How Do I Structure My Multiple Business Ventures?

As the U.S. and the world move toward a “gig economy” of self-employment, it’s becoming more common for entrepreneurs to have income streams from several sources. You may be a caterer who also does wedding photography or a computer programmer who also invests in real estate.

What’s the best way to set up these various projects? Arriving at the right answer for you and your businesses will involve three main considerations: legal, administrative, and marketing.

Marketing

If your ventures are related, setting them up under one brand will give you more bang for your marketing buck. In the above example of the caterer/wedding photographer, having both businesses share a business name, website, and so on would offer more opportunities for cross-selling your services while reducing expenses.

On the other hand, the computer whiz/real estate pro is targeting two different audiences. In this case, separate brands would be easier to define and market.

Administrative

Bear in mind that every company you set up will generate its own set of paperwork, from payroll to tax returns. Only you can decide whether the benefits outweigh the hassles.

Legal

There are three ways to legally structure multiple businesses. Here’s a brief overview of the pros and cons of each of them.

1. Separate corporations or LLCs

In this scenario, each business is a completely separate legal entity. This option will produce the most amount of paperwork and administrative labor.

On the other hand, for risky ventures such as real estate investing, it is a good way to limit your legal liability. If Company X gets sued, Company Y’s assets (as well as your personal assets) are not affected.

2. One corporation or LLC with multiple DBAs

You create one main company, then register a separate fictitious — DBA (doing business as) — the name for each of your ventures. This gives you the administrative ease and legal protection of having just one company, along with the marketing advantages of having the right brand name for each venture.

3. One main corporation or LLC with multiple subsidiaries

This is the most complex of the three options. You set up a holding company that will own the individual corporations or LLCs of each of your businesses. It’s often used by those who want to sell one of their subsidiaries and leave the others intact. Another reason to go this route is to start a new business and have it funded by the holding company.

The legal and tax ramifications are extensive for this option, so we suggest you consult a tax advisor or attorney before moving forward.

Deciding how to structure your multiple businesses is just the first step. You’ll also need smart solutions for accounting, bookkeeping, payroll, and tax planning. That’s where Xendoo comes in.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Quiz: What Type of Entrepreneur are You?

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

How to Write an Effective Invoice and Get Paid Faster

When you’re thinking of ways to improve your cash flow, don’t forget to take a look at your invoice template. If it doesn’t contain all the necessary information, you could experience delays — both in getting paid and in processing payments.

To make it easy for customers to pay your invoice, make sure it displays the following:

Issue date and due date.

Include the date the invoice is sent as well as when payment is due. This will simplify the following up on late payments.

Your info.

You may use your standard letterhead: business name, address, phone number, and email. Or you may provide specific contact info for your accounts payable department.

Customer info.

Business name, address, and contact details for your customer should also be included. Use the name of the organization that will be issuing payment if it’s different from the DBA name.

Your reference.

Each invoice you send out should have its own unique number. Create your own numbering systems, such as a simple chronological order (2018-01, 2018-02, etc.), or subsets for each customer (WD-2018-01, WD-2018-02, MS-2018-01, MS-2018-02).  In addition, the invoice should include your job or project number, if you use them.

Customer reference.

Some customers use their own job or purchase order numbers to track their expenses. If they give you a number like this, be sure to include it, as it will expedite their payment process.

Products and services sold.

This is an itemized list of everything you’re billing your customer for. Each line should include a brief description of the item, the quantity, the unit price, and the total price. Add up all the numbers in the total price column and put that grand total underneath.

Additional charges and discounts.

Next, list and subtract any discounts you’ve promised to the customer. Add shipping charges (if applicable) and sales tax.

Payment terms and methods.

Clearly state your late fees and on-time discounts. List which types of payment you accept and provide whatever info customers need to pay the invoice, such as your Paypal address, bank account number, or link to online payment.

Tips for Getting Paid Faster

Creating the invoice is just one part of a protocol that can significantly reduce your time and effort. Here’s the bigger picture:

  • Advise customers upfront, preferably in the contract, of your billing and payment expectations. Don’t just surprise them after the job is done.
  • Send invoices more frequently. Establish a schedule, say once a week, to ensure that invoicing doesn’t get put off until you “have more time.”
  • Keep itemizations brief. If the customer requests more detail, send it in supporting documents.
  • Copy the same language from the customer-approved quote into the invoice, to help prevent misunderstandings or disputes.
  • Use a smart invoice template. Integrate with your spreadsheet software to automatically fill in customer information and standard pricing, calculate total charges, add taxes, perform bank reconciliations, send past due reminders, and more.

Xendoo understands how hard it is for small business owners to find time for accounting chores, even though they know effective invoicing can make a big difference to their ongoing success. Our monthly services include Xero accounting software that offers robust invoicing tools to get you paid faster.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

“I’m Worth It!” Deciding How Much to Pay Yourself

As a small business owner, you’re always the last one to get paid — after employees, suppliers, lenders, and everyone else who contributes to keeping your doors open. But that doesn’t mean you should never get paid!

After all, you need money to live, too. Struggling with your personal finances will only add to the stress of running a business, and may even affect your performance in both your professional and family life.

Here’s how to figure out when and how much to pay yourself.

Calculate a fair value.

Do some research into standard salaries for your industry and region. Check out:
• What your competitors are paying employees in a position similar to yours
• What salaries or hourly wages are being offered in the want ads
• What your current income works out to as an hourly rate
• How your current income compares to your own employees

There’s nothing to be gained by undervaluing yourself, either — unless your business is founded on the principle of having the lowest prices in town. Customers will value you at the same level that you value yourself. Those who want good quality expect to pay for it and will be loyal to the business that provides it. Those who want cheap prices will always be shopping around or trying to negotiate for a better deal.

Go over your personal budget to see how much money you absolutely need to live on without going deeper into debt each month. Are there places where you can trim expenses?

Find out your legal obligations.

The structure of your business may have a bearing on how you pay yourself. If it’s a sole proprietorship, you can do pretty much whatever you want, whenever it’s convenient.

On the other hand, a corporation is accountable to shareholders and must be able to demonstrate “reasonable compensation.” That’s why this type of business usually has the owner on the payroll, just like every other employee.

You also must keep records of payments to yourself for tax purposes — even (especially!) if you withdraw money from the business as the need arises rather than on a set schedule. Enter these transactions in your accounting software as they happen, and you’ll have less stress when faced with a tax filing or audit.

Decide on a payment structure.

Now that you have a number in mind for paying yourself a fair, livable wage, choose your payment strategy. Which one is right for you and your business will depend on your business structure, applicable tax laws, and cash flow situation. The possibilities include:

• Straight salary

Easiest to manage but not always the most tax-smart.

• Salary plus stock dividends

Dividends from the company stock you own are taxed at a lower rate than salary income, but make sure it’s legal in your location.

• Stock and stock options

Most tax-efficient way of paying yourself.

• Salary plus annual bonus

Could save on taxes in some circumstances.

• A business agreement to pay yourself later

If the business is short of money right now, but still needs to account for your salary.

When NOT to pay yourself.

It’s best not to take any money out of your business if it’s experiencing any of these financial situations.

• Employees haven’t been paid

This would affect staff morale, turnover, and productivity, likely leading to even further losses.

• Creditors haven’t been paid

This will damage supplier relationships and hinder your ability to obtain new credit.

• The business isn’t making a profit

Don’t take money straight out of revenues without first checking your profit and loss (P&L) statement.

If you’d like further advice and insight on setting a fair wage for yourself, tax implications and records, cash flow improvements, or understanding your P&L statements, just ask your expert Xendoo CPA team. We know you’re worth it!

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

How to Make a Budget for Your Small Business

Many small business owners started the company because they’re passionate about what they do, not because they’re good at crunching numbers. So they’re at a loss when it comes to business essentials such as creating a budget.

We’re here to tell you it doesn’t have to be super complicated. As long as you have a few key numbers in place, you’ll be able to see:

• Whether the business is making or losing money
• How much income you need to cover expenses
• How much money you have to reinvest in the business, hire more help, pay down debt or put into a reserve fund
• Where you can cut costs or increase income
• Whether you can or should take out a business loan

With Xendoo, our monthly profit and loss statement will give you a lot of the essential information you’ll need for creating a budget.

Expenses

Look through your records and note all the outlays your business makes per month to keep operating. These may include:

• Overhead — fixed, recurring costs such as rent and utilities.
• Payroll — permanent staff and independent services or consultants. Don’t forget payroll taxes and employee benefits.
• Materials — retail stock or manufacturing raw materials.
• Depreciation — on business equipment such as computers or vehicles.
• Debt repayment — on business loans or other investments.
• Insurance — liability, property, worker’s compensation, commercial auto.
• Taxes — income tax, sales tax, business licenses, import duties.
• Marketing — advertising, promotions, business forms printing.
• Incidentals — office supplies, business travel, client entertainment.

Income

Now review your monthly income. Ideally, it is greater than your expenses. Although it is sometimes a good strategy to take a loss for a short period in order to meet a particular goal, no business can sustain long-term losses. You may receive one or both of these types of income:

• Recurring income — consistent revenue from retainers and contract work.
• Expected income — variable revenues depending on the season and other factors inherent in your market or industry.

Next Steps

Now you can start creating versions of your budget for different situations — both good and bad — that may happen to your business, and planning how you’d handle them. For example:

• Your competitor undercuts your prices
• You lose your biggest client
• You move to a more (or less) expensive location
• You boost the sales volume by 5%
• You hire an additional employee
• You obtain a loan to expand your business

Make It Even Easier

Xendoo makes it easy for small businesses to use our professional services by offering flat monthly fees. No variable expense like you get from accountants who charge by the hour; just one simple, affordable number. Try plugging that number into your budget, along with how much more you can produce in the time you used to spend on accounting chores. We think you’ll find that it’s a very smart option indeed.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.