Organizational and Start Up Costs
Expenses incurred before a business begins operations are not allowed as current deductions. These Startup costs must be amortized over a period of 180 months beginning in the month in which the business begins. Luckily congress passed a bill letting businesses deduct up to $10,000, for 2010 only. If you want to deduct a larger portion of your start up cost in the first year, a new business will want to begin operations as early as possible and hold off incurring some of those expenses until after business begins.
Business or Hobby?
It is generally accepted that people prefer to make a living doing something they like. A hobby is an activity for which you do not expect to make a profit. If you do not carry on your business or investment activity to make a profit, there is a limit on the deductions you can take.
Business Eligibility for Schedule C-EZ
Your business may have become eligible to use the abbreviated Schedule C-EZ instead of the longer Schedule C when reporting business profit and loss on your federal income tax return.
Deductible Home Offices
Whether you are self-employed or an employee, if you use a portion of your home exclusively and regularly for business purposes, you may be able to take a home office deduction. You can deduct certain expenses if your home office is the principal place where your trade or business is conducted or where you meet and deal with clients or patients in the course of your business. If you use a separate structure not attached to your home for an exclusive and regular part of your business, you can deduct expenses related to it.
Domestic Production Deduction
If your business is engaged in a qualifying production activity you may be able to take a tax deduction for your U.S. based business activities. The deduction is limited to income arising from qualified production activities in whole or in part based in the United States.
Are you in the middle of a disagreement with the IRS? One of the guaranteed rights for all taxpayers is the right to appeal. If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case. The appeals procedures is complex, for more information on the appeals process, please contact us!
What can I do to raise money for my small business?
Although the process is complex and frustrating, raising capital is the most basic of all business activities. The most common source of funding, not including personal resources, are credit unions and banks who will provide a loan if it is possible to show that your offer is worthwhile. Other sources are venture capital firms that aid businesses in exchange for partial or equity ownership.
For business financing, what kinds of loans exist?
You must know the exact amount of money that you need, what your purpose is and how you will repay it in order to be successful in getting a loan. You must convince the lender in a written proposal that you are a good credit risk. There are two basic kinds of loans, and the terms vary by lender. They are short-term and long-term. Maturity periods of up to one year are generally short-term; they include accounts receivable loans, working capital loans and lines of credit. Maturities greater than one year and less than seven years is a typical long-term loan. Equipment and real estate loans can have maturity up to 25 years.
When considering a loan request, what do banks look for?
The bank official who reviews the loan request is focused on repayment. Most loan officers request a copy of your business credit report, your tax returns, and financial statements, to determine your ability to repay, and is the cash flow of the business sufficient to make the monthly payments on the requested loan.
What do I need to include in a good loan proposal?
The following main points and documents should be contained and made a part of a good loan package; general information of the business and its principals, description of the business and legal structure of the entity, management profile, market and product information, and lastly financial information of the entity and its principals.