Motley Fool Money - The #1 Mistake Small Businesses Make

Episode Date: October 20, 2020

The overwhelming majority of small businesses in America are one-person operations. Unfortunately, there are aspects to running a business that even prepared minds don’t think of. Laura Adams, personal finance expert and author of Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers, shares the most common mistake people make when starting a new business. Learn more about your ad choices. Visit megaphone.fm/adchoices

Instagram teen accounts have automatic protections for what teens see and who can contact them, plus time management tools. And Instagram will continue adding built-in safety features to help create age-appropriate experiences. Learn more about teen accounts and Instagram's ongoing work to protect teens online at Instagram.com slash teen accounts. With a motley full money extra, I'm Chris Hill. There are more than 30 million small businesses in America. And more than 80% of those small businesses have no employees. They are solo operations.

And maybe that shouldn't be surprising when you consider how many people start a side hustle for themselves while they're still working a full-time job. Laura Adams is a personal finance expert, best known for hosting the popular podcast Money Girl. When we talked recently, I asked her about the most common mistakes that people make when they are just starting out with a new business venture. When you're just starting out, you really don't realize the tax liability. I find that's the number one mistake. People say, I didn't put anything aside that first year for taxes. I maybe put a little bit aside, but I had no idea what the burden would be. So that's the mistake number one. It's not really having a grasp on what your tax liability will be, not paying quarterly estimated taxes. Many people don't even know what that is. They don't know that they're supposed to be. paying tax as you go. You know, you think about our paychecks when we're a W-2 employee. Taxes are taken out every week. You know, you're keeping up with it literally on a weekly basis. As a solopreneur or a small business owner, it's up to you to make sure that you are paying that as you go. Typically, that happens quarterly. So that's a huge mistake because all of a sudden,

you've made a little money from last year. Tax day rolls around and boom, you realize I I've got a big burden. You may not have that much in savings. And so you end up going into a hole right away, and that can cause people to accumulate debt in year number two of business. So that's a big one. And it's pretty easy to get around. If you've got a little help, maybe from a software program that you're using or an accountant,

it can help you estimate what you're going to owe so you know what to put aside. If you want to learn more, check out Laura Adams' terrific new book, Money Smart Solopreneur, a personal finance system for freelancers, entrepreneurs, and side hustlers. I'm Chris Hill. Thanks for listening. We'll see you next time.