Home Business

Starting a business right in your own home can be most rewarding both financially and in terms of life-style.The fastest-growing kinds of this enterprises are computer data and word processing, direct sales for communications, and business services in general, including accounting, bookkeeping and typing.

If you want to start a business from your own home, first make sure you are allowed to do so.
Zoning laws in many localities forbid it, as do some apartment leases and condominium bylaws.
If you are in conflict with the rules,you can appeal for a permit or variance. Also make sure that
you are operating within federal and state laws. Some laws,which were originally designed to prevent sweatshops, regulate what goods can be produced commercially at home.

Be certain to hire a lawyer who has worked with other home businesses. He or she can shepherd
you through the several layers of bureaucratic formality that attend the birth of any business.
You also have to decide what legal form your business should take. Most small businesses start
as proprietorships. They require little expense or government approval to set up.

One big advantage of a proprietorship is that both you and your business are taxed as individuals. Thus,if you have a full-time job and a part-time business that loses money,you usually can write offyour losses against other income.

Be carefull,though:
tax reform stipulates that you must "materially participate" in a business in order to offset income from your full-time job.A major disadvantage of a proprietorship is that in case of a lawsuit,your personal liability is unlimited. That is just one reason why you should be sure to get adequate insurance. A regular homeowners or renters policy probably is not enough. You doubtlessly will need extra personal
liability coverage.

The biggest potential tax advantage of your home enterprise is that you are entitled to deduct
not only for regular business expenses but also for a host of household expenses that you can
prove are directly related to your work. Such deductions are limited to the annual gross income
in the business in 1986. Effective in 1987,the limit drops to the annual net income from the business.

Putting your husband or wife on the payroll of your home business can be a tax saver,but you
will need to follow some rules laid down by the IRS. By employing spouse who has not previously been working for pay, many couples can increase their combined maximum annual contributions to their tax-saving Individual Retirement Accounts from $2,250 to $4,000.

Your business can also deduct your spouse's salary,as well as any amounts it pays in for his or her pension or profit-sharing plans, worker's compensation, life insurance or health policies. Employing your husband or wife will not trigger a tax audit.But the IRS will not permit the extra deductions if it believes you hired your wife or husband solely for tax reasons.

If you are audited,you might be asked to proved that your spouse was hired for a legitimate
business purpose. The more evidence you have that he or she is considered just another employee, the better. Many tax advisers recommend writing a job contract. It should cover your wife's or husband's duties, pay, benefits and the expected length of employment. Keeping a time sheet of his or her work hours and a description of the work will be useful as well.

Be certain that you are paying your spouse a reasonable salary. As evidence,clip newspaper
advertisements for similar jobs. Or call a local employment agency and ask for the going wage.
Try to get a letter from the agency documenting the quoted salary range, or at least keep
legible notes on the conversation.