How do I start a homebased business?
Just do it. Use your name and social security number on Schedule C of your 1040 tax return. Get a website, social media, email address, and business cards – all for under $25! Everyone can be a sole proprietor of a consulting business advising others in low risk services (you would not want to consult on surgery or dental work, that would probably be illegal, but you can join a direct sales or multilevel marketing company as an independent contractor or you can consult or advise in tutoring, job hunting, graphic design, cooking, wardrobe, hair, wealth building, housekeeping, gardening, etc.). This doesn’t mean all of the business activities happen at home (for example, if you drive as an independent contractor for Uber, it is still a home based business that operates as a sole proprietorship and you report the income and expenses on schedule C of your 1040 tax return. Now, you have access to over 475 tax deductions!!!
What are the two tax systems in America?
There are two systems in America, one for employees and one for businesses, and this is how the employee system works: If you are an employee and you make $50,000 a year, for example, the SYSTEM (IRS, state taxing authorities, FICA, etc.) will take $15,000 or more right off the top. Yep. You’ll have approximately $35,000 left over and with that whopping $35,000, you are supposed to pay for all of your living expenses: rent, mortgage, car, travel, entertainment, mobile phones, tuition, daycare for your kids, kid’s activities, etc. After you pay for everything you need, there’s probably no money left, so you end up going into debt and robbing Peter to pay Paul while trying to figure out how to make
ends meet. On top of that, at the end of the year, you get taxed on the whole $50,000 that you never even received!
There’s another system for businesses. What kind of business? ANY business.
Your sole proprietorship / homebased business in your home office, basement, loft, living room or attic. Microsoft. Your hair business. Walmart. Your resume writing business. CVS. Your consulting business. Here’s the point I’m trying to make: you are in the same category with all of those big businesses. It doesn’t
matter what kind of business you own, but please understand that ALL businesses operate under the second system and this is how it works: if you have a homebased business and you make $50,000, first you get to deduct car expenses when you drive for business (interest, registration, oil changes, insurance, or mileage), mobile phones, internet, cable, meals with
your business partners when you are conducting business, vacations (as long as you do a certain amount of business) and well over 475 other deductions that you
probably have never heard of! Now let’s compare this scenario to the employee example: if you make $50,000 and you own a business, and all of your documentable and legitimate business expenses (car, gas, mobile
phones, internet, employees, business trips, business meals, etc.) add up to $40,000, then you get to deduct the $40,000 in expenses from the $50,000 and pay taxes on the $10,000 that’s left over!
Why should I hire my kids or other family members in my homebased business?
Parents, grandparents, aunts, uncles and Godparents spend thousands of dollars on items for children. Money you can NEVER get back. But if you hire your children, you can pay the kids a salary – write that salary off as a tax deduction – GET THE MONEY BACK at tax time (that’s like getting paid, right?) then the kids can use that money to buy the things you were going to pay for anyway (tuition, activities, vacations, school clothes and supplies, etc. etc.) – It’s all tax free to the child and the parent (in a sole proprietorship) up to the first $12,000 per child! If you are someone other than the patent, you can hire the child as an independent contractor to avoid paying taxes and then the child can start their own homebased business as well.