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Running Your Creator Business Like a Sole Proprietor
Let us get started with the first of our creator tax tips. Being a content creator generally means being self-employed. You run your business, creating content for your followers and subscribes, with the goal of profiting from your hard work. Being a sole proprietor, and being self-employed, can often be thought of as being the same thing – you are running your content creation business on your own, and trying to earn as much money as possible. With that goal in mind, it makes sense to run your operations like a business.
Running your content creation business efficiently and effectively should be your goal as a business owner, and it can look different depending on the business that you are in. From the context of creating content, you have the knowledge and tools to run your business and grow your subscriber base, but you may benefit to learn about other aspects of your business. Aside from business operations, there is marketing, legal, accounting, human resources, and information technology aspects which should all be explored to improve how your business runs.
You likely already explored these other areas or at least outsourced them to other service providers. Outsourcing is a viable alternative, and the second of our creator tax tips, to undertaking these business functions on your own, but you may wish to look at them more in depth to gain a deeper understanding and create efficiencies within those areas.
How to Separate Personal and Business Finances
Separating personal and business finances is our next creator tax tip and it is key to making your life easier when it comes to completing your taxes. Mixing personal expenses with business expenses means eventually spending time separating out transactions relating to your content creation business from your personal expenses. To have your taxes prepared accurately, and on time, you will need accurate records of all your business transactions, including organized receipts. Therefore, it is essential to separate your business transactions from the start – or as soon as possible if they are currently mixed with your personal finances.
One of the ways that creators can separate personal and business expenses from each other is to open a business bank account and business credit card, another of our creator tax tips. Using separate business accounts for your content creation business and remembering not to use those accounts for personal matters, is the easiest way to separate business finances from personal finances. Furthermore, organizing your business receipts into a separate folder, whether physical or digital, will help with getting your information in order to prepare your taxes.
Choosing the Right Accounting Software for Creators
There is a wide variety of accounting software available in the market, with various strengths and weaknesses between them. As a content creator, your goal should be to understand how to obtain the reporting you need from your accounting software. Whether that is checking on the profitability of your business for last month, where your cash balance is at, or how your business performed over the last year, you should be able to check on that whenever you like. That functionality within accounting software, whether you are in the content creation business or another business, will be similar across the board. If reporting is all the same, then how should you pick the software for you?
The reality of accounting software is that the nitty-gritty bookkeeping and accounting work will be done by your accountant, not you. As a result, it makes more sense to choose accounting software that your accountant is familiar and comfortable with since they will be the ones working with it day-to-day. Keep this in mind as our creator tax tip to you. QuickBooks Online is one of the key leaders in the accounting software industry, and a suitable candidate for accounting software for content creators.
How to Pay Less Tax by Planning Ahead
You should only pay as much tax as you are legally required to. Now, that might not seem like much of a creator tax tip – but keep reading. Naturally, it makes sense to plan ahead and pay less tax. As a content creator, one of the ways you can plan ahead when it comes to your taxes is being organized with your receipts and bookkeeping. If you are searching for receipts for your expenses when it comes time to prepare your taxes, it is more likely that you will miss some expense than if you were organized from the start. You have many different expenses as a content creator, and being organized is important.
Organizing your expenses, if you are self employed or incorporated, can be as simple as maintaining a folding file folder in your office where you sort receipts by month. If you are more technologically inclined, you may decide to scan your receipts and keep them in digital folders in your computer. If you are incorporated, or running a sizeable content creation business, it likely makes sense to maintain up-to-date books and records in bookkeeping software throughout the year. With your income and expenses recorded in accounting software, it makes it easier to prepare your taxes when the time comes.
Hiring an Accountant vs. Doing It Yourself
As a creator, you are used to doing things yourself and it may be tempting to do your own bookkeeping and taxes. Depending on your situation, it may make more sense to hire an accountant. Hiring an accountant has several benefits including taking work off your plate, reducing your stress knowing that a professional is on your side, and getting the work done properly the first time. This may seem simple, but there is likely no greater tax tip for creators than having someone else take care of your taxes for you.
Professional accountants have years of experience behind them, and they are experts at what they do, whereas you are experienced creating and promoting your content. While you may be able to do your own bookkeeping taxes, you should consider whether it is worth your time. You can likely earn more from producing and promoting your content than it would cost you to hire an accountant.