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managing business income and personal income

Discussion in 'Business Operations' started by grassmasterswilson, Oct 20, 2012.

  1. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Posts: 4,548

    I'm curious what everyone does with there income. I'm a newly wed and obviously kids will come next. I'd like to prepare myself a little bit for supporting my family.

    I am a small company with 1 employee right now. I have a checking account that I operate out of and then recently opened a savings account that I fund periodically for an equipment fund. I like to purchase all of my equipment and not finance it, except for vehicles.

    I don't pay myself and normally just transfer money every couple of months to fund my personal checking. My thoughts of the savings account was that I could fund it and then theoritically I could spend all the business checking and not need 10,000 if a mower or other equipment is needed. Once the savings account gets a good amount I may not fund it as regularly or continue to fund it and have a nice rainy day fund.

    So I'm curious what you guys do? Is what i've done a good idea or should I pay myself weekly or monthly like an employee. Hopeing some of you were or are in my postition and what has worked for you.
  2. grandview (2006)

    grandview (2006) LawnSite Gold Member
    Posts: 3,466

    Of course your claiming all that money going into your personal account. Then your paying tax on the money in your other accounts. Start now with hiring a bookkeeper to do your books or QB,you don't need the taxman coming by to have some coffee with you to discuss your business.
  3. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 17,001

    Im curious also, I try too keep real good books, but in the past I didnt due to a whole lot of personal problems.

    This year Ive reinvested close to 7500$ int my business which was basically my "winter fund", so some how I have too work through that.

    Naturally the little amount I make doesnt take long to addup, and sometimes gets discouraging, buts thats the way it goes.
  4. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Posts: 4,548

    I file a personal tax return with the business on a separate schedule. So when I transfer money from the business to personal it is only taxed as income and not income and wages.
  5. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 17,001

    It all gets trickey, I run my business at my personal home, so my shop and its expenses belong to the business, as well as the water and power bill, my truck insurance is combined with my personal vehicles to get the multi car discount, wit h5 vehicles its a big savings, and I also use personal vehicles for business as well as vice versa.

    Ive never filed my business tax seperate from my personal income tax. I dont think the IRS would go after a SOLO lawncare operator, they have bigger fish to fry, and in my case I probably overpaid all these years anyway.
  6. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Posts: 7,961

    I have a shop and a home office. I expense part of my utilities based on the percentage of the house used. If you have a detached shed like larry that is treated seperately.

    All this stuff does go in a schedule C for the Sole Properitor. Larry could be right that he likely over paid because if you claim business expenses, that comes out of income... if you claim as deductions that reduces taxes.

    I suggest quickbooks even if you have to hire an accountant but over time you will learn quickbooks. It is hard to learn accounting but you must if you want to run a business.
  7. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 17,001

    Whats that "shed" business I said SHOP....lol actually Im fortunately to have a nice shop even have a 9000lb lift.

    I have a real good accoutant, but learning "quickbooks" is a good suggestion, thatnks for the tip. Im solo, but have a little other income and my accountant has never failed me.
  8. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Posts: 4,548

    I'm not real interested in deductions. We all have different ways and reasons

    As the owner in assuming you get paid last with what's left unless your CPA suggested to pay yourself. I think I'm on the right track with having a savings account for equipment and big purchases. This allows me not to need a high checking. I can keep just enough for monthly expenses and use the rest if needed for personal
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  9. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 17,001

    Business wise I keep 3 months expenses on the business end at all times. Reciently I bought a Toro Grandstand for 4200$ so I used my winter time savings which is in personal savings, so in effect I loaned on paper my business 4200$.
    Any suggestions on a better way Im in for.
  10. AdkadTechnologies

    AdkadTechnologies Sponsor
    Posts: 14

    It is always best to try and keep things separate if possible - avoid major headaches down the road. Paying yourself regularly is also often suggested because you are able to budget yourself as an expense.

    Of course, good software can help with all of this.

    Also, don't ever be afraid of "good debt". I know people like to pay cash as often as they can, but in order to grow, you need to be ready to buy the things you need if it will mean more revenue and growth.

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