic dividend that you get for holding, let's say Pfizer. And they pay out roughly 4% dividend annually, at least at this current moment of time. So with an S corporation or an LLC that elects to be an S corporation or a sole proprietorship or a partnership, all that income is pass through, you pay on your personal taxes while a C corporation gets taxed as its own corporation, and then any remaining money in that company then gets paid out as dividends, which you again pay taxes on. That's why there's that double taxation with C-Corporations. And if you're working inside the company, so let's say you're an owner, but then you're also the CEO, you get a salary. So W2 and dividends, if you are also a shareholder, the pros and cons with a C Corp obviously is limited liability as a Perot. That's what LLC's are for. Well, that's what S corporations are. Four, that's the basically the core of incorporating or having an LLC. So that's basically a default. That's why didn't bold it. But with a C Corp, really that focus is that raising capital, to be able to raise capital by selling shares, also known as equity, to pretty much anyone that wants to buy it. There's no restrictions are certain requirements for the potential shareholder there you're trying to sell to, you get that separate corporate tax treatment which can be a pro, especially when the company starts making more money and you as an individual start making money, then the double taxation is actually a benefit. And if you're starting a C corporation, you're probably looking for bigger projects. So by default, that should be a pro. And you also have advantages when recruiting employees. Employees can see, okay, this could be a potential public company. They might be interested in stock options and so on, so forth. So you can offer employees a lot more than just a paycheck. Obviously, the cons are time. There's more things you need to figure out. There's annual shareholder meetings, a board of directors you need to work on. So there's just more things you have to dedicate time to you to figure out. And that obviously comes with more paperwork, which in turn often comes with more cost because there is sometimes a filing fees. I didn't bold costs because S corporations have many of the same cars as C-Corporations. And then of course, tax is a bit of a double edged sword here where it could be a con as well, especially if you are a smaller C corporation earning less profit than oftentimes, a LLC or a corporation makes more sense. If we do a quick Google here US corporate income tax rate. You can see that since January 2018 and right now it's 2021, the corporate tax rate is 21%. See all your profits as the company will be taxed at 21 percent and then any profits after W2, after business expenses and so on, so forth, can be then paid out as dividends to the shareholders. That's obviously something the board of directors will elect to do or not to do. And on the IRS website again or really quickly, they kinda summarize a few things that we talked about. And then the forms that you need a file, that clear form here is the 1120 form. So if we click on this one, we'll go right over to here. And this is really similar to the 1120 S of an S corporation. However, this one isn't just informational, but it actually ends with a amount that you either need to pay or that you can deduct from last year's taxes or upcoming year's taxes. There's also an employer identification number. There's no SSN anymore Social Security number. And this is something you can file for to get. It's very simple to do it and you can find out all the information about on the IRS website as well. But for now, let's keep focusing on the C Corp. If you scroll down here, It's basically all the things you need to know and file on your balance sheet, income statement, all that stuff, so the IRS knows what's going on. Here's the balance sheet, and then you'll have your final number that you will need to pay, which will be reported right here on income number 11. Now, I did want to show you guys the 1120 S. Again, very, very similar. You can kinda just go back and forth. These forms are more or less identical, but the 1120 S for S corporations is informational, while 1120 for corporations is more than just information. And this is something you will have to pay taxes on as the company. And now while an S corporation will send out Scheduled K1s, which the owners how much money they need to pay from the total of company profit or loss. A C Corp sends out dividends and distributions, which is a little bit different. So let's go here and look at the 1099 form. Scroll down here. The IRS will get a copy of this and the shareholder will get a copy of this as well. And that's how profits of the company eventually reach the owners. And the great part about all of these forms is they can be automated with the tax software. Don't stress too much about all how all this works. I just want to show you guys at least once what it looks like if you did end up doing it by hand, which is really unnecessary nowadays. There is three things to remember for C corporations is one at its, its total separate entity. It's almost like IT person itself. It has a limited liability for its shareholders. So shareholders are protected and it's curated to raise capital. These companies are looking for investors, if it's VC for seed funding or eventually for an IPO initial public offering to raise capital from the capital markets themselves. All right guys, let's move on. 13. EIN: I figured it would be worth making a really quick video on the EIN number, the employer ID number. I know there's so many websites out there that charge for this. They'll charge north of 200 icy north of $300 for somebody else. Do this for you and it literally takes five minutes, It's insane. So if you're a C Corp or even if you're an LLC and you on open bank accounts, sign contracts, get 1099 forms, contractor forms, all on your EIN number and not your social security number, then you might want an EIN number and it's really, really easy to get. So let's go through here and see what this is all about. Again, I just went here. It went on employer ID numbers. You can also Google IRS EIN number and you'll probably find this page. There's a bunch of questions here which maybe you want to be asking. So again, go to this website and check out these questions if you see anything interesting to you, I'll try to keep this video very simple and just kind of show you guys that it exists to quickly do yourself. I think that alone is the most important part. Again, if you scroll down, you can always read a little bit more. Now let's go ahead and apply for an EIN online. And this is actually something that at first I was a little confused about, but it makes a lot of sense. So hours of operations when 07:00 AM, 10:00 PM Eastern Standard Time. And this is because if you scroll down here, you are limited to one EIN per responsible party per day, which means you can make it 365 EIN numbers a year every day. You can make an EIN number, which makes sense why there's a time now. So but between these times, Eastern Standard Time Zone, you can go ahead and apply, fill out this application. It takes literally five minutes. They give you 15 minutes to fill it out, and then you get your EIN number and your dot. Right now I'm actually not in this time zone. I'm in Europe right now in the morning. And if I click Start this application, it won't allow me to do it. It's maybe this afternoon. I will try again and then I will snippet what it looks like for you guys. Remember if you are the person applying for this EIN number, you need to have a valid social security number or another EIM, which means you can be a corporation and apply for an EIN. Because remember when we talked about corporations are their own legal entity. They can start contracts, they can open bank accounts, they can apply for EIN numbers are so powerful corporation, they can't vote, but I wouldn't be surprised if they could vote one day. And just for reference and IT IN is used by people who must file a tax return but are not eligible to work in the United States. Usually some form of ex-pat, not something we're going to dive into in this video. This is, this is good to note here. After all validations are done, you will get your EIN number immediately upon completion. So right after you fill out the form, you click submit, boom, you get your EIN number and don't stress out if you never use your EIN number, that's totally fine as well. It's basically if you do decide to use it, then you can start classifying bills and BankAccounts with your business if you don't ever use it, period, that's also fine. There's no repercussions in that either. There's a little video here by the IRS on YouTube, actually a talk about the EIN number. And there's a few things I want to share in this video with you guys. I find quite important, just to reiterate why you want to know these things before you start looking for services or individuals that can do this for you because you will save a lot of money. Just knowing a few things about ions and the government websites to incorporate fictitious names your business, so on, so forth. The EIN serves as a tax ID number for businesses and organizations. First, only the IRS can issue an EIN and it's a free service. Second, you can visit irs.gov slash E IN answer a few questions and get your EIN immediately online. Third, know who will be the responsible party on the application. Generally, a responsible party is someone in control and it must be an individual. You must provide the responsible parties social security number. Fourth, always keep your EIN information up to date. You need to report changes and responsible party to the IRS within 60 days using form 822 b, use the same form to report changes and address. Finally, you're assigned DIN is yours for life. The number is never discontinued. If you close your business right to the IRS to close your tax account. This is important and will help prevent identity theft. To learn more, visit irs.gov slash EIN. Now you know why I really like the IRS website. They really, really tried to make it as easy as possible for everyone. And I think the most important part here is first try it yourself before you talk to a tax professional. And if at 1 you get stuck, at least you know the question to ask the tax or legal professional. And you'll probably know if they're trying to pull one over on you or not. Hey guys, welcome back. So it's the afternoon right now where I am, which is between these time zones, 07:00 AM to 10:00 PM Eastern Standard Time. So now I can go ahead and apply online. So let's go ahead and try it out this time and say, okay, okay, here, you can read through these things. I think this is probably the important part. You just have to do it in one session, won't be saved. Let's go ahead and begin the application. Let's go to, or we're going to have we have an LLC that actually need to do this for let's see what else we got. What it is, blah, blah, blah, files. These are not incorporated and do not false articles of incorporation, That's true. It's actually go here and returned to corporations and see what they say for corporations. Oops, I thought I did selected okay, Change Type C corporations. If you haven't chosen courtesy of C Corp, S Corp. And remember you guys can change these things all the time. This is just for record keeping. There's always easy ways to change it online or filing a specific paper. So this is the corporation one. I could just keep going here, I'm going to complete it, so it's fine. What a corporation is. A corporation is a person or group of people who established legal entity by filing articles of incorporation with the state secretary site that I've already showed you on the floor, he won. A corporation is not a sole proprietorship or partnership. It's really nice how these kinda detail at here, very simple. Start a new business and we can select that one. Let's go. So then we just fill out the name Alex Winkler, yada yada, social security number and probably won't like me continue. Yeah, it's missing all these things, but then you do your address detail yeah, and confirmation. And then right away at the end, boom, you get your EIN number. It's that simple. So I could probably finish this with another minute or two and be done unless I can't find some information on my address or something or I gotta look up my social security number. I've gone through this process before. It's really, really straightforward. And boom, there, you just saved yourself to $300 depending on what your tax accountant or a lawyer with charge, you hope you guys found some value in that. Let's keep going. 14. Nonprofits: Welcome back everyone. In this video we're going to be talking about non-profit organizations, often referred to as not-for-profits. Now, I can go into so much detail about this and probably make a whole other course about it. So I'm going to give you guys the whole overview, make sure we cover the important points. And then if you have any questions, leave them below. And depending on the questions and the amount of questions, I'll be happy to make additional follow-up videos on non-profits alone. For now, let's go ahead and go through some of the major points. A non-profit organization is an organization, first of all, so we're gonna go to the Sun BIS website again, the Florida state website, and show you guys how to register for a non-profit organization. The main difference is that it uses its surplus revenues to achieve its goals rather than distributing them as profits are dividends like with S Corp or a C Corp. So surplus revenues are allowed, but it's used for self-preservation expansion or plants. And these revenues usually come in the form of donations. Now, non-profits do not pay federal income tax, and this is what makes them so interesting. And the second thing that makes them so interesting is that contributions can be tax-deductible. Dive into a little bit more what some of those exemptions are and requirements are. But just know that this is a big, big topic because you might be thinking, okay, yeah, I know some friends or family or maybe we can crowdsource, get people to throw in 50 box and if we times that by 1000 people will have nice donations. Yes, that can work. And those people might not care so much about writing $50 off on their taxes. But if you want those big donors, I give a 100,000 million and so on, so forth. Those people are gonna wanna write those deductions off on their taxes. So you want to become 501 c 3 tax-deductible organization. We'll talk a little bit more about that later on. Always irs.gov forward slash charities, you can learn a lot more about non-profits and we will go there as well. And then the DOS, my Florida.com website, which we've used in the past, will go and explore a few more things I wanted to cover first though. And I think this is where a lot of confusion comes up. I know years back when I was looking to start a non-profit, I think it was for like a mountain by charity or something like that. I did my initial research for it and I headed all laid out. But anyway, there's basically two major classifications. You have your non-profit organization, which is referred to as a not-for-profit or 501 c. And then you have your 50 one, see three. So let's talk about some of the differences. First, both types of organizations are exempt from federal income tax. So that's a big check mark right there alone. However, if 501C3 may allow its donors to write off donations or a 50 one C does not. So when you go to your state website and you incorporate as a non-profit organization, by default, you will have a 50 one C, but not a 501 c 3. So you will not be paying federal income tax, but your donors will not be yet able to write off the donations on their taxes. This is really, really important and we'll talk a little bit more about how to become 50. One is C3 and some terminology here. And non-profit means the entity, usually a corporation, that's why we say Incorporated is organized for a non-profit purpose. It's a tax-free entity, while a 501 c3 means and non-profit organization, because your 501 c right, you apply to become a 501C3. So the 501 c3 is a non-profit organization, has been recognized by the IRS as being tax exempt by virtue of charitable donation. So the IRS basically checked out your 501C3. They liked what they saw, and then they went ahead and gave you that tax exemption status, the 501C3. The 501C3 status. So now that donors can write their donations off on their taxes, this is a really, really important point, awesome little side note here. If 501C3 tax designation remains as long as the organization exists and to kind of summarize everything here. And another term, tax exemption, when speaking about non-profits, is you refer to the result of a non-profit organization being recognized by the IRS. So if someone says, my non-profit, it's tax exempt, they're referring to them being a 501, c3 to a 50 one seat 27. These are different types of classifications you can receive depending what your non-profit does. There's eight main categories and we'll talk about that next little bit of food for thought here, these are the eight broad categories you can do a non-profit for. And here's an example of each one as well. So first we have a religion non-profit, such as churches. You have donation-based non-profits such as the Salvation Army, that distribute goods. You have non-profits that advocate for literacy, such as the Barbara Bush Foundation for family literacy. There's ones that focus on further education, such as scholarships. I'm sure. Number 5, we all know for preventing cruelty to animals and or children such as peta. We have fostering amateur sports such as the Special Olympics. Number seven, public safety such as the Red Cross and number 8, scientific activities or operations such as museums. So if you have an idea for a non-profit, it has to fall under one of these eight categories. And as a piece of personal experience and advice, you have to have a board starting a non-profit. So a non-profit is not a one man show. Also as the founder, you don't have ownership over the non-profit. The board has ownership over the non-profit, and it's really not so much important who starts a non-profit? And there's usually no role as a founder in a non-profit. So if you go to the irs.gov website, charities, you get redirected here to charities and non-profits. You can read through a lot of the documentation here they have for the site, apply for tax exempt status is one of the first major things you'll find. And then they talk about charitable contributions. Right here you can see tax-deductible charitable contributions. So you know that these two are really, really major points and also do noncash charitable contributions such as if you want to give a non-profit organization some stocks or some real estate, so on, so forth. Let's go to the Florida Department of State. And if you come here again, start a business with E filing, you can see that this is an option for filing and incorporating and it is a corporation. So you want to be thinking Board of Directors, larger entity, more filing requirements. It's not just a simple sole proprietorship. So let's go ahead and click on non-profit organization. And you can see some of the requirements here. If you scroll down again, I do apologize, but it looks like Florida side is a little glitchy. Somebody put a def statement at a place here. But you can see here the total cost of starting a non-profit in Florida comes out to me, highlight this so it's easier to read. It comes out to $0.8,750. I've seen prices between a 30.300 for incorporating. So every state is going to be a little bit different. And then scroll back up here, File or correct. Let's go through this again. We've done it several times and then you can see it really looks like your classic application that we've seen many times before. Again, this Florida website looks to have a div out of place. Looks like they need to fix that. That was a new area. It wasn't always like that. And just it kind of looks like your classic corporation. And this is exactly what we solve for the S and C corporation application. So let's keep moving along here. So if you go ahead and click on that, apply for tax exempt status, you go here to that page that talks about that a little bit more. And there's two ways to do this. You have the form 1023 EZ, which is a new form. It's about three pages long and it costs about is like 2 $250 or so to fill this out. And then you have the form 1023, which is the original form and this one is a beast. It's about 23 or 25 pages long. It's gonna take you some time to fill it out. Now the easy form is usually for smaller companies between $250 thousand to $500 thousand in terms of donation revenue. And then the 1023 is usually for larger non-profits. Obviously, you can start off small, and then as you grow, you'll already have your tax exemptions. That could be really, really good. The easy one is also cheaper, about $250 as opposed to this one about $600. This one, the longer form also takes about six months to hear back, while the form 1023 EZ is usually less than six months, it's quicker for the IRS to process. But again, you're going to have to have all your information already in place in terms of you're going to have to have your son is filing completed. I think you already have to have your first annual meeting done. You have to have your board of directors. You have to be a good legit, standing organization with the charitable purpose before you even think about applying to any of these tax deductible classifications, the 50, one, c, three organization. What I do think is really cool about the 1023 EZ is you can fill this out online and pay online, do everything online. Had paid.gov, the IRS is working hard to making everything more accessible online and I got to give them credit for that. All right, those are the main points about a non-profit organization. Again, if you have any questions, leave them below, I'll be happy to answer them and make more videos about this topic. Since this course is focused more on freelancers, startups, and sole proprietors, I kinda wanted to leave this section as is. I'll be happy to explore it more. But you can make a whole, entire course about non-profits. And we'll leave it here for now. And let's keep going. 15. Company Types Overview: Hey guys, welcome back. So I was spending quite a lot of time building a chart to compare all these different businesses. Sole proprietor partnership, LLC, Corporation. I did leave out non-profit for this one. And as I was scouring the internet for information to populate my chart, I found this site, harbor compliance.com, which any two choose. And I got to say this chart was so detailed that I said, You know what, I don't need to reinvent the wheel. Let's go ahead and just use this website because this chart is probably the best one I found online and I'm just so excited to share with you guys so much of this information we already reviewed, and there's just a few things I want to show you guys additionally. So I'm not going to review every line in every cell with you guys. That's pointless and you can always do it yourself. Just going to this website. That's why I left it up here. But there's a few things that I want to show you. So let's talk about those few things I wanted to show you guys. And first of all, we talked a little bit about. Now here's a great quick summary to read and review. But what I did mention a few times is there's a kind of tipping point and when you want and let's say an LLC or an S Corp or a C corporation. And they have a really, really good rule of thumb. Look at this transfer of ownership. Remember, sole proprietorship, that's in this first column right here. You cannot transfer, sell the business, businesses dissolved upon owner's death. So things like this that we talked about in the beginning, really, really nicely reviewed here and then much more information. But one thing that I wanted to talk about is this, this rule of thumb. This is amazing. So at what point do you want it? Let's say, move your sole proprietor or partnership into an S Corp or a C corporation. And the sole proprietor and partnership is really best when you have that small amount of income. And remember, this is because you pay self-employment tax on all of your income. While once you migrate to an S Corp, You only pay social security tax on that reasonable salary that you pay yourself. And the rest is pass through right up here. The rest is a pass-through entity, so it just gets taxed on your 1040 that you submit with the IRS personally, but you don't have to pay self-employment tax on that one. And then with C corporations remember they have that double taxation, but that can actually be fine because corporations get taxed at lower income levels than individuals. And if you guys remember, we're talking about personal income tax rates. And this is for single filers. Now, if the corporate tax rate is, let's say 20%, then if your company is making below $40 thousand, it's going to make more sense to be an S corporation. And if you have, let's say, 10 partners with equal ownership and there's, the company makes $400 thousand. It's still going to make more sense to be a pass-through entity because you're paying less even if it goes up here to 85 at $1000, you're still better off. And you're going to still probably be better off at this 24 percent, because with the pass-through, you're saving a lot on that self-employment tax that you would have to pay on your W2. Really, once it gets into this category, I should change the color of this to read. This is when it gets a little bit dangerous if you're making over a $163 thousand, the tax rate gets hyped up drastically. There's a huge difference between these two tax rates and extra 10 percent. So you want to be really, really careful here. Once you start making more money, it's going to make sense to switch on over to a C corporation, pay taxes on the corporate level and then get the rest through dividends. So once your company starts making over $250 thousand profits per owner, that's when you might want to migrate. That's when it's calculated based on all costs to switch on over. They say it really nicely here. C Corp taxation is appropriate when the benefits of ducting employee contributions and income splitting outweigh the costs of double taxation. Small businesses that will reinvest most of their profits in the business can benefit from low tax rates on retained earnings. Really, really helpful chart. I love how they break it down here and then the tax forms and rates. Again, I was making a chart myself and then I found this one and I was like, Let's not reinvent the wheel for partnerships Form 1065. We already talked about informational. We have S corporations, 1120 S informational. And then for the S corporations, you get this schedule 1040 so the owners know what they need to pay. Similar situation here with partnerships. Here's the self-employment tax. Owner employees are responsible pay self-employment tax on 50%, 15 percent. That's roughly how much the self-employment taxes and that is on what you your reasonable salary right here as well. Owner employees pay self-employment taxes, which roughly 15 percent on the reasonable salary they pay themselves. So let's say I have company Winkler graphic designs and I'm a graphic designer in my company makes a $100 thousand, let's say I could get a job as a graphic designer for $50 thousand in that. So $50 thousand would be my reasonable salary. I only pay that extra 15% right here on that extra fifth, on that $50 thousand and the other $50 thousand, that's not my reasonable salary. I just pay my income taxes on. So that would be $50 thousand times 24% and the other one, my reasonable salary would be $50,000.50 thousand dollars times let's say you have your 0.24 is $12 thousand. And then if you have that extra self-employment tax, that's an extra 15 percent. So that'll be at $19.5 thousand. And that's why you really want to upgrade to an LLC or incorporate and then have that S Corp designation. So you pay only 15% on your reasonable salary. That's a really, really important part and I hope that makes sense. Sometimes you just have to hear it, you know, it doesn't times and eventually clicks. I know when I first started my company when I was at feels like a lifetime ago, I constantly was getting confused about the topic, but eventually it will click, so don't stress too much about it. And let's go here and read a little bit about the C corporation as to wrap this up, C corporations pay taxes at corporate income tax rates. You guys know about that already. This is reported on 1120. 1120 is more than just information. I'll because a C corporation is its own entity. Each owner reports wages and distributions on his personal income tax that we already know on the scheduled 1040, you'll pay taxes only for wages right here. That's your W2 and capital gains on your personal income tax rate. Capital gains is that dividend tax, this distribution suffer from corporate double taxation since both you and the corporation are paying taxes on these earnings, wages are deducted from corporate revenue prior to paying corporate income taxes. They do not suffer from double taxation. That makes sense. So anything you get paid W2, that company is an expense for the company, so that's not going to end up on profits. So the company doesn't pay taxes on your wages by the company does pay taxes on profits and only profits you can pay out as dividends. I hope that makes sense. Really, really great website here I highly recommend checking out these charts and these tables really kind of outlines everything we've talked about. And by now you should have a really good understanding of all the moving parts. Again, please leave questions below. I am more than happy to answer them and make more videos on questions that either appear more often or it would make sense to elaborate further in a video. Let's move on. 16. How To Do Accounting: So let's finally talk a little bit about how to do accounting. You have the three main options. The first option is you can go out and hire a firm to do it. I have done this before, and it's tricky. I've gone through several accountants and it's hard to find the right one. And also the one that specializes in what you do, that's something else that at first you don't really think about. But there'll be certain accounting firms that only do certain businesses, which actually makes sense. Specializing is always really important in these things. And a digital agency, it might work very, very differently than a construction agency. So just know that. So if you do go the hired firm route, just make sure that you go with somebody that specializes in your area. In the end, it can be very helpful, but it can also be very, very expensive. And one of my experiences that I had is one time with one of our companies, we handed over everything kinda halfway through and they had to go through everything and they actually ended up making a giant mess. And then they dropped us as a client because it was too much. And then I personally had a redo everything again, it was a total total nightmare. So what I would probably recommend is if you're going to have an accounting firm, make sure it's all really organized and then have one or start with one from the beginning, or maybe tried to get in contact with a firm from the beginning and then slowly work with them and then maybe start handing off more and more to them in a gradual pace. But it's really hard to just do that. 100%, 36, Flint, there's a second option from a hired firm and this is the semi self option. There is some firms out there like bench, which focus on taking that local accounting accountant experience. So they're kinda like your local accountant but in a digital form. So you work with them online and you have your online solution, but you also have your accountant is can be pretty cool. I was exploring bench. I've never pulled the trigger on it. I'll show you guys what that website looks like in a second. But nowadays it's merging a lot with QuickBooks because they have many of the similar options. That leads me to my third, the full-on self solution with QuickBooks, it's one of the leading players in this space. They've been around for ever. I used to download the software onto my laptop. I even had a CD ROM when I first started that I would install their software on. And now it's all Cloud-based or you could actually still get the desktop version, but I use everything now on the Cloud. And you also have an option for a professional to look over your books and you can ask questions with, and they'll help you. So it's a little bit more now, you know, options 23 are, are kind of merging very closely. I think in the end you can maybe try both and see which one works best for you. There's always usually like a free trial phase. See which one meshes with you and then just stick with that. You know, in the end, baby steps, see what works best for you. Everyone's going to be a little bit different. I think bench ASO, also Taylor's little bit more to those digital agencies. While QuickBooks is kind of for everyone. Here we are right now on the bench website. You can see they have a nice phone number, very detailed, very simple and easy website. They have some really, really big partners, which is good to see. They've been really, really expanding quickly in this space. So it's something that I would probably look into. But I've been using QuickBooks now for a whole long that I don't want to be biased or anything, but I know it works for me. I know how to do it myself. I have a very transparent look into my books. For me, it works really well. Now this is probably less for sole proprietors and more once you have a proper business, let's say an LLC, S-corp, C-corp, and so on, so forth setup. And in a second, I'll show you guys QuickBooks and they have kind of two options for your sole proprietor or partnership and then for an established business. And that's what we're going to be talking about in the next video. So I'll see you there. 17. QuickBooks SE vs Online: Welcome back. In this video, we're going to be talking about QuickBooks, self-employed version versus online. I feel like the naming of here, especially verse online is very confusing because self-employed is also an online version. They should just say verse business, but it is what it is. I think the confusing part is QuickBooks, Their main website, their main online solution for business. And then they have this additional forward slash self-employed. And that's really for solo sole proprietorships. So anyone just getting started in a second, I'll tell you guys which one I use and tried to take a guess along the way. So the first one, QuickBooks self-employed, it's best if you do some side gigs and have all transactions and mixed with your personal and business which is a big no, no with accounting. But if you're just starting out, you have, let's say a personal credit card or debit card. And then you start buying business stuff with that card as well. And it's all mixed together and you haven't really done any accounting, then QuickBooks, self-employed is really the answer for you. You can upload all your bank accounts, they'll import all your information. You can select what's business, what's personal, and they'll organize everything for you. So separation of personal verse business transactions is their big selling point. There's also the Turbo Tax integration, so you can do your taxes very quickly with it as well. That's also for the business. So I didn't highlighted point numbers. See it's best for people with no employees or contractors at that point. Trust me, are you going to want to go to the business one? And this is a big point as well. D, You can not convert, you cannot convert yourself employed into official QuickBooks into it. And at first I thought that was a little bit annoying, but it makes sense because they're just totally different solutions, right? The migration, which is be very, very messy. So QuickBooks Online, the default one is probably the version you want. And to give the answer a little bit about which one I have, actually have both. And that's because I do a lot of new businesses and new adventures all the time. And sometimes it gets a little bit messy. So I have myself employed where everything kinda starting out in the kind of seed phase, very peanuts. I'll kinda mix in with my personal life and then I separate that on their software. Most of the time everything has a formal place inside of QuickBooks. And the great part on QuickBooks is I have several companies there and I can just go into that company and work on it. Unlike bench where you're paying higher amount every month because you have a paid account and working with you. Quickbooks, you don't have to have that paid account. So if I'm just not doing anything that company for six months or so on, you know, the monthly fee is very, very low on the website and that's why I really like and prefer QuickBooks. But again, that's my personal opinion, That's what works best for me. It's not going to be for everybody. Going to the QuickBooks self-employed website, you can see here that the first selling point is starting off getting a solid start, self-starters, small businesses, the features they need to get ahead and save money. You can see they advertise here some mileage zig and calculate your, let's say business mileage. So if you do delivery, you can calculate that and save taxes. We'll talk a little bit more about that later. You can also do that with a quick book business, but they really, really focus on somebody, you know, being mowing their friends lawns are really something convenient, local, maybe you're selling art or jewelry and you drive to the farmer's market, you could start deducting all that and they have a really, really good app that I use myself. Very, very cheap options here. And let's keep scrolling down so you can kinda see what's going on. Track. Mileage, sort expenses obviously from personal and business, That's really good. Organized receipts. You just take a receipt when you're out for lunch or dinner for Business meeting, you had your estimated taxes and then this is what I really like. It integrates really, really well with TurboTax, which is an intuit companies. I mean, this is a massive, massive company and I don't want to get super off-topic, but just to show you guys how big this company is, this is their stock, I NTU, that's their ticker symbol, symbol there, S and P 500 company. They are, they have a market cap of a $154 billion. That's a huge, huge company. They have a massive, massive market share and you can just see that they are just only only going up here. Now this is a very credible company and they have so many big products under their book, they have massive collaboration. So for me, I like to stick with one of the biggest players, I just gives me a little bit of comfort. Now let's go over to the QuickBooks main website and show you guys what this is all about. Also, you have that live bookkeeping so you can get a managed account as well. Phone number up here, really, really detailed. It's also very, very cheap to start off with. You can always upgrade and it's always here. One thing I personally really, really like about QuickBooks is that so many people in so many specifically accountants use it. So let's say you have a hired accountant, like we were talking about with the three options where you can hire somebody, you can kind of semi do it with bench or you can use QuickBooks. The great part about QuickBooks is the fact that if I do hire a firm, that firm knows QuickBooks and they can instantly take over your QuickBooks. And it doesn't matter if I switched firms or then decide to do it by myself. Quickbooks will have a solution ready to go. Having QuickBooks will allow you to make any other integration or work with any firm, usually pretty seamless. It's very rare that an accounting firm will use their own in house software solutions. I've actually never seen that before. I'm sure it was much more common back in the day, but QuickBooks is the default. And there's usually always some sort of offer going on to help you get started at a good price. All right, guys, I hope that made sense again, feel free to leave a question and below this video, I'd be happy to answer it and make a follow-up video if that makes sense as well. 18. 4 Tax Saving Tips: Now this is a section I love to talk about and explore myself and my free time. I'm always looking at tax saving tips and tricks. It's like a black hole. You can always keep exploring. And I'll talk about the four easy ones. The four that you almost have to do to save, start saving taxes immediately. And you're honestly going to be regretting if you don't, there's so many more, but there's so many that are state specific or specific to a specific business or industry. So I won't dive into all those little things, but these are the four that you have to have to know. And before we talk about these four individually, there's a general mindset that's really important. First of all, you want to have a platform like QuickBooks or band, or just any sort of platform. I obviously recommend QuickBooks and then get in the habit of using it often because if you save all this till the end of the year, you're going to be totally overwhelmed and you're not going to be taking advantage day to day or month by month, good tax savings. And it's going to be hard to reach back in time and try to figure out what it was that, you know, $50 bill or a $100 bill that I could deduct my taxes. It's better to always do it either right on the spot or at the end of every month. So that's why I say get in the habit of doing it no less than once per month. And then down here I say documentation is king. It's so true with accounting and finance is the more documented something is, the better. You'll never regret having documentation. You'll only regret not having enough documentation. Okay, So here are the four deductible stuffs. Number one, gas, gas, and I should say gas and mileage. There's apps that auto calculate how much you drive and then you can deduct the gas as well. Going to Google it really quickly and just typing in US mileage deduction for your business. Let's just scroll down here for a second. And this is rates in cents per mile. So if you are driving for business every mile, you can get ¢57.5 back ever since 2020, which basically translates to if you drive 100 miles, you can deduct $57.50 from your taxes. It's freaking amazing and that's why you have to be doing this, especially in America. And guess what? Boom, right here. Irs website, my favorite site that you guys know, I talk about all the time. They always have this really, really detailed. This is just the go-to site for everything. There's so many good blogs and YouTube videos, which I definitely recommend checking out as well, but start or end or both on the IRS website because this is just as black and white as you can get and there's no fluff. Alright, I just corrected number 1 to gas mileage. Again, there's a lot of auto calculation apps into it. The company behind QuickBooks has a great app for that as well. Now, meals and entertainment, by default, there's always a 50 percent deduction. Sometimes that changes, but overall it's always swinging around 50 percent. So if I go out to a business dinner, I can deduct 50% of that expense. Entertainment is a tough one. Sometimes it works, sometimes it doesn't. Usually it's nothing. A quick Google search can't help you find out or the IRS website itself to figure out, is this entertainment like is this show or a concert, or as hiring these entertainers tax-deductible. But if it is, then it's usually already at 50 percent deduction. Foreign transactions, you gotta keep them documented. I was having Excel spreadsheet when I'm on the road for conversions or I just use my company card, which automatically does that. But if I pay in cash, I like to document it and then take a picture of the receipt. I personally travel a lot. I'm on the road usually over a half a year, which is absolutely insane for better or worse. So keep it documented for me. This is a big ones I wanted to write it down. I know the point of being a freelancer or self-employed is sometimes so you could be on the road. So I feel like this might be important to many others as well. Number 4, this is a huge one and this is something I love. Turbotax for. Your home office can be tax-deductible and there's a default rate for the home office again, on the IRS website, it shows you that and you can take the default calculation TurboTax automatically does it for you. And for me the default works pretty well. And I have a whole entire room in my house and apartment in Europe where I only used for business, it's my office and the default tax deduction on TurboTax fits that pretty well. It's about the size for it. But if you do even more than just a room or just a section of, let's say the living room. You can automatically calculate that as well and get even more deductions. But these are the four big ones, gas, mileage, meals and entertainment, foreign transactions in a home office. If you'd get these off, you're going to need you're going to be already saving hundreds, if not thousands of dollars on your taxes annually. So get a tax accounting software, check it off and document everything, and don't leave anything for the last day or week because you will be stressed and you will not save nearly as much money now. All right, moving on. 19. When To File Taxes: So when do you file your taxes? This is something I've often mistaken in the past when I first started my company, I always always thought that you just file at the end of the year because my friends who were employees got their W2 and then they got their tax refunds. And while they were getting money back usually from the IRS I was paying so I was kind of in that thought. Okay. That's how it works. And in a way, it can work like that because there are two options. You can pay quarterly or you can pay annually, but quarterly is not just recommended. It's also required for most businesses earning over x amount of dollars. How it works is you base your quarterly on the year before. So let's say your company brought in a hundred, ten hundred dollars and let's say with all the combined taxes, you're paying roughly 30 percent taxes on that. So you're paying 30000 dollars to the IRS, lets say roughly example, now this $30 thousand, He don't just pay at the end of the year. You're supposed to pay quarterly, which means divide that by four, you're paying $7.5 thousand every quarter at the end of every quarter to the IRS. And you can do that with TurboTax. They make it really, really simple. You can also do it manually by going to the IRS website, getting the form, either filing it by paper or online by paper, by mail, or filing it online. Really, really simple. And it's also good because it helps you not get behind in your taxes. Now if you're just starting off, actually, especially if you're just starting off, no stress about quarterly, you can do it. It's always a good backup option, especially first time. Or if you're having a loss, if you're in a loss, you don't have to file quarterly taxes, especially if it was a loss last year. Again, don't stress out so much. If you're not making any money, if you're just getting started, take it one step at a time. I did it for years annually and it was totally fine. Um, but you can get finds one time I missed an annual filing. I felt it like a week later on total accident and I got like a $150 fine for that. So just watch out. If you do do annually, make sure you at least do it on time by April 15th or March 15th, depending on the company, if it's company taxes or personal taxes. But the second you start making money, especially the next year after you make money, file quarterly, just get in that mindset. The IRS says you need to pay estimated quarterly taxes if you expect, you will owe at least $100 in federal income taxes. So it's really, really not that high of a barrier. Basically want you to pay quarterly taxes. And if you're not paying quarterly, they're going to probably wonder why you might have a higher chance of getting audited. All right, that's all you need to know for now. Ideally, pay quarterly. But if you're just getting started, don't stress, pay annually and go on forward from there. Like always. This is just my experience. Talk to a professional tax accountant and see what's best for your situation. But at least now you know what the options are. 20. Final Words: Wow, and there we have it. It was a privileged doing this course with you guys. The Quickstart business setup, accounting and taxes for freelancers. I really, really hope he didn't enjoy it and got some value out of it. First of all, by now you should know and hopefully understand the terms and concepts we talked about in terms of setting up your business, doing accounting and some attacks, implications of all different business structures. What's best for you and what you need to further explore to get going. Again, guys, I just wanted to reiterate, I'm not a tax professional. I just have been doing this for 10 plus years and I'm giving my opinions, everything, business setup, accounting and taxes in the USA. At this point, you should be ready to further iron out things with a real tax and legal professional with the knowledge you've already obtained, you should be able to save hundreds, if not, thousands of dollars. If you do seek further professional advice, remember to always ask questions if it's in this chord or with anything else, ignorance is not bliss. And when it comes to setting up your business and doing your taxes, I would appreciate any reviews you guys leaf below. It helps me know what you enjoyed about this course and you didn't enjoy about this course and what know what I need to improve. I really do appreciate any and all reviews. And right before you guys leave, don't forget if you want to stick around, joined the community, either with my YouTube channel, YouTube.com, forward slash Alex Winkler or the discord, a trade journal, dot co. Or we have many, many more business topics in the Discord of trade journal which you could find in the footer links. We also have several other courses here on Skillshare, especially around finance. So definitely give them a checkout if you're interested, and I'll see you guys next time. I wish you all the best. Good luck. And ciao for now.