BOOMER ENTREPRENEUR

STARTING YOUR OWN BUSINESS

Let’s approach this slowly and without a large capital outlay to see if this will work for you. The easiest and cheapest way to start a business is as a sole proprietorship. (Definition from www.lectlaw.com - SOLE PROPRIETORSHIP - A form of business organization in which an individual is fully and personally liable for all the obligations (including debts) of the business, is entitled to all of its profits and exercises complete managerial control.

You can start a business and become a sole proprietor without any legal filings (and costs). Your business transactions will be reported on IRS 1040 Schedule C. Go to http://www.irs.gov/formspubs/lists/0,,id=97817,00.html and find the Form 1040 Schedule C and download it. This will give you an understanding of the information you will need for tax reporting. (There are other legal entities for business, but for now, let’s stay with the sole proprietorship).

BUSINESS NAME

You may want to establish what is called a "DBA" which means "doing business as". It is written YOUR NAME DBA YOUR NEW BUSINESS NAME. This is not normally necessary, but since it varies by state it is something that you should check with your banker and with your local city and county office to see what the local and state requirements might be.

ACCOUNTING

We are going to be positive that you will generate income (and we hope it will be substantial amounts) from your business, so plan a way to keep records of your revenue and expenses so you will be able to report properly at year-end. The best way to accomplish this is to open a business bank account. Title it “Your Name – Business Account” or use the DBA if required. You can fund it with enough money to allow you a little money to start your business and keep it above the minimum for service charges (avoid the monthly service charges since they are very expensive to a small business). Run all your income and expenses through this account and your bookkeeping will be fairly easy. You will be able to measure your performance on a monthly basis and at year-end, your tax reporting will be greatly simplified.

If you do not already use a CPA for your taxes, it would be a good idea to locate one and discuss your plans with him/her. As your income rises, you will need to make quarterly tax deposits to the IRS since no one is withholding for you now. Be aware of this and do not let it surprise you. Invite the CPA to lunch and discuss your ideas. It is always good to have a good working relationship with your CPA so he/she can guide you in the development of your business.

A word of caution

If you sell taxable products directly to someone within your state, county, or city of residence, you may be required to collect sales tax and deposit it with your state controller.
Check your local governments to see if you need any business licenses.
Check the zoning of your residence to see what the ordinances are about operating a home business.
Use your Internet resources to find the information on your state’s tax laws.

Now that you are officially in business, you will be able to charge off your business expenses. You need to keep all the receipts for tax purposes. You can put these in a folder and summarize them on a monthly basis. If you use your car for business, keep a mileage log of the miles driven so you can charge off the auto expense at the IRS business mileage rate. (The rate can be found by searching at http://www.irs.gov/). At the end of each month, develop an expense report so your business can pay you back for what you have spent out of pocket to run your business.

The key idea that I am trying to convey to you is plan to be successful and establish systems and procedures to help you run your business in a professional manner.

INVESTMENT

You have already made the largest investment that you will need to make to start your business when you bought the computer that you are currently using to read this information. There will be other expenses to start your business (“You have to spend money to make money”), but we will plan to minimize your starting costs until you are satisfied that the new title of Entrepreneur fits you. Once your business starts to generate income, that income can be used to purchase additional equipment as needed.

CONCLUSION

Be aware that there are several other legal structures for starting a business, but they are more complicated. They will require the services of an attorney to establish them ($$). A good resource for information about the other options and their tax considerations can be found at http://www.irs.gov/businesses/small/article/0,,id=98359,00.html.

Now that we have stated on the path of entrepreneurship, we must do the research to determine the type of business that best suits you on the Internet.