Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
The Biz Question
Right, so we Moms work at home, but how do we go about claiming tax deductions for costs towards the running of our businesses? I am presently trying to get my web page design business up and running, but will need to obtain a loan for advertising and some extra equipment, like extra telephone line, fax machine etc. As my office will be in my home, what tax benefits can I claim? Also, I provide "free" advertising on my site for locals, and sometimes travel to "events" to obtain photographs and content for my website. Can one claim for mileage/maintenance and entrance fees?
Can anyone point me in the right direction? Also what are the benefits of registering a business and how does one 'make' the business separate from the family? Say if the business runs into trouble and loses money for some untold reason. I don't want this to affect the well-being of the family for any reason. What do you have to do to protect them against such an event?
Answer from our Guest Expert Lillyvette Montalvo
Hi, There, Fellow Mom!
I'm a regular at that cafe too -- you know, "the working moms cafe!" I'm not an accountant or an expert in the WAHM field. But I'm a working mom who does financial consulting and I do have some tricks of the trade for you anyway! I have an accountant take care of my taxes -- just to make sure I'm completely "covered" and legal. But since I need to get all of my business info to him, I know exactly what you're looking for!
First, A Biz Tip Appetizer for You
Make sure you have a business plan in place before starting your business. Although it doesn't have anything to do with your taxes or claiming certain benefits, it does give you some very necessary direction for your business. This is a "must" for all business owners. And the good news is you can have a business plan developed free of charge at your local university's Small Business Development Center. (See www.sba.gov for a list of SBDCs and SBA offices in your state.) Or, you can check the local book stores for good start-up business plan books.
For Your Main Entree: Loan Options Extraordinaire!
Save Money with a Phone Line Choice
Save some money on the phone bill by adding on another residential line to your home/office instead of a business line. This doesn't cost as much. Once you've built up your business, you can switch to a business line agreement with your phone company. You pay more for the business line because your biz is then automatically listed in the biz section of your white pages. Since you're going to have business cards and letterhead with your phone number, you can be your best advertisement, for now.
Get Free Milk from the Marketing Cow
Speaking of advertisement, take advantage of the marketing "freebies" available to you. These may allow you to start building some credibility in your field without breaking the bank. Here are just a few ways to do this:
Home Office Deductions
This is particular area is a definite sticky wicket and consulting your accountant is the way to go for sure. The IRS has some very stringent and precise rules on how you can deduct home office space in your house. For starters, make sure you use your "business area or office" for that purpose only. But bottom line is to go the pros on this issue; you'll be better off in the long run.
Travel Expenses Are Valid Biz Deductions
If you travel to events that pertain to business, keep all receipts (and a log) on your expenses since you can claim those as legitimate business expenses. Entrance fees, meals, lodging, mileage are all deductible. Keep a solid record on your mileage: dates, location traveled to, and purpose. Your accountant can tell you the current rate of cents per mile you can claim.
Protecting House and Home
In terms of keeping a business completely separate from the family, consult with your accountant and/or lawyer to see which business formation would be the best for your tastes. For instance, should you register as a corporation, LLC or sole proprietorship? A corporation or LLC creates a separate entity for your business and protects you from personal liability. If you work as a sole proprietor, however, your personal expenses are at risk if there were to be a loss, a lien or a judgment against your business. So you'll want to avoid that most likely.
Other Home Business Resources
You can obtain helpful tips and information from magazines, such asWorking Solo orWork At Home. You'll be surprised at how many businesses are actually home-based! You could also try Idea Cafe's Work At Home and Biz Books sections for more info on home-based businesses.
I hope all of this helps you! Welcome to the home-based workforce!
Best of Success!
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DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. Idea Cafe Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from Idea Cafe. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages.
TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business, CyberSchmooz, and BizCafe.