Top Tactics for Sole Proprietors in 2023

How to survive as a Solo business owners in 2023? | The Enterprise World

Solo business owners face dozens of challenges. That’s particularly true in the volatile economy of the 2020s. Inflation is part of the scenery these days, so entrepreneurs need to focus on the most efficient methods for dealing with rising prices. Additionally, they need to identify asset classes that can serve as rewarding investment opportunities, like real estate.

Other topics that should be a the top of every proprietor’s to-do list include maintaining an escrow account for self-employment taxes, which currently stand at a whopping 15.3% of net income from business operations. Additionally, today’s savvy entrepreneurs are moving online and offering digital products and services to maintain a low overhead. Finally, it’s essential to get reliable tax and legal advice from trusted professionals.

Here are more details about a solo business owner in today’s environment:

1. Consider Investing in Real Estate

Maintaining a separate investment account in real estate is a smart way to grow the profits you earn from everyday operations. Real estate offers tax advantages and the chance to build a reliable cash flow that can help sustain your company for many years. That’s why millions of entrepreneurs divert at least a portion of their monthly profits into real estate investment accounts. But there is another factor to consider. It’s important to take the QBI deduction whenever possible.

How to survive as a Solo business owners in 2023? | The Enterprise World

The Qualified Business Income deduction can save you plenty at tax time. It doesn’t matter whether your sole proprietorship is a tax prep company, a content provider, or an LLC. It’s possible to leverage the power of the QBI deduction to save money at tax time. If your organization is considered pass-through, according to IRS regulations, you can usually take the deduction.

Note that pass-throughs are companies that are not taxed at the corporate level but at the level of individual income, as is the case with sole proprietorships, S corporations, LLCs (limited liability companies), and most partnerships. Fortunately, the 2017 TCJA (Tax Cuts & Jobs Act) allows owners or partial owners of all those kinds of business entities to take the QBI deduction in most situations.

However, to see how the law applies to your company, it’s best to review a helpful guide that explains all the pertinent details about the Qualified Business Income deduction. As an Solo business owner, you need to know whether you can take it or not, what it is, and how to properly claim it on annual returns.

2. Set Up an Escrow Account for Self-Employment Taxes

There are so many things to know about taxes when you’re self-employed so don’t let the self-employment rate surprise you when you file. Many first-time entrepreneurs are shocked to realize that they own the IRS upwards of 15% of their net income, which can be a substantial amount even for Solo business owners.

How to survive as a Solo business owners in 2023? | The Enterprise World

To avoid sticker shock in April, you have two options. Sign up for quarterly payments based on estimated earnings or create a personal escrow account. The latter approach works well for solo owners who don’t want to make quarterly remittances to the IRS. Deposit 16% of each month’s net income into the account and use the money to pay your tax bill each April when you file your personal tax return.

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