Why How To Start A Business At Home Will Change Your Life

By | August 1, 2019

Setting up your business correctly is why how to start a business at home will change your life. People of all ages are starting a business at home to earn an income. Why not you too? There are only a few simple steps to follow to get your business up and running in a very short period of time.

Business at home

Making Your Business Legitimate

The most crucial step in starting a business at home is in making your business legitimate in the eyes of the IRS. If not set up correctly, the IRS can make your life miserable. It can end up costing much more than any profit you make.

Follow these steps to ensure you have all the proper documents that will make your business legal.

  1. Contact your Secretary of State and open an account. Every state is a little different and each state has specific instructions on how to get a business started. (I live in Louisiana and I went to Louisiana Secretary of State website. On the website there is a link to GeauxBiz where I created an account to get the checklist to start a business).
  2. There is a list of all business names that you will want to research so that you choose a business name that is not already in use.
  3. The next step is getting a Tax ID certificate from your State Revenue Office. This certificate allows your business to purchase goods at wholesale and sell at retail. If your business is for services only, you will need this certificate to charge taxes on consumers of your services. (This certificate also gives your business the authority to deduct business expenses from the yearly operating cost).
  4. After you create a business name with the Secretary of State and have your tax certificate, you will then go to the city where your business will be located and file documents and get a license. This normally costs about $50 a year for this license.

You have filed all the documents required by your state you are now considered a business in your state. This opens the door to all the opportunities that every business is entitled to under the law.

Most cities forbid a commercial service business like auto repair to operate in a residential neighborhood. This is because of noise and the number of cars around the property is an eyesore to the neighbors.

If your business is an online business, the approval rate is 100% from cities and states. Some states now charge taxes for online purchases so make sure you are operating your business under the law.

 

Sole Proprietor Or Corporation

There are six different types of businesses. Each one has its own advantage and disadvantage and the tax liabilities are different for each type as well. Understanding these advantages and disadvantages of each business type is imperative; since the right business organization is based on individual circumstances. The LawTeacher.net has a great explanation of how the tax liabilities of each different type of business is applied and handled.

The six types of businesses that you can start are:

  • Sole Proprietorship – is owned and operated by one individual
  • General Partnership – two or more partners as business co-owners.
  • Limited Partnership – is a partnership formed by two or more people having at least one general partner and one limited partner.
  • “C” Corporation – This type of corporation has the greatest amount of startup costs but for a highly profitable business, this is the best option.
  • “S” Corporation – Very similar to a “C” Corporation in that you receive the limited liability of a corporate shareholder with the benefit of paying taxes as a sole proprietor or partner.
  • Limited Liability Corporation or LLC – This acts as a hybrid between the partnership and corporation.

 

Each type of business must be carefully researched to find which one is best for your particular circumstances. For a business that operates only online, like making sales or as an affiliate, a sole proprietorship is fine and customary.

The sole proprietorship business model is actually the most common because a home-based business is usually being operated by one individual. It also requires the least amount of startup costs.

Since the sole proprietor will be taxed at the individual’s tax rate and on the profits generated from the business anyway, there is no need for the added expense of incorporating the business. Usually when the business first starts there isn’t a lot of money in the budget so profits are small.

As the profits rise in the company or the owner is acquiring equipment, property, or lots of money, changing the company from a sole proprietorship to an LLC will be a smart decision to make.

I don’t like partnerships of any kind because of the liabilities that one partner can pass onto the other. One partner that has a gambling problem, for example, can bankrupt the other partner.

Of the three corporations available I prefer the LLC or Limited Liability Corporation. Until the business has a lot of capital, or equipment or property, forming a corporation involves more legal documents and IRS oversight, and not advantageous for most home businesses.

Legal Documents You Must Create

There are certain monthly documents you should complete and maintain for your records. If you ever get in a pinch and the IRS comes knocking, not having these few documents can put your business into an extremely vulnerable position.

I use a Spreadsheet for my sole proprietorship business. I include all of my expenses and sales. All profits and expenses will be easily seen. I use this same spreadsheet to give to my tax consultant and adviser for filing my 1040 tax form.

My business in Internet sales so there is no need for a monthly mileage report or traveling expenses.

I am on a monthly plan of paying taxes to the State from my business. Every month the State mails a form that I complete and submit. Failure on my part to submit form invokes harsh penalties from my State about taxes owed to the State.

Business Taxes

Every business has them, there is no way around it. The great thing about business tax is that the expenses can be deducted from your profits before taxes are figured. In a year that has low to no profit, these expenses are real and can still be deducted from the yearly total. The IRS simply requires a business to report all profit or loss and requires a business to show a profit in the two out of five years.

This is what makes having a home-based business so appealing. Since a brick and mortar business can deduct ALL their expenses – so too can the home-based business deduct expenses. Expenses like Utilities, Rent or Mortgage interest, insurance, repairs to your home, office equipment, office supplies, stamps, furniture, and the list goes on.

If my business uses a mailbox at the post office then mileage to and from post office plus the yearly rental of mailbox would also be deductible.

Conclusion

By learning the proper procedure to start a home business will make earning an income working at home easy, which will change your life for the better. People are struggling to make ends meet. This is mostly self-inflicted due to never learning how to handle money.

Sometimes, however, it is not so much about self-discipline but rather on earning low wages, to begin with. This makes it much harder to provide for a family. So having a home-based business is much more important and necessary. You can literally work two jobs, one from home part-time and your other regular job.

Once your work from home business is earning a nice income, you then have options. You can quit your day job to become your own boss or use your business to supplement your income. Either way is good. Whatever your circumstances dictate is your best approach.

But at least now you have options. Before you started your home business, you had no options.

I hope that you found this article to your liking with information that you can use. If you need assistance at getting started with starting a home business please complete the contact form and I will answer you as quickly as I can.

If you know of someone that can use this information please feel free to share it with them. If you would like to leave a comment or have any suggestions or recommendations again, please feel free to submit your reply. I look forward to answering your comment or suggestions.

Exceed Your Vision

10 thoughts on “Why How To Start A Business At Home Will Change Your Life

  1. Jordan Smith

    Wow! Thank you for this well-detailed step by step plan on how one can get a business up and running in no time. As much as we all want to get into business and start making some cash, it’s best we put some things in place first to avoid possible future problems, hence the reason why this article is very vital. There is nothing more beautiful as earning from a business you love at your convenience. 

    Thanks again for this useful information.

    Regards!

    Reply
    1. Kenneth Merrick Post author

      Thank you, Jordan, for reading my article and finding my information helpful. It is pleasing to me that you are able to use the information for your benefit.

      Reply
  2. RoDarrick

    Great post! I found this post very refreshing. Starting a business from home will definitely be life-changing if the necessary work is put into place first. However, getting started is the major factor and you have provided where to start first, who to get approval from, and the registration procedures to make life so much better. My sister just set up her business online and she decided to fulfill all righteousness by making sure to register at all appropriate quarters to prevent any issues with her business. I will share this post with her and I hope it helps her too.

    Reply
    1. Kenneth Merrick Post author

      You know, Ro, that every state is a little different so make sure your sister contacted her Secretary of State first before preceding on to the city for a business permit. I hope the process was very easy for your sister, and I wish her good fortune in her new home business.

      Reply
  3. Nazmun Nahar

    Great information I found inside of this article. Nowadays a Home-based Business is very trendy. Many people want to start an online business, and for this, they can find out training or guidance easily if they want. But the main point comes when the talk comes on tax and filing the documentation. Many people I have seen start their online journey before they know what the IRS regulations are all about. So I am pleased to see here you have brought together all those guidance which anyone needs to start their online business. Thanks a lot for such a great article. 

    Reply
    1. Kenneth Merrick Post author

      You are so welcome, Nazmun. The point I wish to convey is it is so easy to start a legitimate home business – if you follow a step by step procedure that protects you as much as giving you the authority to earn revenue and deduct your expenses from your taxes. Making money and keeping it is always a good thing.

      Reply
  4. Eddie

     Hey there, what a great article. I really enjoyed reading your article. It was very informative. I like the easy to read and understand part of why it is important. Good job on that aspect. I love all the information that you give in regards to starting a business. You are 100% correct in regards to making it legitimate in the eyes of the IRS. You don’t want the headache down the road. And it gives you a lot of peace of mind when you have everything set up correctly. Do you recommend LLC or soul proprietor? I look forward To your answer.

    Reply
    1. Kenneth Merrick Post author

      Eddie, starting a home-based business for most people is operating on a shoe-string budget. You don’t have to have deep pockets. In that regard, I recommend the Sole Proprieter approach while your business is still new and starting to grow. After it is showing a steady inflow of business or it is beginning to accumulate valuable equipment, I would switch over to an LLC. An LLC protects the owners of the business from getting sued and losing everything.

      Reply
  5. Fran

    Your article is really good, as you have explained clearly and in an easy-to-understand way all the things you need to plan for and to do when you start your new home business.

    Thus far, I have not made enough money from my website to be worried about it.  However, as I have another business and had to jump through all the hoops you mention for that one, I know the day will come.  I’m sure your article will be valuable to many new business owners who have no idea what they will need.  Paperwork is such a pain, but necessary at times.  

    Reply
    1. Kenneth Merrick Post author

      Yes, Fran, paperwork can be a pain and you are right about it is also necessary at times. I think of it as a contract between you and the government. They will allow you to make money with your business and deduct most of your expenses as long as you give them any taxes that you are obligated for. It helps you keep more money in your pocket and less going to the government.

      Reply

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