5 New Rules for Entrepreneurs in 2022The way that business is conducted has been altered over the past few years. Some aspects remain the same however, there are some new rules that could be crucial to the success of entrepreneurs. Continue reading to learn more. 

For 31 million American entrepreneurs, 2022 is a particularly interesting time for business because the economy is bouncing back from the coronavirus – and it’s doing so strongly. Amid the resurgence, many things remain as they were in pre-pandemic times. But there are also a few rules that have changed.

For example, while technology has always had a part to play in running a business, its impact has grown enormously. 59% of U.S. workers are now teleworking3, which means they frequently rely on technology to perform their tasks. As an employer or business owner, there’s every chance that you may need to find the infrastructure and create an environment that allows your team to work from home all or some of the time, especially since 60% of employees prefer to make teleworking permanent.

It’s not just technology. Changing times have rewritten the tenets of doing business in the U.S. and beyond. In this article, we outline five tips for entrepreneurs who are starting or running businesses in 2022.

Write a business plan

A business plan has always been a staple in business documentation. It identifies and analyzes your business opportunity to ensure that your venture is indeed economically and financially feasible. Business plans typically cover things like the types of products or services that you will sell, your pricing criteria, marketing strategy and how much you need to make to break even.

Ultimately, a good business plan serves three main purposes: 1) it creates a reliable growth strategy, 2) it identifies your future financial needs, and 3) it makes a case for you to investors, including lenders and creditors. These three things remain true.

What’s changed: your business plan has to comprehensively cover digital marketing. If entrepreneurs learned anything from the COVID-19 pandemic, it’s that they have to connect with their target audience through technology. Many businesses that survived had robust strategies for digital marketing. These include interactive websites, vigorous social media use, and even video chats with customers. That is to say, a strong online presence gives you an advantage.

Raise more capital

One of the most difficult parts of entrepreneurship – particularly if you’re setting up a new business – is raising the funds you need to open your doors, ramp up sales and meet expenses. Traditional banks generally don’t offer this kind of financing. The conventional route for many entrepreneurs who can’t access bank credit has mostly been tapping into personal savings or turning to friends and family. In fact, up to 65% of startup funds usually come from personal and family savings, with another 10% raised through credit cards.

What’s changed: with 75% of small businesses reporting a rise in the cost of supplies, the bad news – as far as raising capital – is that the cost of doing business is higher now than before. This means you may need to raise more cash than what your capital calculations suggest. Ideally, you will want to double the figure so that you have enough working capital to cover the uncertainties surrounding lockdowns, mandates, restrictions and inflation.

The good news is that there are more sources of business financing than ever before. Gone are the days when entrepreneurs only depended on banks. Now you can get startup loans and credit facilities from online and alternative lenders, who typically have relaxed eligibility requirements. So, while capital requirements are steep, access to business financing has improved significantly to help entrepreneurs raise more capital.

Reporting third-party transactions

Many small business owners receive payments via third-party services and platforms like PayPal, Venmo, Etsy and eBay. Similarly, freelancers and gig workers have platforms such as Fiverr, Uber, Freelancer etc. where they are paid from.

Previously, the IRS required providers of these third-party transactions to report your payments through Form 1099-K as long as the number of transactions exceed 200 in a year or earnings amount to over $20,000.

So, if for example your company accepts PayPal and Venmo payments, the two companies (PayPal and Venmo) would be required to report when you hit 200 transactions in a year or your total payments reach $200,000.

What’s changed: with the passing of the American Rescue Plan Act of 2021, the reporting threshold for third-party transactions is now lower. The law – which came into effect on January 1, 2022 – requires providers to report $600 in total payments, down from the previous $20,000. There’s no minimum number of transactions required.

So, what does this mean? It means PayPal, Venmo, Zelle, Etsy, eBay, Amazon and all other third-party trading and processing platforms are now providing information about your business to the IRS regarding any transactions that total $600 or more. But this only applies to payments received for the sale of goods and services, not personal cash.

Minimum wage for employees

With the exception of a few states like Louisiana and Mississippi, which use the Federal minimum, many states in the U.S. usually set their own minimum wage requirements. This has always made it necessary to keep track of various minimums, especially if you are an employer with employees across multiple states.

What’s changed: in most states, you cannot pay your employees using the same minimums that you used in 2021. Effective January 1, 2022, a total of 24 states – including Arizona, California, Florida, Maine, Montana, New York, Vermont and Washington – increased their minimum wage. Additionally, 35 cities and counties also raised their minimum wage requirements to meet or exceed $15.

The good news is that although the Employee Retention Tax Credit ended in Q3 of 2021, you can still retroactively claim it all through 2024. This will help lower your tax burden as an employer.

Track your incomes and expenses

There are many reasons for tracking business cash. For one, it helps you know where most of your money is coming from. With that information, you will know how to optimize and maximize your income. Besides, it will help you prepare for tax season. Tracking expenses, on the other hand, makes it easy to budget. It also helps you maintain a healthy cash flow and may qualify your business for tax deductions.

This need to track business money is the reason why many experts usually recommend separating business finances from personal finances. The easiest way to do that is opening a dedicated checking account for your business. It ensures that all transactions are neatly organized in one place.

What’s changed: business checking accounts are still necessary for easy tracking of income and expenses, as well as separating business finances from personal finances. Beyond the checking account, you may also need the services of tax or accounting professionals. That’s because there are now new tax laws regarding state- and federal-backed loans like the Paycheck Protection Program. Failure to adhere to these new laws can expose you and your business to legal liability.

 

Original article published on nearside.com

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