Starting a REAL Home Business – The Series – #1

Are you getting paid for work, but not as a “real”business?  If so, you are missing out on some tax advantages and other benefits of having a business.  Over the next few weeks, I will give you some tips on how to set up a home business.  Today, I

My daughter-in-law is one of those “mile a minute” types.  She has two school-age children (kindergarten and 2nd grade), an active social life through her church, and a part-time job as a receptionist.  And she still has time to do catering, for the church and for the occasional party.  The other day, in one of those “AH HA!” moments, I realized she should set up a home business.  Here is why:

• She can set up as a sole proprietor with little paperwork, but she might do better setting up as a limited liability company (LLC), to make her business look more real (I’ll explain more about this later).
• Then she can deduct all her business expenses (mileage, accounting software, etc.) rather than just paying them and not getting credit.
• If she hires someone to help her, she can also deduct those payments from her taxes.
• If you make a profit in your home business, you can offset any income from your other work, to reduce your taxes.

It’s really not complicated to set up as a home business.  The trick is to do everything like a real business, so the IRS doesn’t disallow all your deductions as a “hobby.”

Tomorrow, how to get that home business set up easily and correctly.