10. ASKING FOR MORE TIME
You can ask for extensions, which gives you another six months to file and still be able to decide if you want to deduct such things as asset write-offs and retirement contributions.
9. HOW YOU’LL OPERATE
Plan in advance if your business should be a corporation (C or S), an LLC (or LLP), sole proprietor or a combination. There are pros and cons for each, as well as different tax treatments.
8. PLAN TO MAKE MONEY
When you spend money to make money, expenses will usually be deductible for taxes and don’t necessarily depend on your bottom line.
7. THE HOME OFFICE
There are basic requirements to meet to take a home office deduction on your tax return. Advance preparation can result in tax savings on expenses to run your business from your residence.
6. WHAT’S YOUR BUSINESS?
Certain activities such as rental property, farming and artistic endeavors are treated differently for taxes than an ordinary business is. Know your classification, then plan accordingly.
5. PAY YOURSELF, AND DEDUCT THAT
You get a major tax deferral when you set aside money in your personal retirement plan.
4. PREPARE BEFORE YOU HIRE
Filing requirements (weekly, monthly, quarterly and annually) are a basic element whenever employees are involved. Know your costs so you can maximize the business opportunity.
3. ENTERTAINMENT COSTS COUNT
Not all costs are tax deductible, yet it may be more important for business or marketing reasons to incur entertainment expenses. The key is to track who, what, when, where and why to determine what’s deductible.
2. IS IT OK TO HAVE A LOSS?
The obvious answer is “Why would you?” The purpose of a business is to make money. The better response is “Who is asking?” Your bank is likely looking for a profit, so are you and your associates. Taxing authorities have rules associated with losses, so be aware of them.
1. KEY ELEMENTS TO SUCCESS
Having realistic planning, financial backup, good record-keeping, a trusted advisor network and a strong work ethic are important.
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Patricia L. Jones, CPA, is a partner at P.L. Jones & Associates PC in Worcester. Contact her at pjones@pljonescpa.com.
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