WHAT ARE SOME OF THE TAX ADVANTAGES OF STARTING A BUSINESS?

The ultimate benefit of owning a small business is turning personal expenses into legitimate business expenses for significant tax savings.
- Sanjay Gupta -

(* The following are suggestions only. Contact your accountant for advice.)

By turning personal expenses into legitimate business expenses, you will save significantly. While actively promoting your tea business, ordinary activities become exemptions. What are some of these business expenses?

Expenses fall under several categories, treated differently from each other. Be sure to check with your accountant.

You may want to keep track of your business expenses and revenues using accounting software.

1. Tea Connexions Services: Any products or services used to promote your business (marketing material, inventory, logo design service, private labeling, Internet) and sourced through Tea Connexions should be allowable deductions.

2. Automobile: Keep a trip log in your car. Record the distance and purpose of each trip, especially when promoting your tea business. If you use your vehicle for both business and personal use, you can claim the portion used for business expenses. There are two ways to do this. First, claim a standard amount per mile/kilometer (check with your accountant for the amount). Second, claim an overall percentage of annual vehicle usage. For instance, if you use your vehicle 80% for business purposes, write off 80% of gas, repairs, insurance, leasing fees or interest on your car loan. You can also depreciate a portion of the value of your automobile. (Contact your accountant for depreciation and maximum loan allowance). To determine the best method, ask your accountant.

3. Entertainment: This can be an important part of building your tea business. Entertainment includes meals, theaters, sporting events, and drinks and more. You should be able to write off a portion of these expenses if their primary purpose is business. Keep all receipts and write the purpose of the entertainment on the back of the receipt. Before you meet with your accountant, total the receipts, then ask how much you can deduct. The wealthy have mixed business and pleasure for years; now it’s your turn.

4. Home Office: If you use your home as an office, you must set aside an area primarily for business, ideally a separate room. To determine the allowable deduction, measure the space you use as your home office, then divide that area by the house’s total square footage. For instance, if your house is 2000 square feet and your work area 300, 300/2000 = 15%. Your office would be considered 15% of your house, entitling you to deduct 15% of your mortgage interest, property taxes, and utilities.

5. Office Equipment: You may already have things in your house that you will use for business: VCR, camcorder, computer, calculator, fax machine, scanner, printer. If you presently own these things and intend to use them for your business, a portion of the value can be deducted each year (through depreciation), as can items you later purchase. Contact your accountant for details.

6. Hiring Family Members: Now that you are in business for yourself, you can hire family members to help out. They must be paid a fair rate, but the advantage is that they are often in a lower tax bracket, which reduces the family’s tax liability. Family members should be paid by check at regular intervals. See your accountant for details.

7. Business Trips: Whenever you travel primarily for business you can claim the expenses. This could include travel to trade shows, meeting with buyers, attending seminars - any business related travel.

8. Education: Books, seminars, tape programs, and magazines used to enhance your business skills are business expenses.

9. Marketing: Advertising and expenses related to marketing your business can also be deducted. For instance, if you advertise in newspapers or magazines to increase sales or promote your business, deduct the advertising as business expenses.

These are a few of the taxable benefits for small businesses. Remember these tax strategies are only as good as your ability to keep good records and to keep informed about allowable deductions. Be sure to check with your accountant because rules vary from area to area.

Small business will dominate this millennium. As a member of the Tea Connexions buying group, you are a part of a movement that will change the way business is transacted.

To ask me a question directly, feel free to call toll free: 1-877-leaftea (532-3832) ext. 111.

Best Regards,

Sanjay Gupta
President/CEO

P.S. Over the years, we have received many questions and requests for specific information from prospective members. The most popular questions are answered below. Click the links for the full articles.

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