What is it about business startup that interests you? For some it’s the thrill of the chase – “I’ll do that one, then that one, and then that one.” For others, it’s the idea of a chance to own a business they’ve dreamed about since childhood. Regardless, of your motivation, a successful business startup can offer you many benefits.
A business startup or launch is a new business or project undertaken by an individual entrepreneur to seek, test, develop and evaluate a viable model for delivering a product or service. Business startups can take many forms. Some set out to design a new product or service that enriches an existing product line. Others are attempting to reinvent an entire industry. Still others are developing new methods of distributing goods and services over the Internet.
Each type of business startup has its own unique set of business startup costs. To meet their objectives, entrepreneurs spend a great deal of time researching and redesigning their concepts. They also spend time figuring out how to market their concept to target specific markets. Finally, they have to determine how much they can afford to invest in a business startup. All of these preparations take time, money and dedication.
Perhaps the biggest single expense for most startups is payroll. If you’re self-employed, you may be responsible for providing your employees with every pay check as it comes due. In this case, you may want to consult with a tax professional to help you determine which tax deductions you can take. The tax code includes a wide variety of corporate tax deductions including research and experimentation expenses, labor expenses, and property expenses. A tax professional can also assist you with understanding which deductions will apply to you and which ones will not.
Because startups tend to have much higher turnover than larger businesses, entrepreneurs have to constantly keep their costs down. Unfortunately, many business owners make big mistakes in the initial phase of their businesses by ignoring necessary costs. For example, startup inventories may include hundreds of thousands of dollars’ worth of goods that aren’t yet sold or are yet unused by the business. While startup inventories are absolutely necessary, business owners may want to consider taking the standard business expenses deductions for these items.
You should also keep in mind that you have to pay taxes even while you’re waiting to get started. In the case of a business startup, this means you have to pay income taxes even while you’re waiting to hire employees, do any marketing, or build your infrastructure. When you file your income tax return, you can claim expenses that exceed your income. However, you should consult a tax professional to understand which expenses you’re eligible to claim and which you shouldn’t.
Although most businesses can qualify for general business expenditure deductions, there are several different types of expenses that can be deducted from your income taxes. Some of the different types of expenses include travel expenses to meet with consultants and investors, office supplies, business phone bills, advertising expenses, etc. You should consult a tax professional to learn about the different types of expenses that can be used as a basis for your startup costs.
If you’re planning to open your own business, the first year will always be the most expensive. However, if you work smart you can minimize your costs during the first year. It’s a good idea to start small, by only deducting a few thousand dollars for your first year. After the first year, your expenses can go down steadily, as long as you continue to operate your business profitably. However, if you want to reduce your taxes even more, consult with a tax professional to find out more ways to reduce your taxes.