I've been in operation since mid-July (as a side business; I am still working fulltime and intend to do so moving forward) with really positive results. I've exceeded my expectations and have spent zero money thusfar on marketing/advertising. It's all been on overhead/business expenses (office supplies, Professional Liability Insurance, etc).

How much of my gross income (generated from the business) should I withhold in anticipation of taxes? I know this is an extremely broad question and I'm not providing anywhere near enough detail, but is there a good rule of thumb? I'm W-2'd and so is the wife and we both earn middle-class salaries in full-time positions.

Would 10% be sufficient in the MT's opinion? I have approximately 30% of my total income there now but I'm just wondering what I should hold-back each time an invoice is paid.

Also...As I said I haven't had a need to invest any money into marketing or advertising as of yet. The companies I do business with and find business through are in the dozens so far. So I'm not sure that I need to diversify the way I generate business leads, etc. But is there a good rule of thumb for how much I should reinvest back into the company for things like a solid website, small-scale advertising (business cards) and the like?

At this point I haven't needed anything to generate business and I'm really pleased. Hell I don't even own a laptop and have been able to track expenses, invoices and scheduling through iOS devices. I'm running really really lean. But I want to make sure that I make hay while the sun shines if that makes sense.

Thanks in advance for any advice, critical, constructive or otherwise.

This post was edited on 10/19/16 at 8:53 am

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Posted by baldona

Florida

Member since Feb 2016

20541 posts

Posted on 10/19/16 at 8:57 am to GFunk

You should be paying a quarterly estimated tax of approximately 25% each quarter of what you will owe. Do you not have a CPA? The first year is a not a huge deal as you don't really know, but it's not that hard to calculate. Remember that you have to add The 15% social security/ Medicare to your unemployment earnings so your income tax will likely be in the neighborhood of 30% for your self employment earnings.

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Posted by WhiskeyDick

shite Poster

Member since Sep 2014

1354 posts

Posted on 10/20/16 at 6:34 am to GFunk

Depends on the business. Want some advice that most will say is bad? If it's retail or investment based, don't save shite and spend every penny you can and have it working for you. Saving money aside for taxes is dead money with the low MM account rates. Every penny I own is working for me in some capacity in every business I've ever started. Once you've grown and stabilized, save some back for unseen liabilities such as legal, cash crunches, expansion, etc. Until then, don't liquidate until March/April once you've figured out how much you have due and then pay the tax man. Making money is all about using it to make more of it while taking some risks. Especially regarding startups. If it's not retail/investment based then save a small portion of what you think will be due and blow it out on marketing to expand your business.

Some of my ventures I set aside as much as 70% for marketing. Ex: a membership based revenue model I'm running and started a few years ago. Overhead was low outside of initial dev work around 250k, and I spent every penny I made after that and put into marketing. I tapered off toward the end of the year so I had some cash for taxes, but had most of it in play in some capacity.

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