I have just received in the mail today my first batch of Bank of America checks bearing the name of Cut! Productions. I have to say, it looks pretty cool. If you are a regular reader of this blog, so all six of you, you’ll know that I have endeavored to start a small business of my own. It’s called, obviously, Cut! Productions and it offers a variety of video editing services, specializing in producing DVD slideshows or videos from pre-existing material. Basically, you provide the pictures, footage, music, etc., and Cut! Productions transforms them into a tear or laugh inducing DVD production that you can share with friends and family for years to come. Cut! Productions also produces promotional videos for establishments of every kind.
There, how was that for a commercial? But seriously, I’m pretty excited about the recent developments. Video editing is something I’ve dinked around with for a while, but recently has sprouted into something that is actually providing a relatively steady stream of income. I hadn’t really intended to go all out with the checks and everything so soon, don’t want to peak too early, but after I was paid with a check made out to Cut! Productions, I figured it may not be a bad idea to set up a seperate account. At least if I wanted to be able to use the money I was being paid. Next thing I know, I’m down at the county recorders office filling out a fictitious name statement and setting up a meeting to talk taxes.
If you are planning to start your own business there is something you should know. The government wants in and for big money. As a sole proprietor, your business income and personal income are all thrown into one big. or possibly small, pot. You pay your income tax on all income made from that business plus income from a day job, if you have one. That seems fair, right? Well, the trouble comes when you get to the “other” taxes. You know all those things you see being taken out of your paycheck every two weeks? Social security, medicare, so on and so forth? You are required to pay those taxes for your self-employment as well. But, while at your day job your company is picking up 50% of those taxes, if you have your own biz, you have to pay the whole kit and kaboodle. This is called the “self-employment” tax or SE tax and it’s about 15%. So you’ve got your income tax rate, let’s say 15%, then your SE tax, another 15%, plus your state income tax, about 9% in CA, totalling about 40%. Yikes!
I bring this all up as a warning. Last week we met with some tax adivsors, The Master’s Tax Service in Santa Rosa, and they were very helpful in answering questions and letting us know what steps we need to take to avoid a year-ruining tax surprise next April. In addition to Cut! Productions, Jen is now a PartyLite consultant and is considered a sole-proprietor as well. If you are considering starting a business of your own, I strongly recommend getting together with a tax advisor and getting some guidance as to what you need to do to protect yourself against depressingly large tax bills and how to take advantage of your expenses to decrease your taxable income. We should all probably be doing this anyway, self-employed or not.
But don’t let the IRS scare you. If you have an idea for something and want to try it out on your own, do it! You don’t have to start big, I’m certainly not, and depending on what it is you want to do, the fees for all the federal, state, and local requirements are probably pretty small. The fictitious name statement only cost me 30 bucks and it’s good for five years. That’s one of the great things about America. If you have the vision and drive you can have something to call your own and feel good about working it into something profitable and succesful while enjoying it at the same time. And maybe someday you too can be a “pezzonovante” with a fictitious name on your checks.