Business question.

[JamesCoste]

I just started my first "real" business. This is only a part-time business (building websites for small businesses) out of my house. I'm pretty certain that I can simply file my taxes using TurboTax. I just filed for my "ficticious name" and now have my "business registration certification".<br /><br />Because I've never owned my own business, I have a few questions.<br /><br />1) Should I open up a separate account just for my business? (I think so). <br /><br />2) When businesses make payments, they can simply write a check to my business name, right?<br /><br />3) Part of my business will be a monthly maintenance fee (for keeping their site updated). How do I go about setting up my bank (credit union) so that they can automatically deposit money into the account?<br /><br />Thanks for any answers you can offer.

 

[dolluper]

Re: Business question.

Don't know about the states but some Canadian tricks are <br />Have your own business account with Company name seperate from incoming accounts another account The company account chequing to make payments<br />Recieving account for money coming in {wife's name]<br />Put your house in Wife's name<br />Claim the portion of your house's expense's heat, light,seperate phone, according to size [like 1 room out of 4 room place =25% of costs]and must have a lock on the room<br />Different kinds of business's limited liability, partnership liability,inncorprated,+ + +<br />They could make payments by direct deposit ,talk to your bank or banks they will surly guide you ask about their fee structure Important

 

[JamesCoste]

Re: Business question.

Thanks dolluper for the ideas.<br /><br />I'll talk to my bank this week also.

 

[jinx]

Re: Business question.

Good Luck to you James. <br /><br />Definitely set up a business checking account. Keep it separate from personal stuff.<br /><br />Talk to you bank about direct deposit. They should be able to guide you.<br /><br />The percentage of square footage used EXCLUSIVELY for the business in your home can be used to prorate expenses. Depreciation will also be factored in, and is complicated, but, as I was advised, they will try to recapture it whether you use it or not.<br /><br />Jinx

 

[deputydawg]

Re: Business question.

Good luck with this.<br />My answers would be yes, yes and talk to your bank.<br />Like Jinx said, you can write off your home office, and many home improvements for your business. You may even be able to write off your internet account, E-mail accounts or any other fees to keep the net up and running including some phone bills. I believe this is all done easy with Turbo tax, but am not certain.<br /><br />The best way I found for my business ventures was always to set up a separate account in a different bank. I waited until I had a good balance built up before I gave myself any rewards. I made sure I had enough saved to replace the most expensive peice of equipment, or at least a good downpayment on my most expensive peice of equipment. Then I paid myself a monthly salary based on my monthly income. That was the easiest way to keep the business growing and still make it worth my time running a business.

 

[RPJS]

Re: Business question.

I would recomend that you have a chat with an accountant, here in the UK there are lots of tax breaks for small businesses, and I would guess its the same in the US. The accountant will know all of them if he's any good. No point in paying more than you have to.

 

[Dunaruna]

Re: Business question.

Cash flow is the main concern when first starting up, be dilligent when asking for payment, if a client thinks they can get away with 7 days/14 days etc. they will try, before you know it you are chasing a 60 day account. A direct debit facility is definetely the answer - they got no excuse. Gone are the days of 'The checks in the mail'.<br /><br />Aldo

 

[Kiwi Phil]

Re: Business question.

Be careful of the depreciation you may be permitted to claim on the % of the home use you use.<br />In some countries, when you sell your home, they 'claw back' that which you have claimed should you have an actual capital gain on the homes sale.<br />Your accountant will fill you in on this.<br />Good luck to you - just remember, the harder you work, the luckier you will be.<br />Cheers<br />Phillip

 

[Link]

Re: Business question.

Originally posted by RPJS:<br /> I would recomend that you have a chat with an accountant, here in the UK there are lots of tax breaks for small businesses, and I would guess its the same in the US. The accountant will know all of them if he's any good. No point in paying more than you have to.

Agree 100%<br />If you dont already have one get a accountant. They will be worth every cent you pay them. And the best way to find one is ask people you trust that own a small legit buisness. Thats how we found ours. A good one will also be honest to the "T" and will save you a lot of money. Or a better way to put it is let you keep the money you earned! And you wont have to search for loop holes/Rules as they will know them.<br />And every year rules change.. and they take classes each year!<br />Turbo Tax <br />Is a great way for people who file short form.. and last year 2004 we bought Turbow tax! We were going to get 450.00 back... Our "tax Lady" who only charged 89.00 got us $4000.00 back! Tax Ladie was worth it in IHO

 

[HotLava]

Re: Business question.

Hi James,<br /><br />Congrats on the business venture. I have been self-employed for 10 years and since I started doign larger scale work for corps, I incorporated. Here's what I would suggest for you:<br /><br />1) Find a very good accountant<br />2) Find a local corp lawyer and LLC (costs @900 but will isolate your assests, protect you from the IRS in the event of an audit and make you more appealing to larger sites)<br />3) Buy Busines Liability insurance (costs @900 a yar for 1M coverage)<br />4) Isolate your income into a separate account. <br />5) To set up electronic deposit, all you need to do is provide the payor with the ABA and routing number of your account.<br />6) Contact a local SCORE (score.org) for help<br /><br />Good luck<br />John

 

[Mrs Soulwinner]

Re: Business question.

Because I've never owned my own business, I have a few questions.<br /><br />1) Should I open up a separate account just for my business? (I think so). <br /><br />2) When businesses make payments, they can simply write a check to my business name, right?<br /><br />3) Part of my business will be a monthly maintenance fee (for keeping their site updated). How do I go about setting up my bank (credit union) so that they can automatically deposit money into the account?

Hi James, SW asked me to respond to this because we have been running two businesses from our home for 4 years now. I suggest that you ABSOLUTELY open a separate account for your business. You want to keep everything (and I mean EVERYTHING) separated. Work on getting you a business credit card or a debit card through your bank. That's a whole lot easier for keeping things straight. As far as having businesses paying you, your exactly right. Just have them make the check out to your business name and deposit that money into that account.....keeping all the monies separate. Get you a good business software program such as Quick Books Pro to keep track of everything. From that you can make your "draws" (pay yourself) and that all gets recorded and is easier for an accountant in the long run. As far as the monthly maintenance fees that you will be charging everyone, you will have to talk with your bank and the clients about that. Some companies have ways to make direct deposits, but some don't. <br /><br />One last thing I would love to suggest: If you plan on claiming ANY of the use of your home, I ABSOLUTELY suggest that you find an area in your house, such as a spare room, that you can set up as an exclusive office. AND I would buy yourself a computer that you can work on that would be used exclusively for your business. When it comes to taxes, you truly want to keep everything separated. The reason being is when you started deducting portions of your home, that is the biggest red flag for the IRS to audit you. We do not have any overhead and do not keep supplies or anything, so we don't claim any of our home as being used. I have a computer set apart separate for business and I claim everything that has to do with that computer, but that is all.<br /><br />We did go out and get two extra phone lines... one for a business telephone number and one for a fax line that is separate from our home phone. I pay for my long distance service through our business account and the two phone lines but that's it. <br /><br />Anyway, should you have any questions, please do hesitate to email me at XXXXXXXXXXXX and I will help how I can.<br /><br />And by the way, CONGRATS!! You are going to love working for yourself. And if you do it right, you will NEVER consider working for another again.

 

[Mrs Soulwinner]

Re: Business question.

Oh yes James, Since you will be getting paid by businesses in the state of Florida, please don't forget about charging sales tax. You should visit this website to get more information on that subject and a lot more: My Florida

 

[NYMINUTE]

Re: Business question.

No answers, just a wishing you best of success. I admire those who have the kahunas to take the risk. Great going James.

 

[JamesCoste]

Re: Business question.

Thanks All for the positive comments. I'm keeping my 40 hour per week state job and doing this business "on the side". Who knows where this will take me.<br /><br />Mrs. Soulwinner,<br />You've got mail. Many thanks!

 

[jtexas]

Re: Business question.

James when I was in the tax prep business I found that the number one unpleasant surprise new business owners had to face was the self-employment tax, which amounts to about 15.3% of your net. It's the social security taxes your employer had to withhold from your check, plus the employer's matching share. Put money aside for taxes throughout the year. Get your accountant to run a projection & tell you how much. Just do it!<br /><br />And, take very seriously what mrs. sw says about "exclusive" use for business. A dual-use area won't qualify, but if you can segregate even part of a room, the benefits can be rewarding. Kiwi Phil is right if you take depreciation on your house you could end up triggering capital gain recognition upon selling it, but typically that's minimal compared with the deduction. Remember, every deduction saves you not only income tax, but also the dreaded 15.3% self-employment tax. Then capital gains are taxed at a special reduced rate.<br /><br />Good luck!