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Home Business Legalities And Tax Advantages |
by:
Dean Phillips |
Most cities and/or counties require you to have a business
license and/or permit. Check with your local government
municipalities to find out what the requirements are for
where you live. Depending on where you live, you should be
able to get this information from your local courthouse or
townhall.
Zoning may also be an issue. Municipal ordinances can be
very restrictive about what types of businesses are allowed
in a residential district. This also applies if you plan on
placing a sign outside of your home. Again, check with your
local government municipalities to find out what the
requirements are for where you live.
In addition, depending on how your home business is
structured--as a sole proprietorship, partnership or
corporation--there may be forms to file with the state. The
legal structure affects taxes and the liability of the owner
and the home business, so it's important to follow the
appropriate procedures. Contact your state's Department of
Revenue for filing fees and information.
If you plan to operate your home business under a name other
than your own, you will have to register a fictitious name
with the county--usually referred to as a DBA filing (Doing
Business As). The exceptions to this regulation are
corporations and partnerships doing business under the
umbrella of the corporate or partnership name.
As a home business owner, you may be required to file
estimated tax returns and pay estimated taxes quarterly. If
you have employees, you also have to submit taxes withheld
from employee paychecks. Here are some of the taxes you may
be responsible for:
Employment taxes -- Federal income taxes, Social Security
and Medicare, federal unemployment and state income taxes.
Federal self-employment tax--Required by those who work for
themselves to cover Social Security and Medicare
contributions.
Sales tax--Each state requires a sales tax number for any
company involved in selling tangible items. Sales tax is
collected, reported and paid to the state either monthly or
quarterly.
Unemployment insurance tax -- You are required to pay
federal and state unemployment taxes if you have more than
one employee on the books for at least 20 weeks in a
calendar year, or if they have paid more than $1,500 in
gross wages in a calendar quarter.
Again, check with your state's Department of Revenue for
more information.
A home business qualifies for all of the same tax deductions
regular businesses do. In the eyes of the IRS, the only
difference between most home businesses and Fortune 500
Companies is their size, and the fact that home businesses
can also deduct many household and living expenses.
Owning a home business will entitle you to deduct thousands
of dollars in every day expenses. After all, why pay more in
taxes than you have to?
Listed below are just some of the items you are allowed to
deduct:
* Your car and car expenses.
* Your mileage.
* Your home computer, printer and other office equipment.
* Your home. If you're not a homeowner, you are allowed to
deduct the area where your home office is set-up.
* If you're a homeowner, you may deduct a portion of your
property taxes and utilities.
* Your travel expenses.
* Your restaurant meals, entertainent, dinner parties.
* You may pay wages, tax free, to two of your children, if
they are involved with the business.
* You may deduct your families health insurance.
NOTE: To qualify for the above tax deductions, you must be
actively working your home business.
In closing, since tax laws are continually changing, I
highly recommend you consult with your accountant or tax
advisor to learn more about applying the aforementioned
deductions to your home business.
About the author:
Dean Phillips is an Internet marketing expert, writer,
publisher and entrepreneur. Questions? Comments? Dean can be
reached at mailto: [email protected]
Visit his website at: http://www.lets-make-money.net
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