There are many benefits to starting a home business online. Aside from the potential for earning extra income or even replacing your salary eventually, you will really make your home earn its own keep!
For tax purposes, while it does matter whether you have any other source of income, you can reap the benefits either way when you itemize your tax deductions. The Federal laws apply to us all, but each state may also have various rules that apply, so be sure to read about the tax laws each year to ensure you are within the law and following directions. It is very important to keep all of your receipts throughout the year if you are going to claim any of your expenses as deductions.
The differences for example are that if you have other income the law is strict about having an actual office in your home. You need a door on the room and the room cannot be used for any other purpose. If your home business is your only source of income, then they are more relaxed as the potential for abuse is not so great. You still need the space to be used only for your business, but you don’t need a door.
It may also affect the percentage that you can deduct for maintaining the home where you have the business. For example you may be able to deduct a percentage based on the square feet used for the business for your rent and utilities, insurance, etc. Of course any money you spend for equipment, supplies and advertising are all deductible as self-employed business expenses. If you do not have medical insurance from a job then you can deduct a percentage of some of your costs for insurance, co-payments, glasses, dental, etc as a self-employed individual. If you have staff or consultants who help you to do anything for your business, this is also deductible.
You will start to save money right off the bat if you are working from home as your only source of income. Just add up what you spend now for transportation to and from your workplace, the gas, bridge, parking, etc., and the wear and tear on your car. Factor in what you spend on going out to lunch, being well-groomed (clothes, dry cleaning, shoes, barber or beauty salon). Right there you are saving money that can be used to invest in building your business.
Of course if you are really serious about starting your own business, then it will be easy for you to sacrifice some things if necessary, to make it happen. Namely you can ask yourself if you would rather go out to eat dinner, buy a movie or a new dress or use the money to create a new income source, your own business.
Working online, everything you need to do to promote a business is far faster and less expensive than doing it in the ‘real’ world. For example if you were opening an office or a store your expenses would be very high and that is why the average time for a business to realize a profit is 5-years. You are paying two rents – one at home and one at the store or office. You have insurance x 2, you have utilities x 2, inventory, decor, equipment, and possibly staff.
As well, doing advertising physically – signage, flyers, brochures, mailers, classified advertising, etc. is very expensive. The Internet allows you to create and use all of these faculties at very low cost. There is no postage, there is no paper or printing costs. Online you can also spend money but it is not always necessary – for example you can pay copywriters or designers to create web pages for you; but at the same time you have options to use low-cost software that will do the job, and even to learn how to do things for yourself for free, although this is likely to cost you a lot of time for the learning curve.