The “good bookkeeping is more important than good tax lawyering” edition
Hey everyone, it is the “every once in a while” fatigue-driven Jell-O Shot from Phil again. If I have half a brain cell and I’m sitting at an airport, you’ll get one of these.
This time I’m sitting in the KAL lounge at LAX. Flight time is 1:00 a.m. Tuesday morning: Los Angeles to Bangkok via Shanghai. Ouch. “1:00 am” and “Tuesday morning” somehow sound wrong when you put them side by side.
My wife is coming with me this time. She is on the hunt for inventory for her clothing company. Trips like this can get lonely and it’s great to have her along to share the jet lag with!
We are on China Eastern Airlines this time. Business class, upstairs in the big Airbus, $2,930 round trip each. Cheap!
Bangkok speech
I am speaking at the #DCBKK conference over the weekend. The Dynamite Circle is an online community of entrepreneurs. The common element that links them together is the desire to move around the planet and work from different places. “Location-independent” business operations might be as good a description as any. I will be talking about tax planning for American entrepreneurs abroad. The primary aim will be for “one person” businesses with under $100,000 per year net profit, but there will be information for people who run $1 million+ net profit per year businesses, too. For the start-up person (under $100,000 per year net profit) it’s pretty simple:- Have rigorously good bookkeeping and expense capture procedures (and delegate this to machines or humans as much as possible);
- Tell the truth in your accounting systems;
- Make sure you qualify for the foreign earned income exclusion;
- Pay the self-employment tax and don’t play any monkey business games trying to reduce or eliminate it; and
- Spend your time, money, and focus on doing what Saint Peter (Drucker) told you to do: create a customer.
Small (friendly) rant about “I don’t want to pay tax”
No one likes to pay tax. But you can get so obsessed on this point that you lose sight of the big picture. The big picture is that your business should make money. You don’t get rich by saving tax, any more than you can turn a failing business into a thriving business by cutting costs and firing employees. Your primary objective as an entrepreneur should be to focus your energy and creativity on building revenue. Tax planning, accounting, etc. is a distraction from that. The single best thing you can do is hire someone to handle your bookkeeping and be honest in entering income and expense into your accounting system. Excellent bookkeeping is more important than anything I can do for you. By telling the truth in your bookkeeping you will be sending yourself a few signals:- Your financial systems will be sending you accurate signals about your business. What is working? What is not working? What am I spending money on? Bad information means bad decisions.
- (How shall I put this?) Creating deliberately inaccurate financial systems (to save tax) tells your subconscious that the only way you can succeed in business is by lying.
Thanks for this. Honesty and good communication skills get sorely underrated. It also applies to technical aspects of one’s business, such as finance and bookkeeping. Indeed, it’s a better strategy than a last-minute lawyer to solve old problems.