Start-Up Small Business – Part 2 – (Getting Started)
Many new people entering the world of business miss opportunities they can deduct when starting to grow their dream. I am referring to the expenses occurred before operations even begin. Most people when starting an independent business venture work a job already, which is known as floating your home base while cultivating the new company. Yes, starting a new business means you are working twice as hard with only one stream of income.
Where does that money come from, most of you should already be developing a nest egg retirement system where you have multi divested assets into potential long term outcomes into retirement, most of that money if touched early associates huge tax penalties, however, some can be used into other investments like starting a business. Word of caution this does not mean you can use it as income; in the day and age we live in though planning for retirement isn’t a common activity that has a large yielded amount of reserve that the younger entrepreneur can take from. This is where understanding tax laws and breaks available helps in starting the new business.
Generally a maximum for new small business allows a maximum of $10,000 in allowable deductions meeting the ordinary and necessary requirement. When preparing to start your new business use a startup worksheet to plan your initial financing needed. You’ll need this information to set up initial business balances, and to estimate startup expenses. Most important though is DO NOT underestimate your costs.
Startup expenses: These are expenses that happen before the beginning of the plan, before the first month. For example, many new companies incur expenses for legal work, logo design, brochures, site selection and improvements, and other expenses.
Startup assets: Typical startup assets are cash (in the form of the money in the bank when the company starts), and in many cases starting inventory. Other starting assets are both current and long-term, such as equipment, office furniture, machinery, etc.
Startup financing: This includes both capital investment and loans. The only investment amounts or loan amounts that belong in the startup table are those that happen before the beginning of the plan. Whatever happens during or after the first month should go instead into the Cash Flow table, which will automatically adjust the Balance Sheet.
Reference material: https://www.irs.gov/publications/p334