Tax Advantages and Home Business Legalities

by: Dean Phillips

Most cities/towns/counties stipulate that a new business startup must obtain a license and/or permit to carry on business.

Check with the local government municipal offices to determine what the requirements and restrictions may be for your particular area.

Depending on your location, you should be able to get this information from your local courthouse, town or city hall.

Zoning may also be a factor in getting a license or permit. Municipal ordinances can be very restrictive about the type of business allowed in certain residential areas.

This is especially true if you plan on placing a sign outside of your home.

Again, always check with your local government municipal offices to find out what the requirements are for your immediate area.

Let's not forget the state/provincial and federal regulators as well. They all want a piece of your action depending how your home business is going to be structured, and whether it is a sole proprietorship, partnership or corporation.

The legal structure affects taxes, and the liability of the owner and the home business. So the onus is on you to follow the appropriate procedures to the letter of the law.

Contact your country/state/provincial Revenue agency for filing fees and information.

As a home business owner, you may be required to file estimated tax returns and pay estimated taxes quarterly. If you have employees, you also have to submit taxes withheld from employee paychecks. Here are some of the taxes you may be responsible for:

Employment taxes, Federal/State/Provincial income taxes, Social Security and Medicare, federal unemployment insurance.

Federal self-employment tax is Required by those who work for themselves to cover Social Security and Medicare contributions.

You may need a sales tax number for any company involved in selling tangible items. Sales tax is collected, reported, and paid either monthly or quarterly.

Unemployment insurance tax is a requirement at the federal and/or state level, usually if you have more than one employee on the books for at least 20 weeks in a calendar year, or if they have paid more than $1,500 in gross wages in a calendar quarter.

Again, check with the particular Revenue agency for your country/stat/province for more information.

A home business in some areas qualifies for all of the same tax deductions as the regular businesses do.

In the eyes of some governments, the only difference between most home businesses and a Fortune 500 company is their size, and the fact that some home businesses can also deduct many items not available to the bigger companies.

Owning a home business may entitle you to deduct thousands of dollars in every day expenses.

Listed below are just some of the items you may be allowed to deduct:

Your car and car expenses.
Your mileage.
Your home computer, printer and other office equipment.
Your home, or a part thereof.
If you are not a homeowner, you are allowed to deduct the area where your home office is set-up.
If you are a homeowner, you may deduct a portion of your property taxes and utilities.
Your travel expenses.
Your business phone bill expenses.
Your restaurant meals, entertainment, dinner parties.
You may pay wages, tax free, to two of your children, if
they are involved with the business.
You may deduct your families health insurance.

NOTE: In order too qualify for the above tax deductions, you must be actively working your home business.

In closing, not only do tax laws continually change, but they are different from country-to-country, state-to-state, province-to-province. I highly recommend you consult with your accountant or tax advisor to learn more about applying the aforementioned deductions to your home business.

About the author:

Dean Phillips is an Internet marketing expert, writer,
publisher and entrepreneur. Questions? Comments? Dean can be
reached at mailto: dean@lets-make-money.net

Visit his website at: http://www.lets-make-money.net

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