Pausing for a moment to consider the environment around us:
- Obama is back in office and pledging to "tax the rich."
- Possibilities for seems to be constantly looming across the globe.
- The "Fiscal Cliff" is rapidly approaching.
All things considered, this may not be a great year for the self employed. That's not to say that your business won't be booming - we certainly hope that your hard work is helping you navigate out of the current economic mire. What's causing many self-employed individuals concern is what is not being said, including the fact that the average American household income is roughly $50,000.
Applying a broad stroke of a tax paintbrush finds that the "rich" is virtually anyone who makes more than $50,000 per year. Even painting with a narrow brush finds that households making $250,000 - a number that is thrown around often - won't be able to carry the burden alone if the economy doesn't improve soon. The government changes of 2013 are bound to affect virtually all successful small business owners.
So what is the savvy self-employed individual to do?
Simply what they always do - hope for the best and prepare for the worst.
Reinvest Profits
The absolute best thing most small business owners can do is reinvest in their business and avoid declaring any more than absolutely necessary as income, especially during a period of new taxation and uncertainty. Investing in your business wisely will also help to grow your company, bring you new clients and earn additional income as well.
Get Tax Savvy
This is absolutely the time to get advice and help from a savvy tax professional. There will be changes to the current tax rules before we file for taxes this year and some savvy tax planning now may save you considerable amounts in taxes in the next few months and over the next few years.
Even if you've worked with your current accounting professional for years, consider shopping around to find the experts in your industry. You want someone who can give you savvy (legal) advice - not just fill in blanks of your tax return.
Stay Abreast of Medical Plan Changes
The largest portions of the Patient Protection and Affordable Care Act, aka Obamacare, are poised to take affect by January 2014 - roughly one year from now. If you have more than fifty employees on your health insurance plan, this will likely have significant impact on your company's finances. Start planning carefully and effectively, if you haven't already, to stay in tune with the demands and penalties of the government's healthcare act.
Plan to Get Out Safely
There is always volatility when you're self employed, but one of the most volatile times is the point when you're ready to sell out, close doors or walk away. Those who have had a good run, but aren't interested in learning to operate with the new conditions and potentially much higher taxes, may choose to exit the industry.
As you make plans to retire or sell your company, strongly consider investing in assets that will give you security over the bumpy road ahead. All signs point to a period of inflation in the relatively near future as well as our current ups and downs.
The stock market will continue to grow and shrink, and investing your profits there is wise if you're looking growing assets for the long term - in fact the manic depressive stock market may make this an excellent time to invest in steady companies. Buy low, after all.
Assets such as annuities including my structured settlement cash may also give you relief from the stress of navigating tricky waters for investments and retirement savings. Locking in a delayed fixed or variable annuity with the proceeds of your business' sale is an excellent way to ensure your money is there for you in the future when you may not be able to get by on your business savvy. Invest now while you're able to continue earning, but enjoy the rewards of your efforts the rest of your life.