Busting out the Dragon Ball Z at the office…
Happy Friday!
Home Office: Building a Space That Works for You
When it comes to your home office, it is important to make sure that you are comfortable, and that your workspace is practical for your needs. But it can sometimes be difficult to create that space in your home if starting a business is a relatively new development.
While you can force your home office into an existing space, another option is to do some remodeling on your home in order create the ideal home office space. There are advantages to building home office space:
*It can help you avoid having to hunt for available space in the house.
*A dedicated home office space comes with tax benefits.
*You can create an area that is just right for your home office.
*It can increase the value of your home.
When building a home office space through remodeling, though, it is important to find knowledgeable help and advice. There are several Web sites (like Cal Finder) that can help you find remodeling contractors, and it is important to also call around to find the best options in your local area.
Types of Home Business: C Corporation
Today’s post marks the last in a series about the types of home business you can choose from, guided by a Taxgirl guest post on Problogger. It is important to carefully consider your needs, as well as the tax advantages offered by each type of home business. Consulting with a tax attorney or an accountant can be of great benefit as you make your decision. Today’s post is about the C corporation.
C corporation
Most big companies have a structure known as a C corporation. If you plan to expand your home business to something very large, this might be a good idea. But for most small types of home business, the C corporation doesn’t offer any real advantages. This is because, unlike the other types of home business, a C corporation is not a "pass through." Taxgirl points out the advantages and disadvantages of a C corporation:
The advantages of a C corporation are continuous life, clear
divisibility of assets between personal and corporate, limited
liability among shareholders, freely transferable shares of stock,
virtually unlimited options on structuring stock ownership, and
favorable tax treatment for certain expenses. All good, right?
The disadvantages of a corporation are increased administrative
expenses, compliance formalities and the potential for “double
taxation.” Increased administrative expenses are due to more
complicated accounting and tax compliance (i.e. filing corporate
returns).
The bottom line is that for most people operating a home business, there are plenty of other options that are more likely to work better.
Other posts in this series:
Sole Proprietorship
General Partnership
Limited Liability Partnership
Limited Liability Company
S Corporation
Types of Home Business: S Corporation
Yesterday, we had a look at the limited liability company (LLC) option for your home business. (Disclosure: my home business is an LLC, and I love it.) Today, guided by a guest post by Taxgirl on Progblogger, we will continue the series with an S corporation.
S corporation
Like the other types of home business listed before, the S corporation is a pass through. The S corporation is another of the types of home business that is particularly popular, points out Taxgirl:
The S corporation is another special form of corporation that operates
like a C corporation but is taxed like a partnership. There are strict
limitations on the structure of an S corporation including the number
and types of shareholders.
An S corporation can be helpful if you are going to need additional employees and payroll. But it is also useful for freelancers — even those who employ themselves as their only "employee." However, if you slip up with procedure, you can lose your "S" status for 10 years — and that can have serious tax consequences.
Make sure you consult with a knowledgeable accountant or tax attorney before making a decision on this home business, or any of the other types of home business.
Limited Liability Company: Types of Home Business
Today we will feature another installation in the ongoing series on types of home business. Last time, we looked at a limited liability partnership. Today we will have a peek at the limited liability company (LLC).
The LLC is another pass-through entity, but it has more flexibility than those we have discussed before (general partnership and LLP). It also, points out Taxgirl on Problogger, has liability advantages similar to those offered by a C corporation:
Even though the LLC offers pass through tax treatment, liability is
limited in much the same way as with a C corporation. This means that
so long as you follow the corporate formalities, as well as keep your
personal assets separate from your business assets, your liability will
largely be limited to your business assets.
One way you can do this is to separate your business account from your personal account. My home business is set up as an LLC. My income from my home business goes into a business account, and then I write checks to myself and my husband from the business account. These are known as "distributions."
Friday Fun Video: Rainn Wilson from The Office Interview
I love the TV show The Office. I also like Rainn Wilson, who plays Dwight K. Schrute. Here is a funny interview.
Happy Friday!
A Laptop and Wireless: Working from Home While Away from Home
One of the great things that technology has provided us with is the option to engage in working from home…while not at home.
Right now I am in New York for two weeks, visiting my husband’s family. And thanks to the wonder of the laptop, and wireless Internet, I can get my work done while sitting on the couch at my in-laws’. It works pretty slick. I can still "visit" to a certain extent, and I’ll get my work done, even though I’m not in my home office.
Do you use technology when working from home while away from home?
Types of Home Business: Limited Liability Partnership
Today, we are continuing with our series on types of home business. Today’s topic is the limited liability partnership (LLP).
Taxgirl points out in a Problogger article that the limited liability partnership is similar to the general partnership: it’s simple and it is a "pass through" entity for tax purposes. However, you can register your LLP with your state, and this brings with is some protection, according to the article:
The benefit of registration is that each partner is not liable for
obligations and liabilities arising from the “negligence, omissions,
malpractice, wrongful acts or misconduct” of the other partners. In
other words, so long as you observe the proper rules, liability is
largely limited to your own actions.
Consult with a tax attorney or an accountant before making a decision about which type of home business is best for you.
Types of Home Business: General Partnership
Yesterday, we took a look at the sole proprietorship as a type of home business. Today, guided by Taxgirl on Problogger, we will have a look at the general partnership.
General Partnership
This type of home business arrangement is known as a "pass through." This means that income and tax deductions go through the partnership and then to the partners. Each partner "owns" a certain percentage, and the income and deductions go to each partner in proper proportion. While federal taxes are not paid on partnership income, state taxes or local taxes may be.
Like the sole proprietorship, this is a very easy arrangement. And, like the sole proprietorship, there are some tax limitations according to your personal income taxes. You can have individual assets on the line for the business as well, making your personal assets liable to pay off business losses.
Consult a tax attorney or accountant to make sure that this is the right arrangement for you.
Types of Home Business: Sole Proprietorship
Last week, I introduced a series that will look at the different options you have in terms of organizing your home business. I mentioned that we would be guided by the Problogger article on the subject, which was guest written by Taxgirl. Today we will look at the sole proprietorship.
Sole proprietorship
This is a very simple arrangement. You don’t have to file any paperwork or set up any sort of business entity. Your business income is reported on Schedule C of the 1040, and you treat is as part of your income. Business and personal are fairly interchangeable in this instance. But, as is pointed out on Problogger, there are some downsides:
The downside of these “loose” requirements is that sole proprietors are
personally liable for debts, obligations and the like of the business,
including lawsuits. Personal assets are essentially treated, for
liability purposes, as assets of the business.
Another downside is that your taxes are likely to be higher. Last year, I switched to a Limited Liability Company from a sole proprietorship. Instead of paying $15,000 in taxes, I only paid about $6,500. That’s a big difference. Once your home business starts doing well enough that it boosts your taxes, you might consider switching from a sole proprietorship.
A knowledgeable tax attorney or accountant can look at your home business and income situation and help you figure out what would be most beneficial for your situation.