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Questions?

Why Namu?

Our financial technology is detailed and sophisticated, it solves for the actual nuances that many self-employees face. For example, many software packages will calculate federal estimated taxes, but not State and Local. Also, Namu is fully integrated between your invoicing workflows, accounting, taxes and retirement, so you never need to enter your financial information twice, reducing errors, increasing accuracy, and saving you time. Finally, Namu provides a financial advice to provide you with consultative sessions where we can learn about you and give you the best advice. Sometimes, you don’t know what questions to ask, so we take an open-ended consultative approach to learn about you, your business, your goals, so you can help us help you.

These financial reports are important to understand for the health of your business and should be well understood. The balance sheet is the value of all your assets (i.e. cash and other valuables) minus your liabilities (i.e. debts) equals your equity (i.e. what you are worth). The income statement shows how much money came in as revenue and how much you spent and whereas expenses. The leftover if is your profit (aka net income). These 2 reports together can tell a lot about the health of the business. The 3rd critical report is a cash flow statement, but that is usually not critical for self-employed individuals since they use the cash basis for accounting (instead of accrual accounting).

In accounting, basis defines how you recognize your income and expenses for accounting and tax purposes. Cash-basis is what most people are familiar with, it is how you handle your personal or household finances. You count income when a deposit hits your bank account, and you count and expense when it hits your bank account or credit card. There is no “accruing” for the future or the past. It’s essentially real-time based on your bank and credit card statements. This is the model most self-employed workers also use as it is what the IRS generally requires. For example, if you send a client an invoice on Dec 20, 2019, and they send you the money (via Venmo, Zelle, ACH, check, etc.) on Jan 5, 2020, you would record that income for tax year 2020.

Namu is cash-basis accounting which is another reason why we’re different than others in the same space. We work to build a product that works for self-employed professionals – always.

In accounting, basis defines how you recognize your income and expenses for accounting and tax purposes. Accrual-based account is widely used for corporations, small and medium businesses. All public companies must use accrual accounting, and most businesses with employees start to use accrual accounting as banks and investors and others require it. The distinction is you recognize the income when you record it, not when the deposit hits your bank account. Similarly, you recognize expenses when you record it, not when the withdrawal hits your bank account or credit card. For example, if you send a client an invoice on Dec 20, 2019, and they send you the money (via Venmo, Zelle, ACH, check, etc.) on Jan 5, 2020, you would record that income for tax year 2019 since that’s when you sent the invoice.

Your Company

There are two major corporate structures in the USA – LLC and Corporation. In the case of self-employed individuals, LLC is almost always the right answer, assuming you need a corporate structure at all. A corporate structure’s job is to shield you from the liability of the business. There are other benefits like privacy, estate planning, but primarily, its liability protection. Don’t confuse corporate structures with tax treatment. Single Member Pass-through, Partnership and S-Corp, and C-Corp are all tax treatments that you elect with the IRS. The LLC supports the first 3 tax treatments listed and is the most flexible structure for small businesses. A Corporation is needed instead of LLC if you plan to raise money from investors as in a startup, and for other reasons that are highly unlikely for self-employed individuals. We can discuss these nuances with you if you’d like.

Yes! Contact us using the chat bot on the lower right hand side of the screen or email us at hello@namu.ai. Our Founder will reach out to you directly!

The LLC is a Limited Liability Corporation, a simplified corporate entity in the USA used for liability protection. It’s low cost, easy to open and maintain and very popular. You would need a corporate structure if you want to protect yourself from the liability of your business operations, or to project a sense of formality in your business, or to hire employees.

The S-Corp is a tax election you make with the IRS for how you want your businesses income taxed. It basically allows you to become a regular employee of your company with a periodic paycheck and W2 at the end of the year at a salary that you determine, and then the extra profit above your salary is distributed to you as owner’s compensation. The main benefit of an S-Corp LLC is that it saves you some of the FICA (Social Security and Medicare) tax vs. being a single member pass-through LLC. There are many pros and cons to the S-Corp approach, and generally we recommend against them, but can discuss your specific situation with you to see if it makes sense.

Your Taxes

Quarterly taxes are due 4 times a year. They don’t follow the standard calendar quarter schedule though. The estimated tax on your net income from:

January to March is due April 15;

April to May is due June 15;

June-August is due Sept 15;

September-December is due Jan 15.

Key distinction is that the tax is due on your net income, not gross, so you need to know your expenses for the same time period. Also, you will be paying federal income tax, FICA (social security and Medicare) tax, and your State and Local taxes (SALT) on these dates, so you need to calculate all 3 separately. Namu does this for you automatically and we can talk you through all this.

If you don’t have an LLC, you can use your personal credit cards, but the onus will be on you to separate the charges.

What we recommend is that if you are using personal cards, then designate one of your cards to be used solely for business expenses; it makes your expense tracking much easier.

Even if you don’t have an LLC, you can still open business credit cards with a DBA (Doing Business As) name so that the name appears on the bottom of the card, but that’s purely aesthetic since it’s still your social security number and your personal liability on the line.

If you have an LLC, then we highly recommend opening credit cards in the name of the LLC to keep your business and personal expenses separate and clean. There are other aspects to consider as part of the decision and we are happy to talk through them with you.

Accrual based accounting means you record your transactions when they are meant to happen, not when the cash comes or goes. This is what all public companies, and most mid-sized companies or companies with investors use. Cash based accounting is based on when the actual cash came in or went out. This is what you use in your personal life if you do personal finance tracking. Almost all self-employed individuals use cash-based accounting. For example, if you send your client an invoice on Dec 26 for the work you did in Dec, and the client pays you on Jan 3, in accrual accounting, the income from this invoice is recorded into Dec, in cash based accounting, its recorded into Jan of the next year. This is why end of year tax planning strategies are very critical to reducing your tax bill.

Our financial technology is detailed and sophisticated, it solves for the actual nuances that many self-employees face. For example, many software packages will calculate federal estimated taxes, but not State and Local. Also, Namu is fully integrated between your invoicing workflows, accounting, taxes and retirement, so you never need to enter your financial information twice, reducing errors, increasing accuracy, and saving you time. Finally, Namu provides a financial coach/mentor/guide to provide you with consultative sessions where we can learn about you and give you the best advice. Sometimes, you don’t know what questions to ask, so we take an open-ended consultative approach to learn about you, your business, your goals, so you can help us help you.

Referrals are a great resource for an accountant but overall, you want to feel comfortable talking to this person. In this scenario,

These financial reports are important to understand for the health of your business and should be well understood. The balance sheet is the value of all your assets (i.e. cash and other valuables) minus your liabilities (i.e. debts) equals your equity (i.e. what you are worth). The income statement shows how much money came in as revenue and how much you spent and whereas expenses. The leftover if is your profit (aka net income). These 2 reports together can tell a lot about the health of the business. The 3rd critical report is a cash flow statement, but that is usually not critical for self-employed individuals since they use the cash basis for accounting (instead of accrual accounting).

Your Retirement

Albert Einstein once noted that the most powerful force in the universe was the principle of compounding. Compounding interest is when you are paid interest, on the previous interest you earned, hence compounding. To show an example of the power, if you take 10k and put it in an account earning 4%, and never touch the account again (no contributions or withdrawals), in 10 years, that will be ~14k, in 40 years that will be ~48k. Two things to note, 1) 4% is a fairly low return for a young person to achieve given the growth of our stock market, and 2) you will likely be contributing every paycheck or month or quarter or year, so the growth can be substantial over your working life. Time is the key element here, so start as early as you can, because you can’t make up for lost time in investing.

The SEP IRA (or Simplified Employee Pension IRA) allows you, the self-employed individual, to setup a retirement account which takes advantage of the fact that you are acting as both an employer and an employee. This distinction allows you to save far greater amounts for retirement (up to $57k in 2020) vs. a traditional IRA (up to $6k in 2020). There are other benefits and caveats that we can discuss with you, but SEPs are a great benefit available to self-employed workers.

There are two sides to consider: what you are allowed to contribute and what you can afford to contribute.

First, if you use the highest contribution account which would be a SEP IRA, that would allow you to contribute the lesser of $57k in 2020 or up to 25% of your net income.

Second, how much can you afford to put away each month/quarter/invoice payment? Do you have enough margin within your consulting rates or product sales to allow you to set aside money for a retirement?

One other aspect to consider is that for every dollar you put into a SEP IRA, you get a tax deduction, so the government will pay you back via your tax bill a certain % (based on your average tax rate). This may all seem complicated, but that’s why we built Namu.

As soon as you earn a paycheck, I’m not kidding. If you are 15 and you have a job, open a Roth IRA and put some money into it. I have 3 kids and teaching them how to save and invest at an early age is critical, because again, it’s a function of time per above. If they start investing at 15, then their time horizon to retirement is at least 50 years, massive amount of compounding will happen over that period. We are happy to discuss this and other tax and retirement strategies with you.