A hobby turned side hustle is a common occurrence, occasionally this endeavor becomes more than initially imagined. Often times people only envision the extra income when they decide to turn their hobby into a small business. A sound company enabled my husband to follow a dream doing what he loved on the weekends. An added bonus was the extra money would help us make ends meet, especially since I was an at-home mom. Furthermore, since I was an at-home mom I was able to take on the administration duties and become a “work at home mom“. Little did we know all the extras that would eventually come with owning a business. Even more surprising to us was that our hard work and dedication turned our weekend business into a full-time career for both of us.
Learning to Accept Seasonal Income
In the early years, we would spend the winters stressing about the lack of work in January and February. Being our only income, it is worrisome to not be putting money in the bank every two weeks like when we were employed. As we all know this proved to not be very productive. The reality is that in January and February there is plenty to do.
A Slow Season Doesn’t Always Mean Not Busy
It took a few years to wrap my head around the fact that these months would be slow. The reality is that being a business owner in January is a busy time of year even in seasonal businesses. To be a legitimate business there are recordkeeping requirements. For some, it is only a matter of tracking income and keeping a record of expenses to report on federal taxes. We, however, must file several quarterly and annual reports as well. In addition, we learned this was a good time to begin planning the summer.
Employer Taxes
Once January hits it is time to start checking items off the list. The month starts by completing the quarter four employer taxes for both state and federal. Once the quarterlies are complete the information is ready to reconcile to begin to prepare the employee W-2 forms as well as any 1099 vendors that we may have on record. Our business requires us to also file state sales reports as well as transportation tax reports. Once all of the quarterly and year-end tax duties are complete it is time to move on to the preparations for the federal taxes.
Federal Tax Returns
For sole proprietors, federal business taxes only require adding a schedule C to your Form 1040. However, s-corporations require their own return with the filing of an 1120-S which will also produce the necessary K-1 that business owners will use to file their 1040. The 1120-S is due March 15 to enable the K-1 to be available for the filing of the personal return by April 15.
Year-End Review
While preparing for the filing of federal taxes we incorporate an analysis of our previous year activities. One of our key reports is the “previous year comparison profit and loss statement”. In looking at this report we look for accounts that have a significant increase or decrease from the previous year. Many expenses are unavoidable, it just is part of operating a business. However if and account like rental expense is high or continuously growing, it is wise to determine the cause. Occasionally you can convert the cost of that expense into the acquisition of an asset that would reduce the expense.
Gear Acquisitions
We don’t generally purchase equipment in January, however, it is a good time to start planning our spring improvements. We like to start thinking about what our goals need to be for the year. It is beneficial to plan early as occasionally you can find rebates or good used gear in the spring. Sadly we have also run into items on backorder until well into the season. This is where planning early helps. If we can get orders in early the chances of getting the equipment while still in season are greater.
The NAMM Show
On January 24, 2019, it was a blah dreary day at home. Gary looked at social media and discovered NAMM had started and it was in sunny Anaheim, CA. He proceeded to look at the calendar, how convenient is it that the NAMM show just happens to be in January. There were no commitments on the schedule, all my reports due on the 31st were done. A quick check of California weather added to the temptation. The last thing we checked was the travel route between home and Anaheim. The weather gave us no excuses. Although I thought this was crazy, we spontaneously loaded our suitcases and car and departed less than two hours later that day. Why the heck not, a little vacation along with a business purpose who could say no to that.
A Much Needed Getaway
As mentioned, this trip was very spontaneous. We had no intention of making large equipment improvements in 2019. It really was more of an “all our friends are there we should go” kind of trip. In fact, we had not begun our annual review, I had only just completed my employer taxes. As we moved through February and March we discovered how beneficial this trip was both for the business as well as our personal well being. While the convention itself is all business, many personal discoveries were made along the way. Most importantly this was our first step in working towards finding a “work-life balance”. In self-employment, it is very easy to allow oneself to always be focused on business. I invite you to check back soon as I share more about our journey to the 2019 and 2020 NAMM show.
