Top 10 Business Mistakes Fighter Pilots Make

The primary business of fighter pilots is the distribution of MiG parts, the dominance of air, and the conversion of enemies into a fine pink mist. Some entrepreneurial fighter pilots engage in less violent, more profit-motivated businesses. Slipping surly bonds doesn’t guarantee business savvy, so let’s look at business mistakes you don’t want to make!

Small Business 101

The to-do list for starting a small business is long and distinguished so we’re not going to cover every target you need to shack. You definitely want to get approval for outside work from your chain of command and you must comply with state and local laws.  We’ll assume you have a business idea such as selling real estate, selling snacko kit, or selling your expertise as a simulator evaluator… as an independent contractor. The most enterprising among you will probably play piano in seedy establishments…

There are two basic ways to get paid for work in America. You’re either an employee earning wages (and perhaps other benefits), or you are self-employed.  You can be both, but we’ll focus on self-employment.

When you’re self-employed, you’re responsible for all of the delightful regulatory compliance rules that employees don’t have to worry about. The IRS, your city, state, county, and even quasi-government regulators may get a vote in how and whether your business stays airborne or lands gear up.  Here are the common mistakes you’ll want to avoid.

Top 10 Small Business Mistakes

1. Wrong business type. Most start-ups will be fine selecting the LLC business entity type. Mature businesses may benefit from making the S-Corp election, but this has serious administrative burdens, so significant revenue should flow first. Partnerships also have significant tax and regulatory considerations, so legal advice might help clarify this choice. The default entity is a Sole Proprietorship, but that exposes your family’s finances to your business’s creditors.
2. Scoffing the regs. It’s possible you’re exempted from rules like FINCEN BOI reporting, or filing with your local business tax authority, or paying unemployment insurance, or maintaining worker’s compensation insurance… but you need to know before you hang your shingle. Every city, county, and state is different.
3. Crossing the streams (mixing personal accounts). Your business should be financially firewalled from your personal life. Spending for the business needs to be from a business account. Full stop.  You’re likely looking for liability protection that will keep your personal finances out of reach from a business lawsuit. That financial firewall, when combined with an LLC-type business entity selection, can help create a “corporate veil” that protects your personal assets.
4. No estimated tax payments. If you don’t pay taxes as you earn your dollars in your small business, you’ll face some irksome tax penalties and interest… plus shock and awe with a bigger tax bill on April 15^th. You can always increase withholdings from your day job, but you must either achieve Safe Harbor with estimated payments, day job withholdings, or both. (Pensions are fine for withholding too.)
5. Sloppy books. You may not need to hire a bookkeeper or even use a DIY tool like Quickbooks or Wave yet, but you still need to categorize every single transaction so you can produce year-end reports and determine your quarterly tax burden. Spreadsheets are fine when you have a modest number of transactions.
6. Expense tracking errors. If you don’t track every expense, you can’t deduct as much from your income. This means you’ll pay tax on dollars that you didn’t have to pay. Pay the IRS what you owe, but don’t leave a tip. At the same time, if you’re reimbursed for an expense, you can’t deduct that same expense.
7. No checks. Your personal checkbook might be on a first-name basis with your VHS player and Rollerblades, but you need to be able to move money from your business account to your personal account, to sub-contractors, and other for other transactions that don’t lend themselves to debit and credit card transactions. Some banks allow easy ACH transactions from a business account, others make you pay for it. Checks are a great safety valve.
8. Missed deductions. You’re eligible to deduct half of your self-employment taxes, but you might be eligible to deduct contributions to Solo 401(k)s and other “employee benefits.” Depending on your business, you might be able to deduct home office expenses or depreciation on your vehicle.
9. Mileage vs. Depreciation. Finfluencers would have us all driving G-Wagons and magically “writing them off.” The rules about what type of vehicles you can accelerate depreciation on are complex, literally changing each year, and often require that you use the vehicle at least 50% of the time in your business. Just claiming mileage may reduce headaches and signature-manage an audit. Don’t skip the easy mileage deduction, but also don’t ignore the benefits of depreciation if you drive a lot for your business.
10. Solo 401(k) buffoonery. If you’re earning some extra scratch, the most common Solo 401(k) mistake is not having one. Other common landmines include: choosing a SEP or SIMPLE IRA instead of a Solo 401(k); crossing flight paths with your TSP (exceeding the annual employee limit of $23K aggregated between both accounts).
11. (I was told there would be no math.) Wrong business credit card. If you travel for business, you probably rent cars. You need to use the business card for your business expenses, but you probably also want first-party insurance coverage for car rentals. Not too many cards offer this, but rental car liability is steep, and renting with your own card isn’t good for the “corporate veil.”

Cleared to Rejoin

Entrepreneurship is strong in the tribe, but business clown acts can trip up the best of us.   The business mistakes are usually in the startup phase, so most of these issues can be settled with deliberate choices up front. If you self-assess yourself as maybe, possibly, sort of having room for improvement on your business… the best time to fix it was yesterday, the second best time is today.

Fight’s On!

Winged Wealth Management and Financial Planning LLC (WWMFP) is a registered investment advisor offering advisory services in the State of Florida and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training.

This communication is for informational purposes only and is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This communication should not be relied upon as the sole factor in an investment making decision.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal the performance noted in this publication.

The information herein is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Winged Wealth Management and Financial Planning (referred to as “WWMFP”) disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.

All opinions and estimates constitute WWMFP’s judgement as of the date of this communication and are subject to change without notice. WWMFP does not warrant that the information will be free from error. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall WWMFP be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided herein, even if WWMFP or a WWMFP authorized representative has been advised of the possibility of such damages. Information contained herein should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.