Archive for the ‘Service’ Category
Fictitious Name (DBA)
November 23rd, 2009 | 
Author: A fictitious name is commonly referred to as a DBA, which stands for “Doing Business As”. A fictitious name is any business name that does not contain your own name as a part of it. In some states, that means your legal name (frequently first and last).
If you are not a corporation and you plan to conduct business under a fictitious name, you must file a DBA. If you are a corporation, ownership of your name is ensured when you incorporate. Also, if your legal name is considered very common, you may be required to file a DBA.
Filing your DBA is one of the first tasks to be undertaken because every other piece of paperwork requires the business name. Your bank will also require a copy of your DBA before they will open a business account under that name. This is the only authorization they have for depositing or cashing checks made out to that business name or written against its account.
Your business name should be free of conflict with names already registered in your area. Find out if a corporation has staked a claim to your name by calling your state’s office of name availability. You may also wish to check the DBA books at the county clerk’s office. Finding out at a later date that your name is already legally registered to another business will result in your having to redo all of your paperwork.
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Location Considerations
Selecting your location and getting your business license is an interactive process. A business license is granted for a specific location and the selection of the location must take into account licensing restrictions.
Contact the City or County Clerk’s Office in the city or county where you wish to locate your base of operation. They are an excellent source of information regarding police, fire and health permits needed for your business. Since any business location must fall within the zoning regulations, you may obtain verification from the zoning commission to determine if your business is approved for the location you have chosen. The local business license bureau can also help you with your decision by giving you information on any special restrictions as to types of businesses allowed or disallowed at any location.
If you have decided to locate in a shopping center or industrial area or other commercial location, call the chamber of commerce or city and ask for any publications with listings of facilities available showing number of square feet, price per square foot and other pertinent information.
You may also contact the management of the commercial or industrial complex you are considering and request written information about that location and current availability of leasing space. You should be able to get detailed information as to lease terms, restrictions, traffic patterns and other demographics. Be sure to read carefully and understand all the terms contained in a lease agreement. They vary and may well spell the difference between profit and loss for your business.
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IRS Warning!
Home-Based Business Tax Avoidance Schemes
The Internal Revenue Service has issued consumer alerts regarding home-based business schemes that purport to offer tax “relief.” In reality they provide bad advice to unwary taxpayers that, if followed, results in improper tax avoidance.
Promoters of these schemes claim that individual taxpayers can deduct most, or all, of their personal expenses as business expenses by setting up a bogus home-based business. But the tax code firmly establishes that a clear business purpose and profit motive must exist in order to generate and claim allowable business expenses.
Some examples of personal expenses that are not deductible, but are commonly claimed business expenses in home-based business tax avoidance schemes include
- Deducting all or most of the cost and operation of a personal residence. For example, placing a calendar, desk, file cabinet, telephone, or other businessrelated item in each room does not increase the amount that can be deducted.
- Deducting a portion of the total house payment is not allowable if the business is not real.
- Paying children a salary for services, such as answering telephones, washing cars or other tasks and then deducting these costs as a business expense is not real.
- Deducting education expenses from the salary wrongfully paid to children as employees is not allowed
- Deducting excessive car and truck expenses when the vehicle has been used for both business and personal use is not allowed.
- Deducting personal furniture, home entertainment equipment, children’s toys, etc. is not allowed.
- Deducting personal travel, meals, and entertainment under the guise that “everyone is a potential client” is not allowed.
Any tax scheme that claims a person can deduct what would normally be personal expenses should be considered highly suspect. Taxpayers who have questions on this subject or wish to report possible schemes can call 1-866-775-7474. They can also contact the IRS by sending an email to irs.tax.shelter.hotline@irs.gov.
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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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