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Three Dangerous Myths in Entrepreneurship

Myth 1: Be Your Own Boss

Being an entrepreneur does not necessarily mean you have no bosses. That’s only partially true.

As a sole proprietor, you actually end up with many bosses. Customers are the obvious ones. But then there are the people you owe money to, the people who owe you money, your partners or those you formed strategic alliances with and your employees. At some point, all of these groups call the shots in some fashion.

Investors, should you have any, are most definitely your bosses, considering their money carries weight into how you run things.

If ultimate freedom is what you truly seek, then you’re going to have to learn to live without any relationships or dependents. It may sound a bit harsh but it’s the only real way to have “no one to answer to.”

The only sense in which you are “your own boss” is that you have the freedom to decide what risks to take and what hours to work…as long as your customers and investors are happy.

Myth 2: Getting Investors is Always a Win

Business schools and entrepreneurship classes are to blame for this myth as they teach the steps to starting a business are: develop a business plan and get financed. While there is some truth to this, as investment in your company is often a good sign, it’s not always the case.

Finding investors is a conditional win. It’s a only a positive thing IF…

  1. You need investors and can use the money to grow the business
  2. You find compatible investors

 

If you can build your company without investment, take the chance to do it. Being the sole owner of your business without having to worry about the requirements of investors is worth the experience of finding financial support from other sources even if it’s a bit more difficult. If it’s a choice between growing slowly without investors versus growing faster with them remember, slow growth is still growth, and survival is what counts.

Myth 3: The More Money, the Better

For most startups, there’s a point where the resources should match the opportunity. Don’t be overambitious, meaning build your business without overspending. Just because you have the money, it doesn’t mean the more you spend the more you’ll grow.

So if you want to be an entrepreneur because:

  • You don’t want to answer to anyone
  • You think having someone else foot the bills for your business would be fun
  • Or you’ve got a pile of money stacked up, just begging to be put into a new venture …

… you may be asking to become a victim of alluring but dangerous half-truths.

Think it through.

 

 

By: Kevin Hickman

This content was re-blogged from Tim Berry, Guest Blogger for the sba.gov website

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IRS Tax Tips for the Self Employed

Preparing federal tax returns can be frustrating at times, even for those most knowledgeable. If you are self employed, things can get even trickier. But, fear not. The following are six basic but important tips about income from self-employment that can help sole proprietors or independent contractors stay afloat in the business world:

  • SE Income – In addition to income from your regular job, self-employment can also mean income received for part-time work.
  • Schedule C or C-EZ –  There are two required forms to report self-employment income: The Schedule C for profit or loss from business and the Schedule C-EZ, which reports net profit from business, along with the Form 1040. You may also use Schedule C-EZ if your expenses total less than $5,000 and meet other conditions. Click on the corresponding form link to see if you are eligible to use them.
  • SE Tax – Making a profit means you have to pay income tax as well as self-employment tax, which includes social security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to find out if  you owe this tax, which should be filed along with your federal tax return.
  • Estimated Tax –  Estimated tax payments, are typically done in four installments each year on income that is not subject to withholding. If you do not pay enough tax throughout the year, you may owe a penalty.
  • Allowable Deductions –  You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
  • When to Deduct –  In most cases, you can deduct expenses in the same year you paid for them, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms on IRS.gov/forms anytime.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media.
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By: Kevin Hickman

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