by Emily Mitchell | February 19, 2018 7:12 pm
by Madison Reid
When it comes to home-based businesses in Texas, there are certain considerations. Many people have legal questions when starting out. If that business is in the form of a multi level marketing business, things are a bit different than for some other businesses being run from home.
One of the legal questions that arises is how to get started. For those running a multi level marketing business from home such as Mary Kay, Rodan + Fields, Celadon Road, etc., there are no permits required by the state of Texas to get started. However, other businesses such as those that are based upon food preparation would require a permit.
For those running a multi level marketing business, the focus should not just be legal questions but also a consideration of tax implications. Far too often, home-based entrepreneurs overlook the tax advantages of their businesses.
First of all, though, the business has to be treated as just that: a business. To take advantage of tax write-offs for home-based businesses, the business has to be for-profit not merely a hobby. How the IRS treats business income versus hobby income is different, and tax write-offs for businesses are reserved for enterprises that are being undertaken in the pursuit of profit.
Is there a space exclusively dedicated to the business? If so, you can qualify for the home office deduction. However, the space really must be specific to the business and not be used for personal purposes. This particular deduction is one that the IRS is quite picky about.
Inventory is another deductible expense. These items must be for the purpose of the business, not personal use.
Has the business taken a loss? You can write off business losses even beyond the income generated by the business, provided that the business does not fall into the hobby business category. If it is considered a hobby, losses can only be deducted up to the level of income generated.
How do you make sure that your business does not fall into the hobby trap? Devote significant time to it. Work to become profitable within a reasonable amount of time. Be certain to keep good records. Be certain that your home-based business is more about profit than the mere personal pleasure of engaging with the products being sold. Of course, these are all things that one should be doing anyways in order to grow a strong home-based business.
A small business offers plenty of opportunities for tax deductions. Just be sure to follow IRS rules.
Here are 12 tax deductible tips that even savvy small-business owners and entrepreneurs sometimes forget.
1. Home Office
2. Office Supplies
4. Other Equipment
5. Software & Subscriptions
7. Travel, Meals, Entertainment, and Gifts
8. Insurance Premiums
9. Retirement Contribution
10. Social Security
11. Telephone Charges
12. Child Care
Source URL: http://argylelivingmagazine.com/is-your-home-business-protected-what-you-need-to-know-in-the-state-of-texas/
Copyright ©2019 Argyle Living unless otherwise noted.