Home Business Legalities And Tax Advantages

Most cities and/or counties require you to have a business nlicense and/or permit. Check with your local government nmunicipalities to find out what the requirements are for nwhere you live. Depending on where you live, you should be nable to get this information from your local courthouse or ntown hall. nnZoning may also be an issue. Municipal ordinances can be nvery restrictive about what types of businesses are allowed nin a residential district. This also applies if you plan on nplacing a sign outside of your home. Again, check with your nlocal government municipalities to find out what the nrequirements are for where you live. nnIn addition, depending on how your home business is nstructured--as a sole proprietorship, partnership or ncorporation--there may be forms to file with the state. The nlegal structure affects taxes and the liability of the owner nand the home business, so it's important to follow the nappropriate procedures. Contact your state's Department of nRevenue for filing fees and information. nnIf you plan to operate your home business under a name other nthan your own, you will have to register a fictitious name nwith the county--usually referred to as a DBA filing (Doing nBusiness As). The exceptions to this regulation are ncorporations and partnerships doing business under the numbrella of the corporate or partnership name. nnAs a home business owner, you may be required to file nestimated tax returns and pay estimated taxes quarterly. If nyou have employees, you also have to submit taxes withheld nfrom employee paychecks. Here are some of the taxes you may nbe responsible for: nnEmployment taxes -- Federal income taxes, Social Security nand Medicare, federal unemployment and state income taxes. nnFederal self-employment tax--Required by those who work for nthemselves to cover Social Security and Medicare ncontributions. nnSales tax--Each state requires a sales tax number for any ncompany involved in selling tangible items. Sales tax is ncollected, reported and paid to the state either monthly or nquarterly. nnUnemployment insurance tax -- You are required to pay nfederal and state unemployment taxes if you have more than none employee on the books for at least 20 weeks in a ncalendar year, or if they have paid more than $1,500 in ngross wages in a calendar quarter. nnAgain, check with your state's Department of Revenue for nmore information. nnA home business qualifies for all of the same tax deductions nregular businesses do. In the eyes of the IRS, the only ndifference between most home businesses and Fortune 500 nCompanies is their size, and the fact that home businesses ncan also deduct many household and living expenses. nnOwning a home business will entitle you to deduct thousands nof dollars in every day expenses. After all, why pay more in ntaxes than you have to? nnListed below are just some of the items you are allowed to ndeduct: nn* your car and car expenses. nn* Your mileage. nn* Your home computer, printer and other office equipment. nn* Your home. If you're not a homeowner, you are allowed to ndeduct the area where your home office is set-up. nn* If you're a homeowner, you may deduct a portion of your nproperty taxes and utilities. nn* Your travel expenses. nn* Your restaurant meals, entertainment, dinner parties. nn* You may pay wages, tax free, to two of your children, if nthey are involved with the business. nn* You may deduct your family’s health insurance. nnNOTE: To qualify for the above tax deductions, you must be nactively working your home business. nnIn closing, since tax laws are continually changing, I nhighly recommend you consult with your accountant or tax nadvisor to learn more about applying the aforementioned ndeductions to your home business. nn