Author Topic: Advice on Running a Business  (Read 1046 times)

Carlin

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Advice on Running a Business
« on: June 07, 2018, 12:17:28 PM »
Hi everyone!  I am 25 years old, and I have just quit my $12/hr office job to teach piano and gig full time.  I currently have 27 students, and will have made about 30K by the end of this year.  That probably doesn't seem like a lot, but it's a lot more than I was making, or have the potential to make in IN through an employer.  Now that my schedule is more open I will also be able to ideally double that within the next 1-2 years.  Eventually I will raise my rates as well, and could be looking at a 70K+ income within 5 years or so.  This particular business is great because it also has very little overhead (I teach out of my home).     

This is my first year doing it seriously, and not as a side business and I have a few questions.  First of all, what can I approximately expect to pay in taxes based on what I will have made this year? 

Am I able to deduct all of my purchases such as books, gear, printer, paper, food and gifts for recitals...etc? 

I'm pretty young, so does anyone have any general advice for running, managing, and marketing this sort of business?  I'm very good at teaching and playing the piano, but I don't want to be passive.  I want to stay active and engaged, and build a strong business with different sources of income.  I want to become a fixture in my community. 

Anyway, I guess I'm just looking for guidance from all of you go-getters! Thanks in advance!

BTDretire

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Re: Advice on Running a Business
« Reply #1 on: June 07, 2018, 05:38:18 PM »
Congrates on the move.
Taxes: (Gross minus expenses minus $12k) x 10% of $9,525 + 12% of the rest
FICA: Gross minus expenses x 15.2%
Those numbers will give you an in the ballpark payment, but then next year just pay 100%
of the previous year and you're good.
 I don't know if you qualify for the Pass through tax break for small business, (you probably do)
That will lower your taxes even further.
Say $30k -$5k expenses=$25k-$12K standard deduction=$13k-$9,525= $3,475
10% x $9,525=$952.50 and 12% x $3,475 =$417 then $952.50+$417 =$1,369.50 federal tax.
If you do get the Pass through tax break, that would make your fed taxes about $800.00
Then the FICA tax will be $25k x 15.2% =$3,800
 There is a deduction for half you FICA on your Federal taxes also.
It's complicated.
 Very safe pay $5,200, taking the chance of a penalty pay $4,600
Pay 25% of that every quarter. Due April 15, June 15, Sept 17, and Jan 15, 2019
You must send in your tax payments quarterly, They are due 6-15-18 a week from now.
One check for the total due for that quarter.
 You may have other deductions to lower your Fed tax, but your pretty
much stuck for the FICA tax, not really any deductions for that.
 This is of the top of my head using your $30k.
I would have someone do your tax forms this year, then you can probably
follow that for next year.
 I have a small simple business, but I still have about 40 pages of tax forms.

« Last Edit: June 08, 2018, 05:10:49 PM by BTDretire »

JoJo

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Re: Advice on Running a Business
« Reply #2 on: June 07, 2018, 05:53:54 PM »
Yeah, i agree have someone do your taxes this year.  You may have some things you can deduct that you haven't captured (and some you can).  Since it's in your home, you may be able to deduct some of those costs too.  It's better to have a dedicated space because it makes this deduction more cut and dry.

HBFIRE

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Re: Advice on Running a Business
« Reply #3 on: June 07, 2018, 06:41:56 PM »
I'd advise getting a CPA (I'm also a business owner, but have a much different type of biz).   A good CPA is worth their weight in gold, seriously.  Yes you can deduct these expenses, but definitely get CPA advice on this, and keep all receipts (digitally and hard copy just in case).  Good bookkeeping is the key.   

My parents ran a very successful piano teaching business for 30+ yrs with about 100 total students between them.  Marketing involved using us kids to put flyers on doorknobs (rubber band through hole punch).  We'd focus on neighborhoods with younger families with disposable income.  This worked surprisingly well, but was hard work.  Seriously, the doorknob is the way to go to ensure people read it.  I know it sounds silly, but it forces the person to at least take a quick look at the flyer.  You can also try some marketing on facebook targeted to your specific geo-location and FB has all kinds of targeting options like parents, age, etc.   But I think the flyers is the way to go, even though it seems like work and is pretty old school.  My father wrote a short paragraph that was very professional along with a description of the studio, recitals, etc.  He was pretty crafty with this stuff, and one of the best pieces of advice he gave me growing up is that there is always money to be made, you just have to think outside the box a bit.   Churches and schools also tend to also be great marketing opportunities (for new young students) if you can develop a relationship with some.  Typically they'll have like a bulletin or something where you can hang a flyer.  Once you have a reputation and a stable of students, typically you'll be able to build the majority of your future business through referrals.  My father still relied on the marketing ~ once a year or so once he was established.  He was super strict, and not exactly the nicest teacher, so if he can make this type of business work I'm pretty sure anyone can haha.  One thing you'll want to think about down the road is how you can raise your rates compared to other teachers.  Think of ways you can separate yourself from them and ways that your teaching is of higher quality.  This will enable you to charge more.  Basically always be thinking of how you can bring more value to your students, then you'll create a higher ROI for your time. 
« Last Edit: June 07, 2018, 07:03:01 PM by dustinst22 »