Archive for the ‘Business’ Category:
Operate Your Activity as a Business, not as a Hobby
A business, according to the IRS, is any activity conducted on a regular basis with the intent to make a profit. But you are not required to make a profit in order to claim tax deductions. In order to be a business you must have a product or service that you offer regularly to the public. For tax purposes, you are a business if you sell or attempt to sell a product or service whether you actually call yourself a business or not. Your business is born the day you first offer your product or service for sale.
Intent to make a profit is what differentiates a “business” from a “hobby.” A hobby is an activity that may produce income, but is operated primarily for pleasure without the intent of making a profit.
As a business, you may deduct all of your ordinary and necessary operating expenses, no matter how great or small your income from that business. If you have more income during the year than expenses, the difference is your taxable profit. If you have more expenses than income, the difference is your excess tax loss and can be used to reduce the taxes due on your other income.
If you are running your activity as a hobby, you may still deduct your expenses, but only up to the amount of your income. Therefore, with a hobby there can be no “loss” for tax purposes, but you can still take all of the same tax deductions as in a business as long as those deductions don’t exceed the income. Don’t believe those who tell you that you get no deductions if your activity is a hobby.
You can show your intent to operate as a business instead of a hobby by:
• Talking regularly to potential or actual customers and keeping a list
• Opening a separate bank account in your business name
• Having a telephone, even at home, in your business name
• Keeping good records of income and expenses
• Printing business cards, fliers, or brochures about your business
Buy Business Equipment at Bankrutptcy Sales and Auctions at Less Than Half Price
As you begin your small business and as it grows, you will need office furniture, business equipment, computers, telephone systems, and other expensive assets, even for a business run out of your home. You can buy them all at less than half price. Because so many big businesses file bankruptcy these days, there are sales and auctions of business furniture, assets, and equipment going on continually in almost every area of the country. Instead of shopping at the office supply or office furniture store and paying top retail dollar, shop the auctions and buy the same or even better furniture and equipment at a fraction of the cost.
Few business owners use this strategy, so sales and auctions often have surprisingly few bidders. Advertising for bankruptcy sales is severely limited and often written in difficult-to-decipher legal jargon, so few people are aware that the auctions are being held.
Begin your search by continually checking the legal notices in the classifieds of your daily newspaper. Most cities of any size also have a legal-notices paper, published weekly or daily. Check your phone book under Newspapers and visit the publishing office for a copy. Some magazine stands also sell the legal-notice paper. On pages 346-347 you will find a typical ad for a bankruptcy sale of office equipment. Some U.S. district bankruptcy courts will put you on a mailing list. Give your district court a call.
Auctions are either oral bid or sealed bid. With an oral bid, each item or group of items is auctioned off with all bidders bidding out loud and against each other. The high bidder wins. Don’t get carried away with your bid—there is always another sale another day.
Sealed-bid auctions require that you place your bid in a “sealed” envelope, often with a check for 10% to 50% of your bid, which is returnable if you lose. All bids are opened at one time, often publicly. High bid wins.