Table Of ContentUntethered Success
Untethered Success
Handbook for Entrepreneurs and the Self-
Employed
C.S. Thomas, CPA
Copyright © 2019 Christopher S. Thomas
All rights reserved.
ISBN: 0-578-43574-8
ISBN-13: 978-0-578-43574-9
Contents
Acknowledgments
Introduction
Essentials
Entity
Technology
Accounting
Personnel
Benefits
Taxes
Operations
Finance
Sales
Termination
Appendix
ACKNOWLEDGMENTS
A special thanks to my present, past, and future clients. Your
questions and reliance upon my advice has pushed me to be a better
accountant and keeps my career challenging and rewarding. I very
much appreciate the opportunity to be of service.
Christopher S. Thomas, CPA
Introduction
If you are hoping to find yet another book with flowery,
nostalgic, or idealistic recipes for achieving the American Dream,
you can stop reading now. Entrepreneurialism isn’t a get-rich-
quick scheme. Many end up making less money and working more
hours than if they simply had a regular job that paid wages, which
isn’t always an option. Some become entrepreneurs before they
even realize it. I’ve worked with successful and not so successful
entrepreneurs. Sometimes the difference comes from
understanding. Some have a solid starting point for knowledge and
skills, and for others it’s like trying to figure out quantum physics.
They don’t teach much entrepreneurism in school. The amount of
noise we are inundated with in just trying to get to the right answer
is astounding. Sure, you can hire a lawyer or accountant to figure
things out for you, and even with a solid level of understanding,
having professionals take care of certain aspects may make sense
since your time is valuable. But you should have the choice and
the ability to make informed decisions with a base of knowledge as
it pertains to entrepreneurialism. That is what this book is all
about.
Small business ownership and self-employed individuals
make up a considerable portion of the economy. Self-employment
represents over 10% of the American workforce, and the gig
economy is expected to top 40% by 2020, so entrepreneurial
economic participation is here to stay. Regardless if by choice or
necessity, one can increase the odds of being in the winning
category and not just another statistic of fear that keeps droves
from even thinking of trying. It’s about time solid resources are
made available for those who are self-employed or who are
considering self-employment or engaging in a small business
venture.
This book isn’t for accountants; it’s for the layperson, the
independent contractor, the self-employed virtual assistant
(business analyst, carpenter, etc.), the small business owner, the
entrepreneur. As such, there won’t be any talk of complex
international shell corporations, captive insurance companies, or
other aspects that are typically only applicable in unique situations
for the super wealthy.
Don’t “Just Do It”
There are so many people that surround us who are incapable
of telling us no (in Minnesota, we call it being Minnesota Nice).
So, when you ask them if starting a business or going into self-
employment is a good idea, many answer with, “Of course, yes,
you should do it.” But that may not be good advice for everyone.
If you have a decent job with benefits, it can be a rude awakening
to discover how much it costs to replace what you have from your
employer, and as the saying goes, “A bird in the hand is worth two
in the bush.” The point is that a decent job can be far superior than
several unsuccessful ventures.
You probably have a reasonable approximation of your
monthly household budget. When considering going into a self-
employed situation, don’t forget to consider costs that you may not
see your employer paying for. This includes costs like the employer
portion of health insurance, retirement contributions, life and
disability insurance, employment taxes, and business operating
expenses, to name a few.
Employees are expensive, and many companies would prefer
the flexibility and variability of having contractors rather than
employees. It may sound great. You get to be your own boss, make
your own hours, and the earning potential appears to be more than
what you were making as an employee. So it’s a win-win, right?
Not necessarily. Say, for example, that you have a wage of $60,000
per year in addition to benefits like health insurance (especially if
you have family coverage), retirement contributions, and other
fringe benefits. To equal this total compensation package, a
contractor would likely need to generate (after expenses) over
$80,000. Sometimes it isn’t a choice, as in, the offer is as a
contract worker or nothing at all, which certainly makes the
decision a lot easier. But nonetheless, understanding the economic
reality will greatly help in understanding your value.
There are critical components and decisions that everyone
who will be a small business owner or self-employed individual
should be aware of. In my experience, far too many people start
asking the right questions and seeking the appropriate advice until
after the pain of not making the right decision sets in. This means,
as an accountant, I’d usually start seeing new business owners
around tax time when someone says, “Oh man, that’s right, I
started a small business last year and I don’t know what that means
for taxes and what I should be doing.” And this is when I’d get
questions on how they can save on taxes. First tip: The best time to
save on taxes is before you have to file a tax return and certainly
before you spend a bunch of money on an SUV because you heard
that you can write it off.
Cash is King
Where did all the money go? Sometimes I wonder that
myself. Many self-employed individuals are new to the painful
experience of how our complex tax system works. Unfortunately,
making money in self-employment is very taxing (pun intended).
Though we’ve all heard about the wonderful benefits and special
considerations that are only available to the self-employed, at the
end of the day (year), taxes will need to get paid. Though we can
get some benefit for a home office or vehicle mileage, we will still
need to eat, pay the mortgage, and have money for all sorts of
things. It is impossible to encapsulate one’s personal life entirely
into deductible expenses for business, though I have seen people
try really hard to do so. As such, there will be taxable income,
which is the money we rely on for our personal lives. Taxes for the
self-employed can be much more than what we are used to as
employees and certainly taxed more than investment income,
which can be very frustrating and seem punitive. With self-
employment taxes along with federal and state income taxes, one’s
tax rate on their self-employment earnings typically starts out at
around 30% and is quite a bit more depending on one’s
circumstances. There isn’t anyone withholding the taxes for us, so
it is up to our own self-control to not spend the money so that when
it is time to pay the piper, it’s there and not spent on that Caribbean
cruise.
Taxes get the most attention, and rightfully so as they make up
a significant obligation for the self-employed. But unless one is
basically an employee who just so happens to be receiving a 1099
MISC instead of a W-2, there will also typically be expenses, such
as office expenses, rent, utilities, subcontractors of your own, and
so on that require cash. Managing cash flow can be difficult
enough to do on the personal side. When you are a small business,
it is doubly challenging as you need to eat, and your business needs
to eat, so keeping enough money available to feed the beast can be
difficult. The added difficulty comes in with the fact that the
“beast” typically needs to get fed before the business receives cash
for the products or services you are providing, which can result in
running out of cash, especially since so many start up a business
without an understanding or appreciation for time and capital.
Knowledge is Dangerous, Understanding is Power
The main focus of this book is to provide an understanding of
the various aspects of entrepreneurialism, from the bare essentials
