Patreon’s #OwnYourGrowth workshop collection explored actionable methods for creators to scale their artistic companies. We did deep dives on subjects like taxes, medical health insurance, and outsourcing to freelancers, with knowledgeable recommendation from our model companions and Patreon creators. We’ve created recaps of those crash programs to develop your thriving creator enterprise and discover methods to spice up your bodily, monetary, and psychological wellbeing everytime you need.
As you develop your artistic enterprise, you may see your earnings fluctuate. That’s completely regular. However it’s vital that you understand your numbers and have a transparent image of the long run to get via these rockier intervals. We invited Karat Monetary‘s Noa Rodriguez Hoffman and Manuel Godoy, President of Black Sands Leisure, to share their recommendations on organising what you are promoting for long-term success, making a monetary security internet, and balancing the books that will help you scale and keep away from burnout. Right here’s a recap of their recommendation on proudly owning your monetary wellbeing.
Wish to dig even deeper? Take a look at the total #OwnYourFinancialGrowth occasion recording.
The significance of protecting enterprise and private funds separate
Whenever you’re first beginning out and proving what you are promoting, it’s okay to make use of your private account for funds. However as quickly as you begin making a revenue, arrange a separate checking account. Utilizing a private account to make enterprise transactions has its downsides. It’ll complicate your tax processes and name for the additional work of going again via all of your accounts, which might get costly, too. “It may additionally result in tax submitting errors and even set off tax audits,” explains Karat’s Noa Rodriguez-Hoffman. “And no one desires to cope with a tax audit!”
It’s tremendous straightforward to arrange a devoted checking account for what you are promoting — you’ll want your tackle, enterprise identify, business kind, and an EIN (a nine-digit quantity issued by the IRS to maintain observe of a enterprise’s tax reporting). If you happen to’re a sole proprietor, you should use your social safety quantity. Though it might not really feel vastly vital, your future self can be eternally grateful for creating a transparent line between enterprise and private funds.
Streamline your accounting to cut back workload
Now that you’ve a separate checking account for what you are promoting, you’ll need to join it to accounting software program to save lots of time and keep on prime of your funds. There are a ton of various choices; QuickBooks is a standard one, though there are inexpensive choices equivalent to Freshbooks or Xero. They share most of the identical options, however the principle distinction is that FreshBooks doesn’t embody any accounts payable options, but it surely does allow you to ship invoices, settle for funds, and handle your bills.
Ensure you’re categorizing all of your transactions appropriately from the start, as a result of the system will begin studying and auto-categorizing for you. “This lightens the admin load, so that you’re not pressured to categorize each single enter manually,” says Rodriguez-Hoffman. “Finally it begins to study your patterns and categorize them for you.” Accounting software program can even ship out invoices and pay contractors robotically, which suggests you’ll receives a commission on time, while not having to chase anybody.
Categorize your transactions with a tax skilled if doable, as a result of they’ll know the fitting tax deductions for you. An accountant solely is aware of the knowledge you inform them, so ensure you inform them of any transactions accomplished exterior of what you are promoting account, too. Give them as a lot clear info as doable to allow them to run correct stories.
Find out how to discover an accounting skilled for you
- Use your creator community and friends to supply referrals.
- Be part of Patreon’s Discord neighborhood to attach with different creators.
- When you’ve gathered particulars for a number of referrals, join to debate their providers.
- Earlier than you meet, create a listing of inquiries to ask: what’s their expertise with creators, or your explicit business? Have they got any specialties? What’s their charges breakdown and the way do they impart with purchasers? Make certain they perceive what you are promoting, to allow them to present recommendation on probably the most up-to-date tax methods and maximize your deductions.
Now you can work nearly with professionals all around the United States — so the world of accountants is your oyster!
Consider present monetary well being
To get a grasp in your present monetary well being, you’ll need to work with the next three stories:
- A revenue and loss assertion (P&L assertion) particulars your revenues and bills for a time period: a month, 1 / 4, or a 12 months.
- A money circulation assertion, which is extra of an instantaneous image, tracks how a lot cash got here into the enterprise and was paid out throughout a time period.
- A stability sheet, or assertion of monetary place particulars your property, liabilities and fairness (internet value). Usually banks will ask for this after they’re deciding whether or not to present you a mortgage or credit score. Some would require two years value of statements, plus tax returns.
Understanding the connection between your P&L and money circulation assertion can inform vital strategic enterprise choices, together with one of the simplest ways to pursue development. Any accounting system or accounting skilled ought to be capable of get you these statements. If in case you have “poisonous money owed” (aka money owed between $25,000 and $100,000, with a 6-18 month time period and an rate of interest of 8-12%), work on paying them off first after which put aside some cash to begin funding what you are promoting.
Beginning a enterprise with poisonous debt isn’t going to set you up for achievement, as a result of it’ll simply snowball. Discover a good medium the place you’re paying off these money owed and get a plan collectively to place some cash away for what you are promoting. Bear in mind sweat fairness — all of the issues you are able to do for the enterprise your self with out spending a dime.
Execs and cons of enterprise entities
Now it’s time for the massive ultimate query: to include or to not incorporate? “Usually individuals bounce to organising an LLC first,” says Rodriguez-Hoffman. “However there’s no level organising an LLC in case you haven’t turned a revenue but.” Holding on prime of your numbers will enable you to decide the kind of enterprise construction you want. There are professionals to organising an LLC, versus a sole proprietorship, together with authorized safety. If what you are promoting will get tangled in authorized troubles or is sued, the plaintiff or creditor can solely go after the enterprise’s property, not your private property (so long as you set-up the enterprise appropriately, have saved good data, and haven’t commingled funds). You may also make some critical tax financial savings by selecting the best enterprise entity.
When you attain a sure stage of earnings, you possibly can elect to be taxed as what known as an S corp. That is your means of telling the IRS that you really want what you are promoting to be taxed as an organization, versus a pass-through which is a sole proprietorship. When you attain $75,000 in annual income, you possibly can save as much as $6,000 in taxes simply by electing to be taxed as an S corp.
Patreon Creator Manuel Godoy’s Recommendation
Our workshop co-host, Patreon creator Manuel Godoy of Black Sands Leisure, provided his personal framework for rising your artistic enterprise sustainably. And at its heart is a transparent roadmap and a dedication to “by no means stray from the mission.”
Manuel prioritized “dominating” Instagram, turning into a subject knowledgeable in his area of interest and sharing his experience broadly, spending cash on high quality content material manufacturing to face out from the competitors, being approachable to his followers, and following what his tried-and-tested Golden Rule, The 1,000 Rule. When you’ve accomplished every milestone beneath, transfer onto hitting the following one.
Every step of Manuel’s 1,000 Rule takes effort and time, however they’ll all enable you to come out on the opposite finish as a financially sustainable creator.
“This isn’t a quick course of. By the point I hit quantity 5, I used to be most likely 4 years in. However by the point you hit aim quantity 4, you’ll be 100% financially unbiased as a creator.”
Manuel Godoy, President of Black Sands Leisure and creator of Black Sands, the Seven Kingdoms
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*This put up is meant to summarize and spotlight materials offered as a part of Patreon’s #OwnYourGrowth workshop collection, and isn’t meant as monetary, enterprise, or authorized recommendation from Patreon.
