One of the best tax planning strategies is to have at least a part-time business of your own. As long as you intend to make a profit and have the necessary expertise to successfully run a for-profit business you can even turn what was once your hobby into a successful enterprise. I can’t emphasize enough the profit motive – indeed you must make a profit in 3 of the last 5 years to pass IRS muster. Obviously when you are just starting out you aren’t expected to be profitable, most new business don’t achieve that for the first couple years.
Once you’ve decided what your business is going to be and determine you have the expertise necessary, write your business plan! This is where you sit down and sort through all the options and make projections based on your understanding of your market and local business conditions. You will take the time to review your finances and determine how much money you will need to not only succeed but thrive. You will also project out revenues and expenses to determine the viability of you plan. It’s basically your map to business success and something you should take seriously.
This process, when done correctly will help you determine the area/s of business in which you need help, which leads to the next step: get the assistance and/or training that you lack. There are numerous resources around the valley including the SBA, SCORE and the Idaho Small Business Development Center that will practically bend over backwards to lend a hand.
Your location is critical and can be specific to your business. Obviously if you are starting a machine shop your location will be different than someone starting a used furniture store or an accounting practice. You have to be aware of zoning and check into city requirements to insure you can locate where you have chosen. You have to determine if there is enough parking and acceptable access. Use your business plan to project the number of customers you will need to attract and search for your location with that in mind.
The last thing we’ll look at this post is: what type of entity should I form? The legal structure of your business can range from a sole proprietorship, the easiest form to a complicated corporate structure. In between are LLC’s and partnerships. Each of these structures have advantages and disadvantages. The sole proprietorship leaves you vulnerable to the debt accumulated from the business, the partnership leaves you responsible not only for your debt but the debts accumulated by your partner in the name of the business. LLC’s and corporations are the most advantageous in protecting you and your assets but also the most complicated to form and maintain.
What’s next? Finances.
You have to have the financial ability to ride out the start-up phase. If you can get through the first couple of years, and you have a good idea, and the talent to pull it off, you still need to pay the bills and feed your family. Like choosing your location, this is not a one size fits all. Your business may need very little in the way of initial investment and may fill a need that is instantly recognized in your community. However, for most of us, we need to plan on an extended period of limited income as we pour our time and money into our new enterprise. So figure out what you have, talk to friends and family, and take your business plan to the bank or the SBA and find out if they are willing to fill in the gap.
Now the detail work, register your business name and legal structure with the state, apply for your federal tax identification number (which will be issued instantly on-line), register with the state for whatever permits you may need; sales/use tax, withholding, check on workers comp insurance if you plan on having employees, and check with the city to make sure you have everything you need from them.
There’s still a lot to learn, don’t be afraid to seek out the help you need. I read once that every business needs an outstanding attorney and an outstanding accountant. I believe that to be true. There’s no reason to try and be an expert on everything, concentrate on that which you do best! The rewards are innumerable.
My wife and I just started a newspaper last December and we’re starting an accounting and tax practice in downtown Caldwell. There isn’t enough time in the day to accomplish everything we need to get done. But we are confident that we will persevere and thrive once we get through the startup phase and into our new life.
[wpdevart_like_box profile_id=”https://www.facebook.com/Hensel-Accounting-and-Tax-LLC-415034981983891/” connections=”hide” width=”200″ height=”165″ header=”small” cover_photo=”show” locale=”en_US”]