Entrepreneurial

from Reuters Money:

Self-employed? When to graduate from sole proprietorship

When Darin Edmonds started Waterproofing Solutions, Inc. earlier this year he knew making a go of it wouldn’t be easy in a struggling economy. But he was determined to get things off on the right foot, and to him part of doing that was putting a wall between his personal and business assets by setting up a Subchapter S Corporation.

“When I began in this business 21 years ago it was okay for me to start out as a sole proprietor. At this stage in my life, when I have personal assets to protect, that’s no longer a sensible option,” says the 46-year-old Corona, California, contractor.

Whether they are running a small side business, investing in real estate, or are established professional service or trade professionals like Edmonds, go-it-alone, self-employed individuals typically start out as sole proprietors because it’s easy and relatively uncomplicated. Under a sole proprietorship -- or general partnership if there is more than one owner --a business can get started simply by hanging out a shingle.

By contrast, while separate business entities such as limited liability companies or Subchapter S Corporations can shield personal assets and offer potential tax benefits, they also come with more paperwork and cost. Edmonds paid nearly $3,000 to have a legal professional set up his corporation and file the appropriate paperwork with the state, and will need to pay state annual fees as well. His accounting costs are also likely to be higher. “The peace of mind is well worth it,” he says.

Not everyone needs to form a separate business entity, says Johanna Sweaney Salt, a certified public accountant and partner at Kaufman Schmid Gray & Salt in Claremont, California. “There isn’t a lot of trouble a portrait photographer can get into, and there is always professional liability or umbrella coverage as a backup,” says Sweaney Salt, who nonetheless cautions that people should consult an attorney on such issues. “A lot of business owners complicate things when they really don’t have to.”

It’s Tax Day: Do you know where your tax return is?

kelly erb– Kelly Phillips Erb is a small business owner and practicing tax attorney at the Erb Law Firm in Philadelphia. She is also the author of the popular Tax Girl blog. The views expressed are her own. –

Chances are, you’ve already filed, as only a third of all tax returns are filed during the last week of tax season. But if you haven’t, keep these tips in mind:

- Postage rates for large envelopes went up yesterday (yes, yesterday). If you’re mailing your return – and it’s a big one – make sure to allow extra time at the post office.

What is tax deductible for small business?

A woman fills out an income tax form in New York. REUTERS/Mike Segar

A woman fills out an income tax form in New York. REUTERS/Mike Segar

– Stephanie Rabiner is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. This article originally appeared here. –

There is no definite answer for those of you who wish to know just what is tax deductible for a small business.

According to the painfully dry tax code, a business may deduct all expenses that are ordinary, necessary and reasonable.

Common budget mistakes for tech startups

A call centre personnel uses a calculator as she answers a call from a investor at an online brokerage company in Tokyo October 23, 2008. REUTERS/Yuriko Nakao

A call center employee uses a calculator in Tokyo. REUTERS/Yuriko Nakao

– Ed Buchholz is the co-founder and CEO of 60mo, a cloud-based financial services company catering to small business owners. The views expressed are his own. –

Most everyone is familiar with the cliché: more money, more problems. But what if the problem is money?

Keeping your tech startup solvent requires the avoidance of several common budget mistakes. A budget or lack thereof can make or break a startup. Keep your overhead intact by doing the following:

The right way to do home office deductions

– Stephanie Rabiner is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. This article originally appeared here. –

Some people believe that home office deductions are akin to begging the IRS to audit your taxes. While this can be true in some situations, home office tax deductions, if done properly, are completely legal and can provide a big payoff.

So if you work from home, consider the following tips. Home office tax deduction rules are a bit tricky, but with a little forethought and attention to detail, you should be just fine.

5 small business tax writeoffs for 2010

Jason Beahm is a contributor to FindLaw, a Thomson Reuters publication. This article originally appeared on FindLaw’s Free Enterprise blog. –

Small businesses can always use a few good tax writeoffs. So we recently came up with 5 tax writeoffs for 2010. Let’s jump right in:

Create jobs, get a deduction

If you hired new workers between Feb. 3, and Dec. 31, 2010, that didn’t merely replace people who left and who had been unemployed for more than 60 days, you can save 6.2 percent of your payroll tax. You can also get another $1,000 business tax credit in 2011 if you keep the new employees for 52 weeks or longer.

You’re getting audited – now what?

– Charley Moore is the founder and chairman of Rocket Lawyer Incorporated. He advises both early stage companies, large enterprises and their investors on strategic partnering and corporate development strategy. The views expressed are his own. –

Getting a letter from the IRS is enough to instill fear and trepidation in the minds of many small business owners. Opening the envelope to reveal a tax audit notice can be the thing of nightmares. After the panic attack subsides, there are things you can and should do to prepare for a tax audit. It doesn’t have to be as intimidating as it sounds, as long as you take it step by step.

1. Find out specifically why your return is being audited.

While the IRS is supposed to tell you why your return was selected, if they don’t, it’s up to you to ask. Your taxes can be audited for a variety of reasons:

10 small business tax mistakes that will cost you

Donna Fenn has more than 20 years experience writing about entrepreneurship and small business trends. She is the author of “Upstarts: How Gen Y Entrepreneurs are Rocking the World of Business and 8 Ways You Can Profit From Their Success“. This article originally appeared on BNET. The views expressed are her own. –

There’s not an entrepreneur on the planet who likes thinking about taxes. I know, it’s only February, so you’re likely still in deep denial about April 15. But it’s time to get organized. Almost every aspect of your business has tax ramifications and if you don’t know what they are, you’re inviting trouble down the road (can you say “audit?”).

For tips, I recently spoke to Sandy Botkin, a CPA, attorney, former trainer of IRS attorneys, and the CEO of The Tax Reduction Institute in Germantown, Maryland. He’s also the author of “Lower Your Taxes — Big Time 2011-2012”. Botkin shared 10 common tax misconceptions that both fledgling and experienced small business owners are guilty of. How many of these phrases have you uttered?

from Reuters Money:

Kill the mortgage deduction and give it to entrepreneurs

Prospective home buyer Jessica Doctoroff (C) visits a condominium for sale with her real estate agent Brenda Bremis in Medford, Massachusetts April 2, 2009.   REUTERS/Brian Snyder  Somehow I don't think President Obama had the home-mortgage interest deduction in mind when he mentioned the U.S. tax code before the U.S. Chamber of Commerce this week.

Yet winding down and eliminating this write-off for homes would be good for business. It's unfair, doing nothing to revive the housing market and can be put to better use shifting it to entrepreneurs to create jobs.

Most of the job creation in the U.S. economy comes from small businesses, which typically have no public shareholders to sate and are not primarily interested in fattening pay packages of overpaid executives.

Top 5 changes for small business in 2011

– Jason Beahm is a contributor to FindLaw’s “Free Enterprise” blog. FindLaw is owned by Thomson Reuters. –

The cliche is true: the one constant is change.

This year a series of regulatory, compliance, and legislative changes will occur that will affect small business owners. Paychex, Inc., recently put together a list of the most influential business regulations in 2011. We narrowed the list down to five that we found the most interesting.

1. Tax changes – In 2011, taxes are going to get even more complicated for small business owners. (What did you think, it was going to get easier?) However, as a plus, there will be a retroactive extension of some of the tax incentives that expired at the end of last year.

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