Howdy purevelour-ga,
A reminder of the "Important Disclaimer: Answers and comments provided on
Google Answers are general information, and are not intended to substitute
for informed professional medical, psychiatric, psychological, tax, legal,
investment, accounting, or other professional advice."
Sure, you can work for a company and draw a regular paycheck as well as run
your own company out of your house. Just keep in mind a few things.
You will want to make sure your home based business is considered a business
and not a hobby. The Gordon, Hughes & Banks, LLP. web site has some great
tips on just this issue.
http://www.ghbcpa.com/articles/article_campfield_tamara_maximize_tax_benefits_of_your_home_based_business.html
"The main factor in determining whether an activity qualifies as a trade or
business is a profit motive. A safe harbor for a presumption of a profit
motive is being profitable three out of five consecutive years ..."
The article goes into more details on general rules on how to differentiate
between a hobby and a business.
The same article goes into the second issue you will want to deal with, and
that is deductions when it comes to a home based business. This is where
lots of people get into trouble.
"To qualify as business deductions, expenses must be ordinary and necessary.
...
To qualify, your home office must be used exclusively and regularly for
business and either:
- Your principal place of business,
- Used to personally meet with clients, patients, or customers, or
- Be a separate structure, detached from your personal residence, which must
merely be used in your trade or business."
The article discusses some other issues with a home based business. You
should read it in detail as it provides a nice summary on this topic.
You also should find out if there is any conflict of interest with your
"day" job. There could problems if your LLC competes with your "regular"
job. I have worked in situations where the company outright did not allow
me to work for someone else, including myself. The people you work for
might not want you doing business with any of their clients, no matter the
type of business you are operating.
If you signed some type of employee agreement, you might want to review that.
If your company is not going to be in competition with your "day" job, and
management is approachable, you could just ask them.
If you live a covenant controlled community, or a city with restrictive rules
on home based businesses, you will need to contend with that as well.
There are all of the other issues that one needs to address when starting a
business. Your LLC will need to get (even if you don't have employees) a
Employee Identification Number (EIN), possibly business insurance (to cover
clients that come to the house, or if you go to a client's house and break
something, etc.). You might consider getting a business bank account as
that can go towards being a business versus having a hobby.
There is the LLC paperwork for your state, sometimes a "Doing Business As"
(DBA) or "doing business under an assumed name" process that some states
require. If it is a retail type business (instead of a services company)
then there are tax licenses and sales taxes to collect.
The Internal Revenue Service has documentation on their "Businesses" web
page that also can be handy.
http://www.irs.gov/businesses/index.html
"information for:
- Corporations
- Charities & Non-Profits
- International Businesses
- Partnerships
- Small Bus/Self-Employed"
With my LLC, the LLC sends in a 1065 form for the business and the profits
(or losses) flow through to my personal income tax (1040) form. You might
want to talk to a tax expert on the specifics as it applies to you.
All of the above might seem overwhelming, but in my experience it is just
a "step-by-step" process that goes fairly quickly in application.
If you need any clarification, feel free to ask.
Search Strategy:
Google search on: hobby versus business
://www.google.com/search?q=hobby+versus+business
Personal experience of doing exactly the same thing.
Looking Forward, denco-ga - Google Answers Researcher |
