How To Start A New Business

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Starting a new business may not be a practical idea to your friends in this tough economy, but having an entrepreneurial spirit can pay off in the end. If you’re dedicated to your business ideas and have a focused business plan, chances are, you can be successful. Every business venture poses a risk and you have to decide if selling cookies out of your home or starting a car wash business is worth it. However, most entrepreneur’s have said, being their own boss has its rewards. The following guide is a few tips on how to start a business.

Starting Your New Business: What You Need To Know

Every new business idea should be formed from a written business plan. Write down your goals, services, products, employees and business model on paper. You should also determine the outlook of your business in 5 years. If it’s possible, get the training and know how to successfully run a business by attending seminars, webinars, or by taking a few courses at your local community college. Finding a great location for your business is also a part of your early business decisions. Will you be working from home or an office?

Taxes, tax identification, permits, and registering your business name are also very important factors in starting a new business. More importantly, acquiring the proper funding to run and sustain your business is the key to success. Have you saved up enough money to start your new business? If you need additional funding resources, individuals can look into venture capital, private loans, government backed loans, and grants. When you’re taking out a loan, you should give careful consideration to how you’ll be paying the loan back. Avoid starting a new business and running into excessive debt trying to pay back your loans. The Small Business Association (SBA) has a lot of available online resources to help you with starting a new business.

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The Deductible Dozen: Tax Deductions for Your Small Business

The following are the top tax deductions that are often overlooked by small-business owners.

Home Office Space:

If you have a portion of your home that is solely devoted to work, you can either claim a portion of your rent, mortgage, and other home expenses based on the percentage of your home that is used for business or use the simplified deduction.

Furniture:

You can claim a deduction for desks, filing cabinets, and other furniture that you purchase for the office. You can deduct the full cost in the year that the items are purchased or depreciate the expense over seven years.

Office Supplies:

You can use expenditures for consumable office supplies to offset a portion of your business income.

Office Equipment:

The cost of computers, printers, and other office equipment can be deducted in total during the year of purchase or depreciated over five years.

Computer Software and Subscriptions:

The cost of industry-related magazines and business-related computer software can be fully expensed in the year purchased.

Business-related Mileage:

If you use your vehicle for business-related travel, you can claim a deduction for mileage, tolls, and parking. You can either calculate the actual expenses or deduct a percentage of your auto expenses based on the amount of business usage.

Travel Expenses:

If you travel for business, you can claim expenses for lodging, transportation, and miscellaneous expenses related to being on the road. There are limits to how much you can deduct for meals, entertainment, and client gifts.

Retirement Contributions:
If you are self-employed, you can deduct contributions to your IRA or KEOGH on your personal income taxes.

Insurance Premiums:

Depending on the circumstances, you may be able to deduct up to 100 percent of the cost of your health insurance if you are self-employed.

Telephone Expenses:

You can claim up to 100 percent of the cost of business calls made from your home phone. You can also deduct the percentage of your cell phone bill related to work-related calls.

Social Security:

If you are self-employed, you can deduct half of your social security contribution.

Child Employee:

If you meet certain requirements, you may be able to deduct the salaries of your children that you employ in your business.

Before claiming any deductions, be sure to consult a tax professional or certified public account to ensure that you comply with current tax regulations.

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30 Things You Can Deduct From Your Small Business Taxes

When it comes to cutting costs for a small business, annual taxes are a great place to start. There are a wide range of expenses that can be lawfully deducted from your taxes, from utility bills to paying for a new company truck. Check out the list of 30 items below to find some of the common deductions that entrepreneurs and small businesses make to reduce their tax bill each year.

30 Common Deductions for Small Businesses

1. Housekeeping, cleaning and sanitation
2. Radio, TV and paper advertising
3. Company cars and other vehicles
4. Membership dues for commercial associations
5. Uncollected payments from customers
6. Fees from financial institutions
7. Travel for business purposes
8. Structural repair and maintenance
9. Hosting for meetings of employees, managers or board members
10. Donations to charities
11. Computers, printers and peripherals
12. Appliance installation and repair
13. Shows and conventions
14. Depreciation of property value
15. Employee education and improvement
16. Hosted events and entertainment for customers
17. Fees related to franchise ownership
18. Certain types of group insurance plans
19. Qualifying home office expenses, including utilities and equipment
20. Payments made for legal consultation or services
21. Financial loss from theft or vandalism
22. Interest generated on business property mortgages
23. Costs related to moving to a new location
24. Payrolls taxes, like social security and unemployment
25. Employee pension plans
26. Research and development for new products or services
27. Earnings from royalties
28. Payments made to subcontractors
29. Leasing of storage space for commercial property
30. Certain types of discounts given to customers

It’s important to note that there are some stringent restrictions that determine what does and does not qualify as a business expense. Business owners must take care to keep their personal finances and accounting separate from their company to avoid confusion or mistakes. Talk to a licensed professional if you are unsure if one of your expenses can be deducted from your taxes.

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What You Need to Know About the Fed’s Rate Rise

As the Fed moves to gradually raise the federal funds rate, small business owners should take stock of their cash flows. Doing so now will help small business owners gain access to the capital they need when they look to expand or grow their business. It might seem counter-intuitive. If you know that rates are going to rise then why not gain as much capital flow as you can now? Here are a few reasons why you should think carefully before approaching a lender now.

First, raising the rate is a good thing. It shows that consumer confidence is building and that the economy is gaining strength. However it also means that lenders will increase their interest rates and closely analyze risk. If your business is low risk and if you maintain steady cash flow then lenders are more willing to invest at a lower interest rate. But if your organization has depended a great deal on capital flow with limited cash flow then your accounts do not look good on paper. The perception is that your business depends on capital, not cash, to survive.

Fortunately no one wants to see small businesses suffer, including the Fed. A blow to small businesses will impede any further strengthening of the economy. This is why the Fed is slowly raising rates. As interest rates rise, invigorate your cash flows by taking advantage of the strong economy.

As mentioned earlier, a stronger economy means greater consumer confidence and spending. In such a scenario your business is poised to benefit greatly. Your cash flows will strengthen. You might want to hire more people or expand into new markets or products. When lenders look at your books and see that your capital flow outweighs your cash flow they might consider an investment too risky, resulting in your business’ inability to expand at just the moment when expansion is optimal.

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Frequently Asked Questions About Tax Records

Sometimes in life, it’s necessary for you to share your tax records with a third party. For example, if you want to apply for financial aid, the lender might want to see your tax returns to determine your eligibility for receiving such aid. You simply request a transcript of the return by using IRS Form 4506-T, which is free of charge. In the case of requesting financial aid, you can ask to have the transcript sent to you or for it to be sent to your prospective lender. You may have questions about the process, so here is a list of the answers to the top four:

1. What is the Timeframe for Transcript Recipt?

Whether you request the transcripts be sent to you or to a third party, they will usually arrive within 24-48 hours after the IRS receives the request for the transcripts. Be careful. There are less-than-savory, fly-by-night operations that promise eight-hour turnaround times. That is not part of the IRS’s program.

2. What Kind of Transcripts Can You Get by Submitting a 4506-T?
There are five possible transcripts available. They include:

•1040
•1120
•1065
•W-2
•1099

You can request any version of the forms listed above.

3. Does it Cost Anything After Getting the Free Form?

Prices are variable, depending on your specific circumstances. It’s usually best to contact us for a quote before submitting the order. That way, there are no surprises.

4. What Happens if My Transcript Request is Denied?

It’s rare for such a request to be denied, but it does happen. Usually, the chief reason is that you forgot to include your address on the form or included an address that doesn’t match the address on your tax return. Form 4506-T includes a section for previous addresses for just this situation. Also, you should make sure your signature matches that on your tax return and is legible.

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