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Time To Startup!
Inspiration and Information for Starting Your Business

Archive for January, 2010

Small Business Reacts to New White House Jobs Proposal

Posted on January 28th, 2010 by Heather
Category: Grow a Business

“Good, fine—now do it yesterday.” That sums up the reaction to President Obama’s latest plan to spur job growth among small businesses.

Under the plan, small businesses receive an extension of tax incentives authorized in the American Recovery and Reinvestment Act, or ARRA. The plan also extends the suspension of fees and the promise of larger guarantees for Small Business Administration loans—all good things for small businesses.

Announced on December 8, the plan is part of the Administration’s strategy to create jobs, expand business investment, and create greater access to capital. And to hear the reactions of most small business CEOs, the plan itself isn’t the problem—it’s the pace of Congress in approving it.

In addition to other tax incentives, the President also proposed eliminating capital gains taxes on small-business investment for one year, suggested that unused TARP funds be redirected to small businesses, and proposed a short-term tax cut for small businesses that hire new workers in 2010.

Like all such proposals in turbulent economic times, the actual effect won’t be known until…well, until it’s known. And that won’t happen until Congress enacts it. But the fact that the Administration is trying to provide aid to small businesses is a good sign, says Molly Brogan, a spokesperson for the National Small Business Association (NSBA). “The capital gains elimination and the extension of the bonus depreciation deduction will help get more cash in the pockets of Americans,” she says.

But NSBA echoes the consensus that speed is crucial. “We are pleased to see President Obama paying close attention to small business and offering some sound proposals,” says Todd McCracken, NSBA President and CEO. “But the time for talk has long-since passed. We need the administration and Congress to act now on these proposals—they simply can’t wait.”

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A Hobby or a Business?

Posted on January 21st, 2010 by Heather
Category: Home Business, Small Business, Start A Business, Work For Myself

When a habit begins to cost money, it’s called a hobby.—Jewish proverb

It’s great to have a hobby. It’s also great to have a business. And proverbs aside, either one can cost money or make money. But once you get to the point of declaring it at tax time, you have to choose—are you pursuing a hobby, or running a business?

You won’t be surprised to hear that the IRS has very particular ideas about where to draw the line between a hobby and a business. It’s all about your motive—specifically the profit motive. 

Your motive for pursuing a hobby is self-satisfaction. You do it because you enjoy it. You may or may not earn a profit, but that’s secondary. In order to be treated as running a business for IRS purposes—to deduct your business expenses, set up a retirement plan, and claim other tax breaks allowed to business owners—you must be engaged in a “trade or business.” And for that, a profit motive must be present. You might find your business immensely satisfying—goodness, let’s hope so—but the profit motive is non-negotiable.

This doesn’t mean you necessarily make a profit. Many small businesses spend some time marinating in red ink before that happens. But the intention to make a profit is what separates a business from a hobby.

If Uncle Sam considers your business to be a hobby, your ability to deduct losses will be limited to the extent of the income produced by that hobby. This prevents business owners from using a hobby to generate a tax loss to shelter their other income.

Yes, they’ve thought of everything.

All hobby income is reported as “other income” on Line 21 of your Form 1040. Hobby expenses, though, are only deductible if you itemize your deductions. What’s more, they are considered “miscellaneous itemized deductions” and you can only deduct the portion of them.

Although the IRS can challenge any business as a hobby, businesses that have traditionally fallen into the hobby category—”hobby farming,” for example, or home-based craft businesses—face a greater chance of IRS scrutiny than other types.

Establishing a profit motive:

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Business Owner’s Toolkit Has a New Podcast

Posted on January 19th, 2010 by Heather
Category: Grow a Business, How To Information

Business Owner’s Toolkit®, one of the web’s most popular small business resource sites, is announcing its new podcast.

If you’ve been a fan of the radio show, never fear–Greg and John are still here to impart their business wisdom each week, but now they’re 100% digital!

Business Owner’s Toolkit is the country’s hottest forum for the one-in-five Americans who already own a business and the two-thirds of Americans who say they want to start their own business. Each show delivers topics relevant to business owners and features guests who are subject matter experts in their fields. Listeners tune in to hear hosts and guest experts dispense practical wisdom that can be put right to work.

An accomplished journalist who’s covered the political and business worlds for the last decade, host Greg Corombos brings a true passion for business to the show. And John Duoba, Publisher/Managing Editor of Business Owner’s Toolkit, will supply the “Toolkit Top Take-Away” with quick, actionable tips you can start using right away.

If you haven’t had a chance to hear it, I highly recommend subscribing today.

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Location, location, location.

Posted on January 14th, 2010 by Heather
Category: Home Business, Start A Business

How many times have you heard “location, location, location—it’s the most important factor in starting a business.”? So how important is location for your business in an era where people telecommute, shop online, and research just about everything online first before even leaving the house?

It depends on what type of business you have. Obviously if you have a restaurant or boutique retail-type shop, location is critical. Common sense really still applies to location selection if you intend to have a business that relies mainly on foot traffic.

And don’t forget that for some properties you may be able to find federal or state grants to open up shop in a rural or underutilized area. Check out the SBA HUBZone site to find out if there are areas near you.

But if you have a more service oriented business or a home-based business – perhaps you’re a handy man, an accountant, a consultant, a freelancer – you really do have a choice now about weather or not to even have a traditional storefront.

Consider how often you will correspond with your customer electronically or on the phone. Will you go to them or will they come to you, if a face-to-face meeting is required? How much or how little privacy might you or your customer need?

The answers to some of these basic questions will point you in the direction of knowing weather or not you can successfully run your business from your home or if you should look for a bricks-and-mortar local.

There’s a great reference article from the University of Maine Cooperative Extension showing the pros and cons of running a business from your home. It provides additional information on why you might actually want to run your business from home at least initially.

Keep in mind that whatever option you choose, it’s important to do your homework on potential benefits or restrictions. For instance, although rare, some cities may have zoning laws prohibiting certain kinds of home-based businesses. On the flip-side, you may reap tax benefits from claiming the home office tax deduction.

Determining location is definitely one of the most important steps in planning your business—which is why I recommend that you “research, research, research” all of your options.

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