Listen to Episode 001 of EPW Live (or read the transcript below) where Elizabeth shared about:
- Your accountant said you should be an S-Corp … but are you ready for the real costs?
- Should everyone do an FB Live show?
- Elizabeth’s top 2 biz books for 2016 (so far) & how the EPW team implements them.
You can watch future shows live (and leave comments for Elizabeth to answer live on the show!) by following the EPW Small Business Law Facebook Page.
–Full transcript– Good morning. This is Elizabeth Potts Weinstein, and this “EPW Live 001.” One of the interesting things about doing Facebook Live, and I’m going to talk about this further, when I’m talking about should everyone do Facebook Live, is you’re both the talent, the person talking and producing the content on the show, and you’re also producing the show, which is difficult. The first thing I wanted to share with you guys is about S-corporations. S-corporations come up a lot this time of year and for anyone who’s watching this, the live recording of this, it’s May because here in the United States we filed tax returns. If you filed corporate tax returns, you filed them in March. If you filed personal tax returns, and you filed it on time, you filed it in April. Even if you didn’t file your tax return on time, you probably thought about it, because you had to pay any taxes that were due, so you probably, at least, did some calculations. You thought about, if you own a business, “Should I stay a sole proprietor, should I stay an LLC, who files taxes as a sole proprietor, or do I need to be something else?” Your accountant may have said to you, “Hey, you should file taxes as an S-corporation.” I get a lot of people who come to me right around this time of year, saying, “Hey, I need to be an S-corporation. My accountant, my tax preparer told me to.” We go into this process of, does an S-corporation make sense to you, because one of the big issues is that it doesn’t necessarily make sense for everyone. Being taxed as an S-corporation…let me make that distinction. You can be an LLC that’s taxed as an S-corporation, or a corporation that’s taxed as an S-corporation. That’s something I’ll talk about in our future shows. We’ll talk about that another time, but if you’re taxed as an S-corporation, yes, you can save money on taxes that way, and that’s something we can talk about later. But, there are some administrative costs that happen, and you need to factor into it. That’s why I talk about the True Costs. If you’re going to save money on taxes, and your accountant says, “You’re going to save $1,000 on taxes, or you’ll save $10,000 on taxes.” That’s great, but you need to know how much you’re going to save on taxes [laughs] to decide if it’s going to be worth it to you, because if you’re going to save $10,000, then probably yes. If you’re going to save $1,000 on taxes, probably no, because that’s probably not enough money. So, here are the administrative costs, both financial costs and logistical costs of creating or having your business be taxed as an S-corporation. First, you’re going to have a bunch of different things that have to be switched over. When you start to be taxed as an S-corporation, you, as the owner, you’re going to need to run payroll to pay yourself. You’re going to probably pay yourself partially a distribution as the owner, but you are also going to be paying yourself a payroll as the owner/employee. You’re going to set up payroll. I use Gusto to pay myself. I have an S-corporation for my business. I use Gusto to pay myself, which used to be called ZenPayroll. It is wonderful. It’s very easy to use. It’s very inexpensive, but it does cost some money. You’re also going to need to have your S-corporation file a tax return. It doesn’t pay its own taxes, but it has to file a tax return. It’s not the tax return you probably want to do yourself. There is a TurboTax for it, but it’s not an online one, and it doesn’t have a Mac version in it. It’s only a PC version. You can use that, but I personally…even though I do my own personal taxes, I pay someone to do my S-corporation tax return. It’s not something I want to learn. I do my own personal taxes. It makes sense to pay someone $600 or $700, or whatever is appropriate in your area to pay someone, to have them do your S-corporation tax returns. You need to factor that in. Just for those two things, we’re talking $1,000. Then you’re going to have the logistical paperwork of the switching over, which you could do yourself. You could pay a lawyer. You could pay a CPA or accountant person to switch over, so it may just be your time, it may be paying from under $500 or whatever to switch it over. Also, there may be other costs to you in your state. Let’s say you’re here in California. I’m using it because we’re one of the worst examples. Let’s say you’re sole proprietor and you want to be taxed as an S-corporation. We have this horrible franchise free tax of $800 a year, even if you make zero dollars of revenue or profit. The second you form a corporation or an LLC that is taxed as an S-corporation or taxed any other way for that matter, you have to pay the $800 a year tax, so you have to factor in that $800 a year. It’s called a franchise fee but, really, it’s a tax. You want to make sure you know about all those costs before you decide to form an S-corporation. It’s something to consider, that list of things. If you’re making a $100,000 a year in your business – you’re taking that home – then you’re probably going to save a lot of money; but, if you’re making $40,000 a year, it’s probably not worth it. There’s going to come some point where you’re going to make that calculation and it’s going to make sense for you. Also, if you already have employees, you’re going to have that all employment stuff set up already. You’re going to have Gusto set up, or whatever payroll system already set up, so that cost is already built into your business, so you don’t have to factor that in. It does depend upon the business that you have which of these costs are going to really impact you, but we are talking at least $1,000 unless you’re going to do your own S-corporation tax return, which I don’t even do. It’s something to make sure that whoever is setting it up for you is straightforward with you about how much these costs are going to be and that it’s factored into the calculation when you decide whether or not you’re going to be an S-corporation. Let me go ahead and refresh the Facebook Live. One of the weird things about Facebook Live is that the comments are really difficult to manage. I’ve done a lot of live streaming over the years on different channels, Livestream, Ustream and Facebook Live is very difficult to manage the comments. Ustream and Livestream, Livestream you have to pay for and Ustream you may have to pay for now, I don’t know they have a back end of the comment, but Facebook doesn’t…at least for the non‑celebrity people, doesn’t really have a back end, so I’m looking…I’m the second computer [laughs] and I’m looking at the comments on the second computer. It’s difficult. It doesn’t refresh very easily. Second thing I want to talk about is this, Facebook Live. Facebook Live has been around for a while. Live streaming has been around for a long time. It’s funny how people are acting like streaming live video is this new thing, because we were doing streaming live video in 2009 and 2010 on Ustream and then in Livestream and places like that. But it’s now become really hot because a lot more people have the bandwidth to be able to do it. Now we can do streaming live video on mobile. It’s much more accessible to a lot more people. There are a lot more tools to be able to do it. But it doesn’t mean that everyone should do it. That really was the question that I was posing was, that I was putting in here was, “Should everyone do live video?” The answer is, “No.” There are a couple of reasons. Number one, this is hard, because you’re being the talent, not that I mean the talent, but you’re being the host. You’re having to come up with the content, and talk live, so you can’t be scripted really. I have an outline here, but this isn’t even a webinar. You could do this as a webinar. I could have slides and not have this to be a talking head a thing. You’re live, you have to come up with stuff and produce it. Now you know media companies have been doing Facebook Live in a studio. If you are bigger, you can do this with big, not just Wirecast, you can do it with Wirecast bigger, but ultimately they are using the exact same software as I am. There’s fancier software too. You can do this in studio, with multiple people, and multiple computers and all kinds of fancier equipment. If you’re not like that, you’re doing it like me. You’re multitasking. This is difficult to do. I have two computers running. I have my phone. A member of my staff is texting me to make sure I’m live. “Yes, I can see you,” which is good because I wouldn’t know for sure if anyone can see me. Consider, my computer is telling me that 97 percent of the processing power is being used on this brand new laptop. By the way, literally, my laptop is a week and a half old, which is frightening. It’s hard to do this, to be able to talk and manage everything at one time. You definitely don’t have to have a top of the line computer to be able to do this. You don’t have to pay $500 bucks for Wirecast. You can use your phone to stream Facebook Live. It’s not going to be at the same level of quality, though. You’re not going to be able to do titles like this and stuff, but you still can do Facebook Live. The second thing is, live video requires, like I already said, being able to think on your feet, being comfortable with messing up all the time. A lot of people aren’t comfortable doing live video, like a lot of people aren’t comfortable doing live television. You can learn those skills, but you have to want to be able to learn that. The third thing is, you’ve got to have a strategy for this content. Some people are doing live video as news. We have news media organizations going to the Trump thing to report on it. That totally makes sense for live video, like that we would do for live television. You have people who are using live video for these personality, celebrity‑ish, little things of the day to follow them around. That makes sense if you have a personality brand. But you’ve got to give people a reason to watch you live. What I’m doing here is really a live podcast. In a lot of ways, one of the reasons I’m doing this is because I find that it’s easier to record video live, and the production takes less time than recording it. Then producing a recorded video takes me more time because of all the editing and all that level of production. It takes seriously five times as long. While doing it live, the energy of it is better for me, the feedback I get is better, and it takes less time. I like this much better. You get instant feedback from people. People can do questions and answers. Really for me, this is like doing a live TV show or live radio show. I did live radio for a while and I enjoy that. That’s what I’m doing, it’s a live podcast, live radio show but with video. That’s the idea. You need to have a strategy for why you’re doing this and why it’s live. Why does this content need to be live? What is the point? There are people who are throwing it out there. Why do people need to watch it? Right now, you can throw anything up there, and it’s coming up on notifications. Right this second, people are probably going to watch almost anything because they’re bored and they’re on Facebook. There’s this wonderful arbitrage that’s going on right now because the attention is there but it’s not going to stay there for very long. You’ve got to give people a reason. There’s this little tiny window that we have right now on Facebook Live, but it’s not going to stay open very long. So you have a little bit of flexibility to experiment for a short amount of time. Take advantage of that, but come up with a strategy quickly. Are you going to be reporting news that is very timely? Are you going to be doing personality brand stuff? Are you going to have a live podcast, live radio show? What is the strategy going to be? It needs to be an actual strategy for why this stuff needs to be live. The thing is, every business can do video, but every owner isn’t necessarily the right person to be the host. There’s always a strategy for how video can be used by a business. The third thing I want to talk about are my business book picks for at least the first half of this year: Simple Numbers and Uncommon Service. Let’s talk first about, Simple Numbers. This book, Simple Numbers, Straight Talk, Big Profits. Four Keys to Unlock Your Business Potential, this book I recommend for every business owner, who’s making under five million dollars gross revenue, who either has employees or wants to grow to have employees. If that’s the business you have, then you should all read this book. It should be required reading for every business under five million with employees or wants employees. This is the book for you, about cash flow, about managing the finances of your business so you can grow. Some of the stuff in here were things I was already doing in my business, but it gave me a lot of clarity of what to tweak in my spreadsheets and my financial analysis. There were two things that I took away from it that I implemented immediately that were very, very helpful. One, were salary caps. Salary caps, like salary caps for sports teams, you can implement in your own business. Thinking this way almost sounds very cold, but it’s not. It was incredibly helpful. I implement the salary caps against my own salary, not against my employees, which is sometimes terrible for myself, but it’s very useful. As well as deciding when can we hire new people, you’re using it for projections. Because the thing is if you have a service-based business, your salaries are the big expense. Looking at it from a salary cap perspective has been incredibly helpful. The second thing for that I’ve used is the sweat equity calculation, calculating down to exact numbers how much sweat equity have I put into the business. This has been a great psychological help for me in my business. Tons of the other stuff in here that’s really helpful, a lot of which isn’t yet applicable to me, because it’s applicable more to businesses that are making at least between a million and five million, and I’m not there yet. So the second book, this is something that we’re doing in the business as our book club for two of us in the business. One of the things we do is, we’re working on something, a project in the business, we can read a book together and use that book as the lenses for the project. One of the big things we’re working on right now is our client experience, which you might think of as customer service but we call it client experience. We’re looking at client experience through the lenses of this book, through this Uncommon Service book. A lot of wonderful things in here, and really, that’s been the big thing, is this has got a lot of great examples for how you can look at customer service. A lot of the examples in here are more examples of big business or at least small businesses that are a lot bigger than mine, small businesses that have a 100 employees as opposed to three, but still helpful examples that we’ve been able to use as we’re creating a new client experience program for the business. That’s all the stuff that I want to talk about for Facebook live today. If you have any other questions you could ask them on the EPW Small Business blog page, or you can go to elizabethpw.com, where you can, of course, send me a message there. You can also learn more our small business law start‑up plans, or you can set up a quick call with me if you wanted to talk about the S-corporations or any of that stuff. If you really wanted to get more into about whether that’s an appropriate for you and your business. I’m planning to do more of these Facebook live shows because this is a great way to create more video content in a real efficient and fun way. We’ll see how it goes. Thank you guys for watching. If you have any questions or any feedback let me know. I hope you guys have a wonderful day and I will talk to you later. Bye. —- Here are links to the books Elizabeth talked about on the show:
- Simple Numbers, Straight Talk, Big Profits!: 4 Keys to Unlock Your Business Potential Hardcover – by Greg Crabtree
- Uncommon Service: How to Win by Putting Customers at the Core of Your Business Hardcover – by Frances Frei & Anne Morriss