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Answer from our Guest Expert Peter Soh of AdviseInc.com - page 2
Sole Proprietorship Write-offs
Many small businesses are ran as sole props. Owners take responsibility for the business's debts and liabilities, yet they enjoy all the profits as well. Some general tax write-offs for sole proprietorships would include:
If you run your business from home, learn more about the Office-in-the-Home Deduction compliments of Idea Cafe.
Equipment depreciation -- Every piece of equipment you use in the operation of your business can be depreciated and provide you with valid tax write-offs.
Greeting cards -- Here's alittle known tax write-off. When your small business sends out greeting cards for various business reasons, their costs are deductible.
Mileage -- Don't forget every mile you drive on behalf of your business is deductible. Keep a detailed track records of these miles for each tax year, and present them to your accoutant for write-off purposes.
Partnership & LLC Write-offs
General and limited partnerships and LLCs are considered "flow-through" entities, which means the owners are taxed on income, or they can deduct losses on the company's undistributed earnings each year. These distributions are typically nontaxable, and this single level of taxation is very attractive for startup companies. The LLC has been very popular because it offers all of its owners limited liability, single taxation, and flexibility for tax benefits; whereas the partnerships cannot offer limited liability for all of its owners. Some write-offs for partnerships and LLCs you may not have considered include:
Big Money Investor Allocation LLCs and partnerships allow some flexibility in the tax treatment for each owner. For instance, a big money investor in the entity may want to deduct tax losses generated by the entity. If all parties agree, losses from a company can be allocated to the big money investor, and if there's income, those amounts can be allocated evenly to the other partners or shareholders.
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