There is no magic number or percent you should be making. The key is growth and the fact that now you have taxable income and you may miss out on deducting expenses.
Covid-19 has shifted the landscape of our economy and small businesses. Many individuals recognized they could take their passion or their hobbies and monetize them. Are you at that point? Should you continue as a side hustle or push to start a legitimate business?
“The only thing guaranteed in life is death and taxes.”
The IRS will always collect the taxes that are due. The amount of income you make will determine the amount of taxes you will owe. That’s where shifting to a sole proprietor may be the next move. After registering for an EIN, opening a business checking account, and getting your new business off the ground, you can track expenses that can be write offs at the end of the year. That will decrease the amount of taxes owed to the IRS.
Sounds straightforward? Just keep one thought in mind, as a sole proprietor, you open yourself to risk. Any claims filed against your business will be the sole obligation of the owner. It does not offer you shelter until you become an LLC or an S-Corp, but those incur higher costs that may be unnecessary for your situation.
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