As a finance professional, a loan broker is considered an expert on money matters. Every day, commercial loan brokers examine the financial records of companies big and small. They review the current standing of the stock market, and most likely, read several trade publications and mainstream business magazines. Still, many loan brokers overlook their own business finances. They fail to protect the hard work they have dedicated to making their brokerages successful by neglecting to enforce proper book-keeping or adequately filing their income levels. These simple techniques will assist in creating mindfulness of your own finance issues.
The first step in being attentive to your brokerage’s finances is to incorporate the business into an LLC, or limited liability company. Doing this adds significantly more liability protection than a sole-proprietorship. In the case of a lawsuit or brokerage deal gone bad, your llc-status will protect your personal equity and helps to separate your personal and professional possessions. Having an Inc. or llc at the end of your company’s name can generate greater tax savings depending on how it is structured. For both legal and taxation reasons, incorporating your brokerage is a smart move to protect it from unfavorable circumstances.
You know the quip “it’s not personal, it’s business?” Keep that in mind with your expenses, as well. For an independent loan broker, the line between business time and personal time can sometimes be blurred. Make sure you know what expenses count as strictly personal, and what may be applicable to your business. Keep receipts separate and engage in good bookkeeping practices. Use software and online tools to help you track how you’ve split your expenses in the past. This will be incredibly useful when filing tax returns.
Be sure you are claiming your “real income” on your personal tax returns. How much are you really bringing home as a salary? The amount you make from each lending deal isn’t really your income. Take into consideration what you spend for office space, printing, mailings, etc. You can still benefit from programs like flexible spending accounts and retirement and college savings as someone who is self-employed, just as you would if you were an employee at a large brokerage firm or bank. Bring all of these factors into account before claiming your annual income.
If you work from home, calculate the square footage of your office and make sure to deduct it from your tax return. Because the home office is part of personal life, it gets overlooked as potential tax savings. In some scenarios, you can claim portions of your home heating and electrical expenses as a business expense. You can also deduct certain amounts of mileage for client meetings and work-related events. Check your tax codes to see if these savings apply to you.
If necessary, hire an accountant or good tax attorney to assist you with your financial information. A certified public accountant (CPA) can review all of your money information and help guide you in making decisions about your independent brokerage. A tax attorney can help you navigate any complicated legal matters that can create hang-ups in your lending business. It’s always good to have a second set of eyes, whether for all of your finance information or only for tax returns.
Even though a loan broker may review loads of financial information each day, the smaller details of their own brokerage’s money matters are often overlooked. From legal issues to taxation requirements, it is important to be mindful of these elements to maximize the income potential of your brokerage and protect yourself from any regulatory repercussions.