Today we’re writing about a critical topic for anyone who’s recently faced a layoff and is considering starting their own business. Being laid off can be daunting, but it’s also an opportunity to create something new. Starting a business is an exciting journey, but to ensure long-term success, you need to get things right from the start. That’s where consulting with an accountant or tax advisor becomes essential. We’ll explore why this step is so important and how it can set you up for long term financial success and stability.
Starting a business after a layoff often means you’re working with limited resources. Unless you use or exclusive Bridge Strategy, you might have severance pay, unemployment benefits, or savings to fund your venture. But do you really understand your financial position? This is the first reason to consult an accountant, tax or financial advisor that specializes in career transitions. Here’s a note to keep in mind: most financial advisors don’t specialize if career transitions.
An accountant or financial specialist can help you:
- Assess your current financial health.
- Create a realistic startup budget.
- Determine how much capital you’ll need to launch and sustain your business.
For example, imagine you’re using severance pay to fund your startup. Without proper planning, you might overspend on non-essentials or overlook critical costs like taxes or insurance. An accountant or advisor can guide you in allocating your resources wisely.
One of the most important decisions when starting a business is selecting the right legal structure. Should you operate as a sole proprietor, form an LLC, or incorporate? Each option has significant tax and liability implications.
A tax advisor or accountant can help you:
- Understand the pros and cons of each structure.
- Optimize your choice based on your financial goals.
- Set up your business in compliance with local and federal laws.
For instance, if you’re launching a consulting business, an LLC might provide the liability protection you need without overly complicating your taxes. However, if you plan to scale and bring on investors, incorporation might be a better fit.
Taxes can be one of the most intimidating aspects of running a business, especially for first-time entrepreneurs. The last thing you want is to be caught off guard by unexpected tax liabilities or penalties.
A tax advisor ensures you:
- Understand your tax obligations, including estimated quarterly payments.
- Maximize deductions and credits available to small businesses.
- Stay compliant with payroll taxes if you hire employees.
Let’s take an example: Many new business owners don’t realize they can deduct startup expenses, such as market research or advertising, up to a certain limit. A tax advisor will ensure you take advantage of these deductions while keeping your records audit-ready.
Consulting with an accountant or advisor isn’t just about the immediate setup. It’s about creating a roadmap for long-term success. An accountant can help you:
- Develop a cash flow management plan.
- Set profit goals and monitor your progress.
- Plan for growth, including scaling operations or securing funding.
Additionally, they’ll help you prepare for retirement and unexpected financial challenges, ensuring your business remains sustainable in the long run. With their guidance, you’re not just building a business; you’re building a future.
Here’s another important insight: Most traditional Financial Advisors know little if anything about the nuances of a career transition financial planning. Mostly, they can help you roll over your 401k to an IRA correctly, but that’s about it.
When I was recently explaining to a big advisory firm what we do, they literally looked at me with the glazed over, deer in the headlights look, clueless about how to even respond. That’s because most are taught to deal with Retirement and estate planning or are a fancy name for insurance or annuity salespeople only. Even their investment advice centers around strategic asset allocation – a theory recently heavily questioned in the Wall Street Journal.
Generally, they know very little about career transition to business planning to building a gateway to massive financial success. I know, amazing but true.
Starting a business after a layoff is a bold step, and it’s one that requires careful planning and expert guidance. Consulting with an accountant or advisor isn’t just a formality; it’s an investment in your success. From choosing the right structure to planning for taxes and long-term growth, their insights can make all the difference.
If you’re ready to take your first step, reach out to a trusted accountant or advisor today. And remember, preparation now means peace of mind later.
If you've been laid off or in between jobs or just unsatisfied with the job you've got, be sure to go to lifebydesign360.com and subscribe. Each week you'll get important updates on new podcasts that can help you get the job you want now, create a side hack and an income that you can never get fired from and get on the fastest path to retirement success and financial freedom.
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Owning your own income is very freeing. It takes some work, but if you do it right, and I’ll show you how, there is no better feeling in the world.
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