If you think of yourself as a creative and talented person who is ready to combine several jobs for making more profit, then this Prestige Auditors article is exactly for you. You can start your business by just doing what you love, and sell popular products around the world. If you are interested in turning your hobby into a business, here are some points that you should consider.
For being in business, all you need is:
- To prepare a business plan
- Keep good records
- Open a business bank account (read this blog)
- Create a separate phone number and obtain a license and permit
- Take some steps in order to increase your profits
Let’s compare expenses! Every income from your activities is reportable and taxable. However, expenses like using a car, postage, membership fees, and home office expenses can be deductible. This all depends on the choice of whether you are running a business or just pursuing a hobby.
When it comes to the hobby, all your profits should be reported; however, deductions are limited to the profit that you make. These deductions are considered to be miscellaneous itemized deductions and can only exceed 2% of your corrected income.
Profit should be reported when you are doing professional business. If you find your business profitable, you can start saving for your retirement. All you need is to put your savings into a pan on a tax-deductible basis.
Incorporating Your Business
With the fast growth of your business, you have to think over your organization’s incorporation or form a Limited Liability Company (LLC). Here are some steps that you should follow for legalizing your business:
- Personal Liability Protection:If you decide to form your Limited Liability Company, all your assets, including car and home, will be protected from creditors.
- A Tax Edge: By forming your company as an S Corporation, you are not safe since you will have some problems with IRS concerning your hobby status in order to prohibit your deductions. Therefore, it is crucial to show IRS that you are going to turn your hobby into a real, profitable business.
- Sales Edge: If you are positioning your company as a legal business corporation, it will help you dramatically increase the profit of your company. Most customers only trust corporations or Limited Liability Companies since they are more tuned for doing serious business.
By transforming your hobby into a legitimate business and forming an LLC, you are granted a great opportunity to increase the profitability of your small business and put it on a more serious level. Prestige Auditors is ready to guide you in this process by preparing all the necessary documentation for your successful business startup, getting you tax exemption, and a ton of other ecommerce business solutions if you design to go