Originally Posted by Greensmith33547
Ok, I'm a little confused. I'm starting a lawn business around March of 2013 and my wife and I met with our accountant who said that we would take the amount we charge per hour, minus the cost of business, then take 25% for taxes from profit and the rest is net. I have seen questions like this open a can of words, but can someone give me a simple yes or no?
Let me see if I can put this in simple terms. You accountant is giving you a very basic explanation of how a business works. You take the amount of money you get from your customers, subtract from that whatever it costs you to run the business. That is your net profit that you will be paying income tax on. He is saying that you can figure (roughly) 25% out of that will go to the IRS and state but you should know what you are already paying along with your wife. So, what's left after taxes is what you put in your pocket.
Your cost of business is the money you spend on gas, oil,cell phone, advertising- any money that you lay out for your business. But be careful. Your truck payment (and larger equipment) is most likly a depreciable item meaning you can only claim those payments for a limited time. Your accountant will explain this to you.
Once you know what your expenses are it's a simple matter to figure how much you have to charge to pay for them. You will want to make more than that in order to put money in your pocket.