Awards & Engraving

Start Here October '19

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10 S T A R T H E R E 2 0 1 9 consider buying a franchise. If you are going to create a new enterprise that emulates a well-established business, you are, at worst, likely to fail and, at best, be gobbled up by the competition. If you do decide to purchase a franchise, conducting due diligence is critical. In short, know everything about what you are getting into before you sign anything. To determine your market niche, talk to potential customers, competitors and suppliers. Ask prospective clients to make comparisons between similar offerings available on the market and what would be of added value to them, if improve- ments were made. No matter how great a new idea is, if no one is motivated to buy it at the price you have to sell it for to make a profit, you don't have a business. Taking the Plunge To turn an activity into a business, you don't need to reach a certain level of sales or income. To have a business, all you really need is a reasonable expectation that you'll make a profit from the activity. As far as the Internal Revenue Service ( I R S : www.irs.gov) is concerned, you are supposed to report income "from Hobby Versus Business A hobby is something you do at your leisure. When you make it a busi- ness, you must show up for work (e.g., have established operating hours, and dress and act the part). Think of your hobby turned business as your "second job" and make it a priority in your life. Still, the hobby vs. business ques- tion boils down to how you handle your expenses and what to do, if your activ- ity loses money. For example, let's say you sell custom gifts and promotional items to the country club crowd—you know, golf, tennis and swimming enthusiasts— in your spare time. If you actually lose money from this endeavor, when you factor in all the related expenses like sub-contracted goods, materials and marketing, the IRS will let you deduct this loss to offset your other income (i.e., your regular day job), if your "budding enterprise" is considered a business. You cannot deduct a loss if it's a hobby. According to the IRS, an activity is a "business" if it has made a profit in three of the past five years. Until you have five years under your belt, the IRS will look to see if you're taking the activity seriously and treating it like a business with the pri- mary goal of making a profit. For example, • Do you keep financial records for your business? • Do you have a separate bank account for your business? • Do you have a business name? • Do you invest in advertising and marketing? If you are interested in learning more about how the IRS determines a profit motive for a business, you can go to the IRS website and search for the article "Is your hobby a for-profit endeavor?" Nobody's Business But Your Own Let's say you've come this far in read- ing this article and either you haven't been dissuaded or you are now more fired up than ever to get started. When you're ready to move your activity beyond a fun pastime, you need to get serious about managing it. A Tax Reseller number per- mits you to purchase prod- ucts wholesale, and those purchases aren't subject to sales tax until they are resold. whatever source derived." This means that whether you con- sider something a hobby or a business, if you are making money, you need to report it on some form of tax return—either your personal one (in the case your "business" is a sole propri- etorship), or a business version (if you decide to create a LLC or S-corp). Have I confused you or begun to scare you off? Hope- fully, I have not, but this is a perfect time to make you aware of a very valuable (and no-cost) resource you need to utilize—your nearby Small Business Development Center ( S B D C ). Click on www.americassbdc. org, enter your zip code, and locate one of nearly 1,000 SBDC offices that offer no-cost business consulting, help with writing a business plan and applying for Small Business Administration (SBA)— the US agency which funds the SBDCs— loans and grants, and low-cost training for start-up and newly established busi- nesses. At very least, every business should have a plan. A good business plan con- sists of a strategic, tactical, and financial overview. It should answer the following questions: • What are you planning to do? (the Goals) • Why are you doing it? (the Motivation) • How are you going to accomplish this? (the Methodology) • How much money do you need? (the Means), and • Where will the money come from? (the Resources) A business plan should help you rec- ognize the risks and challenges as well as the opportunities and strengths of the concept behind your business. There is no set format for the business plan. It is just important that every business have a sound, thought-out, goal-oriented plan—then refers to, is guided by, and executes that plan on a daily basis.

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