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Most small businesses need cash infusions at some point, and how you secure the funding can make all the difference between whether your business succeeds or struggles. To help determine which is best for your business, let’s break down the three primary types of funding available: debt, equity and hybrid financing.

Debt: Borrowing to grow

Debt financing involves borrowing money and repaying it with interest over time. This includes traditional options like bank loans, lines of credit, and Small Business Administration (SBA) loans.

The main benefit of these options is that you retain full ownership of your business, though loan payments can put a strain on cash flow. Also, lenders often require collateral—like equipment, real estate or other assets. If payments are missed, creditors can seize the collateral and, in some cases, pursue legal action against the business or owners.

This option works best for businesses that have stable revenue and are able to make timely payments. And since you retain ownership, you preserve control over decision-making. However, if your cash flow can’t sustain the regular loan payments, debt financing is not a workable option.

Equity: Trading ownership for capital

Equity financing means selling a portion of your business to investors in exchange for capital. Common sources of equity funding include:

• Angel investors
• Venture capital firms
• Crowdfunding platforms

Unlike debt financing, equity financing doesn’t require repayment, but it does mean giving up some ownership and potentially sharing future profits.

This option is often best for start-ups or high-growth businesses that may not qualify for traditional loans due to limited profitability or lack of a solid credit history. While equity investors can offer valuable guidance, expertise, and networking opportunities, it’s important to consider the trade-offs like shared decision-making and less control over the direction of your business.

Hybrid financing: Combining debt and equity

Hybrid financing combines elements of both debt and equity financing. Examples include convertible notes, where debt is converted into equity under certain conditions, and revenue-based financing, where repayments are based on a percentage of future revenue. These options offer more flexibility by aligning payment terms with your business’s performance.

Hybrid financing is a good choice for business owners looking for tailored funding solutions. It allows you to leverage the benefits of debt and equity, but the terms can be complex and require careful negotiation to ensure they fit the needs of your business.

Financial statements matter

Accurate financial statements are essential when seeking funding for your business. Lenders and investors will want to see a detailed and comprehensive financial package that includes:

• Income statements, which show revenue, costs, and profits
• Balance sheets, which summarize your assets and liabilities
• Statements of cash flows, which detail how money flows in and out of your business

Additionally, you might be asked to provide supporting reports like accounts receivable aging, detailed expense breakdowns, and information about owners and key employees. These documents provide a clear picture of your business’s financial health and operations, so potential funders can evaluate the risks and potential rewards of their investment.

Most lenders and investors will expect to see at least two to three years of historical financial data, along with projections for the next two to three years. These reports should tell a clear, compelling story about your business’s financial stability and growth potential.

What’s right for your business?

Choosing the right way to fund your business comes down to your business model, growth stage, goals, and how much risk you’re willing to tolerate. As your business’s needs evolve, you might end up using a combination of debt, equity and hybrid financing.

Your Smolin advisor can help you keep your financial records in check and walk you through the pros and cons of each option. Reach out and let’s talk about how to fund the next phase of your business’s growth.

Starting a business with partners and not sure which entity to choose? An S corporation could be the perfect fit for your new venture.

One benefit of an S corporation

One big perk of an S corporation is that shareholders aren’t personally liable for the company’s debts. To keep that protection intact, make sure you:

• Properly fund the corporation
• Keep it separate from personal finances
• Follow state requirements (like filing articles of incorporation, adopting bylaws, electing a board of directors, and holding organizational meetings).

Handling losses

If you expect early losses, an S corporation offers a better tax advantage than a C corporation.

While C corp shareholders don’t get tax benefits from losses, S corp shareholders can deduct their share of losses on personal tax returns—up to the amount they’ve invested in the business. Losses that exceed your basis can be carried forward to offset future profits when there’s sufficient basis.

Profits and taxes

Once the S corporation starts earning profits, the income is taxed directly to you, regardless of whether it’s distributed. This income is reported on your personal tax return and combined with your other earnings.

Your share of the S corporation’s income isn’t hit with self-employment tax, but your wages are subject to Social Security taxes. If the income qualifies as qualified business income (QBI), you can take a 20% pass-through deduction, subject to certain limitations.

Note: The QBI deduction is set to expire after 2025 unless Congress extends it. However, there’s a good chance it will be extended—and possibly even made permanent—under ongoing Tax Cuts and Jobs Act negotiations.

Fringe benefits

If you’re offering fringe benefits like health and life insurance, keep in mind that while the company can deduct the cost for shareholders owning more than 2%, the benefits will be taxable to the recipient.

Protecting S status

Be careful about transferring stock to ineligible shareholders (like another corporation, a partnership or a nonresident alien), as it could terminate your S election, turning the corporation into a taxable entity.

To avoid this risk, have shareholders sign an agreement to prevent transfers that would jeopardize the S status. Also, remember that an S corporation can’t have more than 100 shareholders.

Final steps

Before settling on your business entity, reach out to your Smolin advisor to discuss your options. We’re here to answer your questions and help set your new venture up for success.

With nationwide gas prices higher than a year ago, it’s good news that the 2025 optional standard mileage rate for business vehicle use has increased too. The IRS recently announced that the cents-per-mile rate for operating a car, van, pickup, or panel truck will be 70 cents in 2025, up from 67 cents per mile in 2024. This rate applies to all types of vehicles, including gasoline, diesel-powered, electric, and hybrid-electric models.

The process of calculating rates

The 3-cent increase from the 2024 rate aligns with recent trends in gas prices. On January 17, 2025, the national average for regular gas was $3.11 per gallon, up from $3.08 last year, according to AAA Fuel Prices. But the standard mileage rate takes into account all vehicle-related costs, not just the price of gas.

The business cents-per-mile rate is actually updated annually based on an IRS study that examines the fixed and variable costs of operating a vehicle, including gas, maintenance, repairs, and depreciation. When gas prices significantly change, the IRS may adjust the rate midyear.

Standard rate or real expenses

Businesses can deduct the direct costs tied to using a vehicle for business such as gas, oil, tires, insurance, repairs, and registration fees. Vehicle depreciation can also be claimed, but certain limits apply to vehicle depreciation that don’t apply to other types of business assets.

The cents-per-mile rate is an excellent option if you prefer not to track every vehicle-related expense. With this method, instead of itemizing all actual expenses, you only need to log key details, like mileage, date, and destination for business trips.

Businesses that reimburse employees for using their personal vehicles for work often favor the cents-per-mile rate. This approach can help attract and retain employees who frequently drive for business since, under current law, employees can’t deduct unreimbursed business mileage on their own tax returns.

If you choose the cents-per-mile rate, just be sure to follow all the necessary rules. If you fail to do so, the reimbursements could be classified as taxable wages for your employees.

When you can’t use the standard rate

There are situations where the cents-per-mile rate doesn’t apply. It partly depends on how you’ve claimed deductions for the same vehicle in the past. But in other situations, it depends on whether the vehicle is new to your business this year or if you want to claim first-year depreciation tax benefits.With many factors in play, deciding whether to use the standard mileage rate for vehicle expenses can be tricky. If you have questions about claiming these expenses for 2025, or on your 2024 tax return, reach out to your Smolin advisor for help.

An advance health care directive allows you to outline your medical preferences in case you are ever incapacitated or unable to make decisions. These directives are often part of a comprehensive estate plan and might be called by different legal names depending on where you live.

Here’s a breakdown of some healthcare directives you should add to your estate plan.

Healthcare power of attorney

Similar to how a durable power of attorney gives your chosen agent authority to manage your finances if you are unable to do so, a health care power of attorney (or medical power of attorney) allows a trusted person to make personal medical decisions on your behalf. Some states call this a healthcare proxy.

Selecting the right agent is crucial. Since you can’t predict every medical situation that might arise, it’s essential to choose someone who knows you well, understands your values, and can be trusted to honor your wishes. This designated agent is often a family member, close friend or trusted professional. It’s also wise to name an alternate agent in case your first choice is unavailable.

Living will

A living will is a legal document that outlines what medical treatments you do or don’t wish to receive should you be unable to communicate such decisions. It provides clear guidance on what life-extending medical treatment you wish to have or decline in the event of a terminal illness or incapacitation.

This document only takes effect if you become incapacitated, usually after a physician has certified that you’re facing a terminal illness or are permanently unconscious. In your living will, be sure to outline your wishes for end-of-life care, which may include consultation with a doctor.

Since requirements for a living will vary from state to state, it’s a good idea to have an attorney familiar with local laws help prepare your living will.

DNR and DNI orders

It’s a common misconception that you need to have a living will or advance health care directive on file to implement a “do not resuscitate” (DNR) or “do not intubate” (DNI) order.  To establish a DNR or DNI order, all you need to do is discuss your wishes with your physician and have them prepare the necessary paperwork. The order can then be added to your medical file.

Even if your living will covers your preferences about resuscitation and intubation, it’s a good idea to request DNR or DNI orders when you’re admitted to a new hospital or facility to clarify your wishes for loved ones.

Put your directive into action

To make your advance healthcare directive official, it must be in writing. Each state has its own forms and requirements for creating these legal documents. You may need forms signed by a witness or notarized, depending on where you live. If you’re unsure about the requirements or the process, it’s a good idea to consult an attorney for help.

Keep in mind that health care directives are flexible—you can update them anytime. Just make sure to follow your state’s specific guidelines when making changes.

Contact your Smolin advisor for help drafting an advance health care directive and adding the necessary documents to your estate plan.

Medicare health insurance premiums can be a significant expense—especially for high-income earners and married couples paying separately for coverage. Here’s what you need to know about how taxes factor in.

Medicare Part B: what it covers and who pays

Medicare Part B, often called Medicare medical insurance, helps cover doctors’ visits and outpatient services. Most people age 65 and older qualify, but it’s also available to some people with disabilities, ALS (known as Lou Gehrig’s disease), and end-stage renal disease. Unlike Medicare Part A, Part B plans require monthly premiums, which can add up.

Your monthly Part B premium is based on your modified adjusted gross income (MAGI) from two years prior (as reported on your Form 1040. MAGI is your adjusted gross income (AGI) plus any tax-exempt interest.

In 2025, most individuals will pay a base monthly premium of $185 per person for Part B coverage.

Higher-income individuals pay an additional surcharge on top of the standard premium. In 2025, this surcharge applies if your 2023 MAGI was over $106,000 as a single filer or over $212,000 for joint filers. You can find a breakdown of 2025 Part B premiums and their applicable surcharges here.

Part B premiums, including any surcharges, are automatically deducted from your Social Security benefit payments and appear on the annual Form SSA-1099 from the Social Security Administration (SSA).

Part D prescription drug coverage premiums

Medicare Part D provides private prescription drug coverage, with base premiums that vary by plan. Higher-income individuals are subject to an additional surcharge on top of the base premium.

For 2025, this surcharge applies if you:

• Filed as an unmarried individual for 2023 with a MAGI above $106,000
• Filed jointly for 2023 with a reported MAGI over $212,000.

You can find each covered person’s 2025 monthly Part D surcharges here.

You’ll pay the base Part D premium directly to your chosen private insurance provider. If you owe a surcharge, it will be deducted from your Social Security benefits and shown on your annual Form SSA-1099 from the SSA.

Deducting Medicare premiums

Medicare premiums can be combined with other eligible healthcare expenses to claim an itemized medical expense deduction. You can deduct the portion of total qualifying expenses that exceed 7.5% of your adjusted gross income (AGI).

Your 2024 tax return and 2026 Medicare premiums

The income reported on your 2024 Form 1040 will influence your 2024 MAGI, which will determine your 2026 Medicare premiums. If you’re self-employed or own a pass-through business (LLC, partnership, or S corporation), you have more flexibility to manage your MAGI through deductible retirement contributions or depreciation strategies.

Maximize savings on Medicare costs

Medicare premiums can add up quickly, and your 2024 tax decisions may directly impact what you pay in 2026. And, while 2026 may seem far off, smart planning now can help you avoid unexpected premium increases in the future.

Reach out to your Smolin advisor to discuss your options to minimize costs and optimize your financial situation.

If you own a growing, unincorporated small business, high self-employment (SE) tax bills might already be on your radar. The SE tax covers your contributions to Social Security and Medicare as a self-employed individual.

SE tax basics

The 15.3% SE tax rate applies to the first $168,600 of your 2024 net self-employment income. This rate includes 12.4% for Social Security and 2.9% for Medicare. In 2025, the rate will apply to the first $176,100 of your net income.

Beyond those thresholds, the 12.4% Social Security tax component of the SE tax drops off, but the 2.9% Medicare tax still applies to all income.

How high can your SE tax bill climb? Higher than you might think. The main driver is the 12.4% Social Security tax, because the Social Security tax ceiling increases every year.

To calculate your SE tax, start with your taxable self-employed income (usually from Schedule C of Form 1040) and multiply by 0.9235 to get your net SE income. For 2024, if your net SE income is $168,600 or less, multiply the amount by 15.3% to find your SE tax. If it’s more than $168,600, multiply $168,600 by 12.4% and the total by 2.9%, then add them together.

Example: If your net SE income for 2024 is $200,000, your SE tax bill will be $26,706 (12.4% × $168,600) + (2.9% × $200,000)., totaling $26,706. That’s a hefty tax bill!

Projected tax ceilings for 2026–2033

The current Social Security tax on your net SE income may seem steep, but it will likely get worse. As your business income grows, the Social Security tax ceiling will continue to rise with inflation.

Here are the latest projections from the Social Security Administration (SSA) for the tax ceilings from 2026–2033:

• 2026 – $181,800
• 2027 – $188,100
• 2028 – $195,900
• 2029 – $204,000
• 2030 – $213,600
• 2031 – $222,900
• 2032 – $232,500
• 2033 – $242,700

Could these projections be too low? Definitely. The SSA’s estimates often come in lower than the final numbers. For example, the 2025 ceiling was initially projected to be $174,900 but ended up at $176,100. But if the projected ceiling holds, by 2033, the SE tax on $242,700 of net SE income will be a whopping $37,133 (15.3% × $242,700).

Disconnect between tax ceiling and benefit increases

While it may seem logical that the Social Security tax ceiling would rise at the same rate as Social Security benefits, they don’t. For example, the 2024 Social Security tax ceiling is up 5.24% from 2023, but benefits for Social Security recipients increased by just 3.2%. Similarly, the 2025 Social Security tax ceiling will rise by 4.45%, but the benefits are only going up by 2.5%

This discrepancy is due to different inflation measures being used. The Social Security tax ceiling rises with average wage increases while benefits are adjusted based on general inflation.

S corporation strategy

While your SE tax bills are steep and likely to rise, there are ways to reduce them to more manageable levels. One strategy is to start running your business as an S corporation.

You could pay yourself a reasonable salary and distribute the remaining income as dividends. Only your salary would be subject to Social Security and Medicare taxes, potentially saving you money.

Reach out to your Smolin advisor to explore strategies for managing your SE tax.