The Top Five Reasons Why Many Home-Based Businesses Fail

Everyday there are thousands of people looking to start a home-based business. In addition, there are hundreds more who start a work at home business and then fail miserably. Why? It is because they fail to see that the business opportunity was not viable and junk to begin with! Can this trap be avoided? Yes, if people learn to target the gems and reject the scams. Let's discover the top five reasons why many home-based businesses will never work.

Problem #1: Most new opportunities are totally unproven. The fact is many of the opportunities are too new! The market for the products and services is not well-established yet. Usually, the only people who get rich with these opportunities are wealthy Fortune 500 companies that have tons of money to spend anyway. Opportunities that are too new are too risky! It is important to let others who can afford it pave the way.

Problem #2: Most of the money-making methods are the same old boring plans and programs. Many opportunities claim to be new and innovative, but really are not. Some look new, but in reality are only a facade! With a little research, you will see that there is nothing "new" at all about them. What is important is to get involved in an opportunity that is new, different and better than others, is rock solid, and is part of an explosive combination of the three hottest emerging multi-billion dollar trends.

Problem #3: Many home-based business opportunities only make the promoters rich. Average people who are involved in these plans almost never make any money. Only those considered the "heavy hitters" make the real money; they are the ones who have all the connections.

Problem #4: Many of the hottest and exciting money making opportunities are immoral and illegal. This is something that has to be avoided at all costs! Never, ever, get involved with any opportunity that looks and sounds good, but due diligence shows to violate ethics and laws. Who wants to go to jail? Always ask what is the product or service behind the opportunity, where is the market for this product or service that is supposed to take the world by storm, and would it be possible to make lots of money without all the hype and buzz?

Problem #5: Many opportunities are not long lasting. In other words, they are here today and gone tomorrow! They are pure hype with no type of firm foundation behind them; there is no "real" product or service. When all the hype runs out, the market is gone for good! Never become involved in a home-based business opportunity based on pure hype.

So, there you have it: the top five reasons why some home-based businesses will fail. Carefully look for potential problems with any business opportunity; avoid them, and you will be well on your way in finding a true legitimate business right from the start!

Get All Your Home Business Tax Deductions

In any small/home business you definitely have more tax advantages than if you were simply an "independent contractor" or "sole proprietor" claiming the income on your personal 1040 tax return. The tax advantages become substantial when you consider how you can improve the profitability of your home business by filing a separate Schedule C for your business income and declaring all of the deductions you are entitled to.

You may be missing some very important deductions. You must itemize your deductions for your home business operation on a separate schedule just as you would for your personal deductions. Knowing which deductions you are entitled to can save your home business hundreds of dollars a year.

Here is some background information on how your income tax amount is arrived at by the IRS.

The U.S. taxation code states that almost all income is subject to federal income tax. The way that you, as the owner of your home business, arrive at the final amount of income tax is as follows:

Gross Income - (All Expenses + Miscellaneous Deductions + Depreciation on Assets) = Taxable Income

Taxable Income x (Your Tax Rate) = Income tax for the fiscal year

Here is a quick definition of the terms in the above taxation equation:

Gross Income: The total of all income for the year after the cost of inventory has been accounted for.

Expenses: All costs of doing business during the fiscal tax year. Examples include payroll, materials, supplies, interest on business loans, etc. To find out if an expense qualifies as a legitimate business expense, consult your accountant or the IRS.

Depreciation: This is a way of spreading out the deductibility of an asset over a period of more than one year. This is done for assets like real estate, equipment and other assets with a long economic life. This method of taxation write-off has certain advantages. Be sure to talk to your accountant regarding proper depreciation rules. The IRS has different depreciation schedules for different business property. These rules are subject to change by Congress and the IRS.

Miscellaneous Deductions: This is an often misunderstood and overlooked way to save a lot of money on taxes. Remember that these types of expenses must be totaled up and declared on a separate schedule of your income tax forms. Always track your expenses and be sure to save at least one copy of every deduction. You will be asked for proof of every transaction that is declared as a deduction if you are audited by the IRS!

Here is a list of some of the most common business related expenses you can deduct from your income taxes:

1. Airfare
   
2. Auto Expenses
   
3. Books and Magazines
   
4. Educational Expenses
   
5. Home Office Space* + a portion of Utilities, Telephone, and Maintenance Costs
   
6. Office Furniture
   
7. Cleaning Expenses
   
8. Meals with Business Clients
   
9. Laundry Expenses (when traveling)
   
10. Advertising
    
11. Bank Fees and Interest
    
12. Licenses and Regulatory Fees

* If you own your home you must use the IRS depreciation rules to determine this deduction. If you rent, you may also deduct a portion of your rent.

Check IRS Publication 535 or contact me to schedule a consultation to find out if you can deduct any or all of the above.

As you can see, there are many deductions that are allowable for your home business. The best way to get more information on tax deductions and related information on income taxes is to go online to http://www.irs.gov. There you will find a helpful search engine containing thousands of government publications that you can research and print out if you need to.

Now you have a good idea of the deductions you are entitled to take. So do your research, keep track of your expenses and take all of the deductions you can for maximum profit every year.

5 Tips to Staying Focused when Starting Your Home-Based Business

Have you decided to start a home-based business? You may be juggling a full time job, a part time job and family life. You know that there are many things you need to do in order to successfully start your business and work from home. How are you going to fit your business project into your daily commitments? It's easy to become overwhelmed and lose focus. Losing focus will cause you to take no action. Action is essential to moving on from where you are now, to where you want to be.

Here are 5 tips to stay focused on starting your home based business:

1. Chunk down

If you have a large task to tackle, it is always easier when you break it down into smaller components. You'll find it easier to focus because you won't feel as overwhelmed. For example, "Register a business name" can be broken down into: "Think of five business name ideas," "Find out how to register business name," "Get registration form" and so on.

2. Keep a "to do" list

Once you've broken down major tasks into smaller ones, make and keep a "to do" list. Always keep a notepad and pen with you so that you can jot down any new ideas as they arise.

3. Schedule your time

Every evening, decide on three to five tasks on your "to do" list that you wish to accomplish the following day. Stay focused on these tasks and only move on to the next tasks on your list once these have been completed.

4. Set goals

There is nothing better for staying focused than setting goals. Visualize exactly where you want to be in a month, six months and a year. In a month's time, do you want to have registered a business name and got all your equipment set up? In six months time, how many clients do you want? How much revenue do you want to generate in a year's time?

5. Just say "No"

Be assertive and carve out more time for your business project. Saying "no" to that extra demand by your boss every once in a while, can get you home one hour earlier a couple of days a week. How about cutting back on the amount of housework that you do? Imagine how you could channel that extra time into your business.

If you put these five tips into practice, you'll definitely find it easier to focus on and achieve your ultimate goal of working from home.

Types of Business Structures

When you decide to start your own business, there are many decisions to make. A critical decision is to decide what legal or formal structure the business will take. This is important because if you desire to work with wholesale suppliers or establish business credit, you will need to prove that you are a legitimate business. There are four forms your business can take: sole proprietorship, partnership, S-Corporation, and limited liability company. (There is also another corporate entity, the C-Corporation, but this structure is not often used by small businesses and will not be discussed here.)

A sole proprietorship is the simplest form your business can take. It has a very simple legal structure and you must get a business license from your state to get a sales tax license, if your state has a sales tax. The disadvantage of this business form is your personal assets are not considered separate from your business assets. If you sell a product and the product injures someone due to a fault, the victim could sue the distributor of the product and they could sue you. Not only can your business assets be attached, but your personal assets as well. The advantage of this type of business structure is that you are allowed almost all of the business expenses and deductions that corporations can get. If you make a profit this money is added to any salary your received from your job or other income and is taxed at the normal rate. If you have losses, then you can often deduct these losses from your salary or other income.

An S-Corporation is the most common type of corporation used by small businesses in the United States. A S corporation does not pay taxes on its profits. All profits and losses flow through to the shareholders(you) and is considered ordinary income for tax purposes. Ordinary income is different from earned income in that you do not pay Social Security and Medicare taxes as well as federal income taxes. You only need to pay the basic federal income tax. An important advantage of incorporating is it limits your liability. Your personal assets cannot be attached and liquidated by creditors; only the corporation's assets. In addition to limiting liability, an advantage of incorporating is credibility. When your business name ends with "Inc." wholesalers will be more willing to deal with you, it is easier to get into trade shows and it is easier to find trade credit.

A partnership is formed when two or more people sign a partnership agreement and file taxes as a partnership. Partnerships have several disadvantages. If you or your partner are sued, then each of the partners is personally liable. If you and your partner decide to part ways, dissolving the partnership can become messy. A partnership does not enjoy all of the tax benefits nor is it as flexible as a corporation. And partnerships are considered a high value target for an IRS audit. Each partner is liable for a co-partner's wrongdoing. An alternate form of partnership, the limited liability partnership (LLP), is formed when two or more people form an LLC (see below). The LLP enjoys most of the same benefits as the LLC, though each partner is often still responsible for the others' wrongdoings.

A limited liability company enjoys some of the tax benefits of a sole proprietorship, as well as the liability protection of a corporation. There is no double taxation that can occur with a corporation. The liability is limited, in that the owners are protected from liability for certain acts and debts of the LLC, but may still be responsible for any debts beyond the fiscal capacity of the company.

Before any final decision is made about the type of business structure you choose for your business, consult a tax attorney or CPA. They can give you advice based on your individual needs as to what structure is best for your business, as well as additional ways to limit your liability and insure that you pay the least tax possible.