Legal issues of a home business
When it comes to starting a home business, a lot of people have the right idea and might even have a great product but as far as the legal issues go, not too many people know what they are doing. If you are planning a home business you need to do your research ahead of time, well before you ask for financing and commit to it in order to understand just what you are getting yourself into. The tax issues are very different for a home business and they do require more information from the IRS than what you may be used to filing. Here are some steps that will make it easier for you to understand what is expected of you for tax needs.
Register your business
This is the first thing you need to do. If you are a sole proprietor and you are operating under your name, you may not be required to do this as your tax situation will come out of your personal income and you will now need to make quarterly tax payments. If you are declaring a LLC or another type of business you can do this online or you can register with an attorney. No matter which route you take, make sure you are properly registering your business so you don't get in trouble with the IRS. Depending upon the state you are in, you may be required to take out a notice in your local paper to publish your business. Your county clerk's office will be able to let you know what type of information you need to fill out in order to register your business.
Acquire a business license
After you declare your business and have it registered you will need to acquire a business license. This gives you the authority to operate your business. The type of business you are dealing in may need licensing through the Federal government as well as the state. Again, your county clerk may be of assistance when you are trying to figure out licensing information.
Separation of personal and business income
As a sole proprietorship you can have the two mixed together as they will become your income and you can then deduct out all of the business expenses. However other businesses will need more of a separation like opening a business bank account and credit cards. It is important to keep accurate records as you will need them for the IRS if you are audited.
You must pay quarterly taxes and possibly pay business taxes if you have an LLC or other corporation. Make sure you understand what your tax obligations are and that you are paying on time and the complete amount or you do risk a penalty from the IRS. Anyone that owes $1,000 or more to the IRS must make quarterly tax payments or risk a penalty. If you think that you will owe, it is best to pay so you don't have a penalty and so that you don't owe a lot of money when April 15th rolls around. The IRS has multiple publications on quarterly taxes along with information as far as how to file business taxes goes so you don't have any problems. You might try working with a CPA if you are concerned about your taxes.
Depending upon the type of business you are running, you may be required to deal with zoning laws. This is common for using your home as a place of business like if you have clients coming to your home for massage services or other things. You need to make sure you are working with the state and federal government in order to comply with zoning laws to make sure you are not in violation of anything.
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