Running Your Own Race and Fireflies

There are a couple of items I want to address before the usual content. First, thank you so much to Inflate Maine for helping me exhaust a bunch of children over the 4th of July weekend. Inflate Maine made renting a bounce house so easy - ordering, drop off, setup, and pick up. The kids all had an absolute blast.

Second, the One Big Beautiful Bill was signed into law. This bill contains many changes to tax law. We’ll be going through the changes with a fine tooth comb, but keep in mind that official IRS guidance on the implementation for many items has not yet been released. Stay tuned for updates and discussion on relevant changes.

Top of Mind

I like to run. I've been running since high school and I've tried to keep up with it throughout my adult life. I run a mix of races each year with varying degrees of success. Racing, no matter how fast you run, is a great forcing function for disciplined training. I run the LL Bean 4th of July 10k most years. This year's race was a total disappointment for me. I blew up just after mile three and had to slog out the second half at a pace I wasn't proud of.

Every runner has the occasional bad race, so it's a good time to pause and reflect on what happened. I could try to blame things like the humidity, the early start time, or even the tight hamstring, but those are all minor obstacles. The real issue was that I ran someone else's race instead of my own.

I had built a strategy for myself that matched my training and accounted for the hills, humidity, and early start. But then, at the last minute, I got swept up in wanting to compete with another dad. I went out too fast and then tried to hold a pace that wasn't my own.

This is something I see constantly in financial planning. Social media and casual conversations make it easy to compare your financial situation to others, but those comparisons rarely include the full picture. The aggressive investment strategy that works for your colleague might not fit your risk tolerance. The tax strategy your neighbor raves about might not apply to your income situation. The retirement timeline that seems perfect for your friend might not account for your family's unique circumstances.

There are no right or wrong financial goals, just like there are no right or wrong race times. But if the strategies and tactics don't fit your specific situation and objectives, you're going to end up running someone else's race and may find yourself disappointed with the results.

Worth Knowing

Speaking of running your own race, business structure decisions are a perfect example of where one-size-fits-all advice can lead you astray. I regularly see clients who've set up unnecessarily complex structures because they heard about someone else's "tax savings."

The classic example: your friend raves about the self-employment tax savings from their S-Corp election, so you assume it's right for you too. But S-Corp elections only make sense above certain income thresholds, and the administrative costs and complexity might outweigh any tax benefits for smaller operations.

I regularly see business owners who've adopted complex multi-entity structures because they heard about someone else's setup at a networking event or read about it online. Meanwhile, they're paying thousands in formation fees, annual state fees, and additional tax preparation costs that might not be justified by their actual tax savings or business needs.

This is where the IRS concept of "economic substance" becomes important. Tax strategies need to have legitimate business purposes beyond just tax savings. If the only reason for your structure is to reduce taxes, and it doesn't make economic sense for your actual business operations, you might be setting yourself up for problems down the road.

The key variables that actually matter: your income level, the type of business activity, your state's tax structure, liability concerns, and future growth plans. What works for a $500,000 consulting business might be overkill (and expensive) for a $50,000 side hustle.

Before you copy someone else's business structure, make sure you understand why it works for them and whether those same factors apply to your situation. Sometimes the simplest approach is the best approach.

Mark Your Calendar

• July 31st: Business accounting method change deadline. If you're considering major accounting changes like cash to accrual, inventory accounting, or depreciation methods, you'll need to file Form 3115 by July 31st for the change to take effect in tax year 2025.

• September 15th: Q3 estimated tax payments are due. Additionally, it is the final deadline for calendar year S-Corps and partnerships to file 2024 returns (with extension).

• October 16th: Final deadline for individual returns with extensions - still a few months out, but worth keeping in mind for planning purposes.

Maine Wildlife Fact

Fireflies are a quintessential part of warmer summer evenings. We've been letting Will stay up a little bit later to watch them before bedtime. We recently learned that fireflies are nature's most efficient lights! They can convert energy into light with nearly 100% efficiency. For comparison, a regular incandescent lightbulb only achieves about 10% efficiency, with the other 90% lost as heat.

Equally fascinating is that fireflies spend 1-2 years as glowing larvae underground before emerging as flying adults. The adults we see flashing on summer nights live only 2-3 weeks in their winged form. Their evening display is essentially a brief, highly efficient sprint to find a mate before the end of their life cycle.

These Maine wildlife facts have been brought to you by Will (almost 7) and Frank (3), Flying Point Advisors’ on-staff naturalists.

Questions about any of this? Just reach out - I read every email and love hearing from you. Thanks for reading. You'll hear from me again in about two weeks.

- Mike