Archive for the ‘Admin Notes’ Category
January 1st, 2010 | 
Author: Do You Qualify for a Home-Office Deduction?
To qualify for a home office deduction for the business use of your home, you must use that portion of your home exclusively and regularly for your trade or business and it must be your principal place of business.
- Exclusive Use: To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. The area used for business can be a room or other separately identifiable space. The space does not need to be marked off by a permanent partition. You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Exceptions apply if you use part of your home for the storage of inventory or product samples, or you use part of your home as a dare-care facility.
- Regular Use: To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose.
- Trade or Business Use: To qualify under the trade or business use test, you must use part of your home in connection with a trade or business. If you use your home for a profitseeking activity that is not a trade or business, you cannot take a deduction for its business use.
- Principal Place of Business: You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for the business use of your home, your home must be your principal place of business for that trade or business.
- Place to Meet Patients, Clients, or Customers: If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet the following tests.
- Separate Structure: You can deduct expenses (subject to the deduction limit) for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers.
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Is it Right for You?
One of the fastest growing markets in the United States is the home-based business. It’s interesting to note that one in four businesses located in an office or industrial area started in the home, including such well-known companies as Mary Kay, Hershey, Hewlett Packard, Lillian Vernon, Ford, and Apple. It has been estimated that more than 32 million Americans are self-employed and working at home. This does not count those who were doing so on a part-time basis while holding a “regular” job. Part-time self-employed home workers numbered an additional 1,000,000+.
Home-based businesses span a wide range of occupations and industries. One multi-state study conducted by a team of university-based researchers found that the top five occupations were marketing/sales (24%), contracting (15%), mechanical/transportation (13%), services (12%), and professional/technical (12%). Other studies yield varying results, but they all indicate that home businesses represent a wide range of occupations and industries.
The trend toward home-based business has occurred for several reasons. The advent of the electronic age with its computers, fax machines, copiers and other office technology has made it possible for almost every family to start a business from home. Job insecurities and layoffs have forced white-collar workers to pile out of corporations. Many of these displaced middlemanagement people have taken their skills home and translated them into viable businesses run from their home offices. The trend toward home-based business has also been impacted by economic considerations such as eliminating rent and utilizing other home-office deductions. As an additional bonus, having a home-based business has allowed parents to stay home with their families and addressed elder care and parental leave without added costs.
Home-based businesses can be very successful. They can also turn into disasters or, at the very least, unproductive semi-attempts at dabbling at business. In order to help you get off to a good start, we have devoted this chapter to some of the most important considerations that will contribute to the success of your home-based business.
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The Virtual Location
With the advent and subsequent advances in technology, another type of business location has emerged the virtual location. Millions of product and service businesses now exist entirely on the Internet. There are no limits to the ways that they operate.
- Retailers who choose not to setup brick and mortar (physical) locations, put their products up on their web sites and use online marketing strategies to reach and sell to their target markets via shopping carts.
- Affiliates set up web sites and sell other people’s products without ever handling the merchandise. They merely advertise the product, take the order, and use the manufacturer for fulfillment.
- Virtual service professionals utilize company websites and email databases to simultaneously market their services and keep clients abreast of the latest industry information. Then they service their customers via electronic communications, sometimes never physically meeting face-to-face.
The interesting feature of the virtual location is that the consumer seldom knows (or cares) what is behind the scenes in the operation. The only thing that matters is that the product or service fills his needs in terms of quality and timing.
The opportunities are as limitless as the imagination in the minds of today’s entrepreneurs. I have seen thousands of part-time employees contracted out for construction jobs, heavy equipment moved across the country, giant auctions taking place, cars sold, betting taking place, and every other unimaginable type of trade pursued all arranged and taking place from virtual offices in homes. Now, with smart phones and other portable communication devices, businesses can communicate with customers and venders from literally any location that is within range of wireless connectivity.
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What Can and Cannot Be Copyrighted?
Persons or organizations creating “original works of authorship” including literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual displays usually register copyrights. Authors, artists, song writers and creators of computer programs typically register copyrights. Businesses often copyright their logos and other artwork that is representative of their companies
The word “copyright” literally means the right to copy. According to the U.S. Copyright Office, “The owner of copyright has the exclusive right to reproduce, distribute, and, in the case of certain works, publicly perform or display the work; to prepare derivative works; or to license others to engage in the same acts under specific terms and conditions.” For example, the author of a book will typically sell all or part of his or her copyrights to a publisher who actually prints and markets the book to the public.
The U.S. Copyright Office defines the following broad categories of works for which copyrights can be registered:
• literary works
• musical works, including any accompanying words
• dramatic works, including any accompanying music
• pantomimes and choreographic work
• pictorial, graphic, and sculptural works
• motion pictures and other audiovisual works
• sound recordings
• architectural works
Computer program copyrights are typically registered as “literary works.” Architectural plans and maps are registered as “pictorial, graphic, and sculptural works.” Things that cannot be copyrighted include any inventions, ideas, procedures, processes, slogans, principles, or discoveries.
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