4/03/2008

Startup checklist in US

In US it seems it's real easy to start your own business. It should be to expand your equity and get to your life goal as you would like. However, you could also use it for tax credit for the expanse that incur that comes as part of a perk if you would put it in such context. Here is Checklists for starting your first business.

How do I 'become' a business?
You set up a structure. If the business is just you, or will be just you for a while before expanding, then a sole proprietorship is probably best. There's nothing you need to do in advance, nothing special to file until tax time, and you can now deduct many new expenses. You can always change structures later, in case you grow. In the USA, a sole proprietorship just means you add two new pages to your annual tax return. That would be a Schedule C to show your income and expenses, and a Schedule SE to figure your self-employment tax.

You also need to establish your start date. This can be the point when you actively started trying to get clients, or the point when you agreed to your first paid gig if it was a total surprise. From that point forward, any expense that qualifies is deductible.

What qualifies as deductible? Any reasonable and necessary expenses related to your business. So any money spent to connect with clients or potential clients, to do your work, or to get necessary equipment to run the business. For example, you can deduct:

* web hosting, web design, domain names, etc.
* the business percent of your cell phone, including data plan
* part or all of your home internet service, based on how much you use it for business
* business cards or any other business promo items
* computer equipment
* software used in the business
* paper, ink cartridges, and office supplies
* ipod, etc. (if it's related to your line of business, like podcasting)
* camera, etc. (once again, if it's reasonable)
* contract labor or subcontractors
* professional fees, like legal or accounting
* meals and entertainment with clients if you discuss business before, during or after
* conference registrations
* mileage driven for business
* tolls and parking fees for business trips
* other business travel expenses, including motel and airfare


Miles are deducted on a flat rate, currently 50.5 cents per mile. That flat rate includes fuel and vehicle repairs, so you don't need to track those separately. (No need to save gas receipts!) Each January 1, record your current odometer reading, so you can figure your total miles driven. Mileage as a whole is a complex topic. Commuting isn't covered, but driving to a meeting with a collaborator or to a client's site is. You might want to read more info on mileage expenses.

The whole point is that you probably have enough qualifying expenses to offset your income, so you won't owe any self employment tax.

Records
Make a business folder, accordion file, box, what have you, for receipts and records.
Receipts:

* original receipts are best
* note the business purpose right on the receipt
* on meals and entertainment, note who was with you
* if you are missing some receipts, go online, and print out replacements from the vendor or your credit card
* track expenses by category on a spreadsheet

For a bit more about expense tracking, read Simplified accounting for side businesses.

Calendar
Your calendar is an important business record. It helps support where you were and when and who with, and that's important to establishing what is deductible. So keep it complete, and be sure to print out a copy at the end of the month and put it with your other records.

* note client meetings and meals
* note all business travel, including miles driven


Banking As a sole proprietor, there is no requirement that you have a separate bank account. It's much better from a record-keeping perspective, but not required. The bank account will still use your social security number, but you can put your business name on it.

Licenses Now, don't tell anyone I told you this, but it's pretty unlikely that you need to file any business licenses if you are just consulting, speaking, writing, podcasting, etc. If you aren't selling any taxable services and aren't having walk-in business traffic, you might not even be required to file anything. Some jurisdictions may require a general business license or DBA (doing business as) filing. Ask around with others in your area, because this varies significantly from place to place.

Contracts
When you work on your own, you'll find yourself signing frequent contracts. Most times, you'll have to start with what the client provides, but don't sign blindly. Now is a good time to line up a legal adviser who can quickly read and respond to any contracts you receive. If you'll be providing contracts for your clients to sign, ask some other independent pros in your field for a copy of theirs. That will be the best starting point.

Insurance
Any business includes some liability. I recommend you read Insurance and the Home Based Business for an introduction.

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