Now is an excellent time for vendors to evaluate the effectiveness of their business practices. Here are a few strategies to consider to ensure that you cover all of your financial bases and enjoy a profitable year.
Start by talking to a certified public accountant (CPA). Even if you don’t regularly consult an accountant, speaking with an advisor will help you discern a long-term strategy in addition to helping you get ready for the next tax season. This additional perspective can help you prepare for everything from tracking expenses to filing tax forms. Next, take another look at how you classify your business. Are you a sole proprietorship, partnership or incorporated? If you’re considering forming a limited liability company (LLC) to mitigate some financial risk and reshape your approach to taxes, this is another item to discuss with an accountant. In general, your business entity should reflect your booth’s revenue, which may change if you have worked at flea markets for several years.
Insurance is one factor of increasing importance to vendors, as mobile payment technology becomes more commonplace. Smartphones can play an integral role in the vending experience, so be sure you have adequate coverage in the event that something happens to your phone. Equipment, such as card readers and your inventory, may need to be insured, as well. Information stored on these devices should be backed up, either on a separate hard drive or in a data cache in the cloud.
Full time vendors must file quarterly estimated taxes and self-employment taxes (SE taxes, Form 1040). To avoid paying penalties at the end of the year, get in touch with your State Income Tax Department to be sure you have all of the necessary forms. Crosscheck this information with the SE Tax page on the IRS website. Another important step is to assess your taxes from previous years to see if you underpaid or overestimated your payments. Get your finger on the pulse of what your booth has earned to date, and organize this information well in advance of tax season. Keep a ledger and audit it periodically to be sure it’s up to date.
Additionally, keep your vendor finances and personal expenses separate. Whether you’re a sole proprietor or an LLC, it’s a good practice to open separate checking and savings accounts for the revenue generated by your flea market business. Nellie Akalp, CEO of CorpNet, an online legal document filing service, recommends opening a dedicated savings account into which vendors transfer 25 percent of each payment received. This strategy makes it far less painful when it’s time to pay self-employment or small business taxes. Akalp also suggests opening a business credit card, so that each statement serves as an easily audited trail of the year’s expenses.
In addition to streamlining all of the information pertaining to running your booth, taking the time to protect and back up your personal data will ensure a healthy and prosperous New Year. Taking proactive measures with your finances year round prevents issues from coming up during tax season and throughout your vending schedule.