The easiest small business entity to start up is the sole proprietorship. Partnerships rank next and corporations are the most expensive to start up.
In any event you have to make sure that you have correct identification numbers from a federal, state & local standpoint. You must also find out what licenses are needed for your particular business.
You must keep good records. Otherwise the IRS can disallow your expenses. You normally should open up a separate checking account for your new business. Be particularly careful of travel, entertainment, business gifts, automobile & computer expenses. The laws are such that no deduction can be made unless you keep proper records.
You have to decide whether you want to conduct business on a cash, accrual or some other method.
Home offices are watched closely by the IRS. You must use a certain portion of your home on a regular and exclusive basis.
You cannot deduct expenses in your business for personal, living or family expenses. Also, if the business is deemed to be a hobby you cannot take a net loss in the business.
Meals and entertainment expenses must be directly related and associated with a business in order to be deductible.
The cost of training or education is not deductible unless the deductions will maintain or improve the skills required by your employment or meet the requirements imposed by an employer, applicable law, or regulations as a condition of retaining your established employment relationship.
These are some of the areas to be considered when starting a small business. Seek professional help in order to make sure that you are in compliance with various federal, state & local laws. |