What are some key steps to take in creating my business, after I consider the information above?

While starting a business may be complex or simplistic, depending on the nature of that business, many experts assert that some early steps include: having a store of capital available for a long period of time while in start-up mode; deciding the location of the business; its corporate and legal structure; creating your company name; obtaining licenses or certifications; obtaining a federal tax identification number to properly file IRS documents and taxes; forming a relationship with an accountant; and creating a business plan/strategy document.

What are some guidelines for creating a business, according to the IRS?

According to the IRS, you should determine whether your business is a business or a hobby. If indeed it is a business, then the IRS will expect to receive various forms, reports, and returns. Ask yourself the following questions to determine how the IRS will treat your new business entity:

• Does the time and effort put into the activity indicate an intention to make a profit?

• Do you depend on income from the activity?

• If your business incurs a loss, is it due to circumstances beyond your control, or did it occur in the business's start-up phase?

• Have you changed methods of operation to improve profitability?

• Do you or your advisers have the knowledge necessary to carry on the activity as a successful business?

• Have you made a profit in similar activities in the past?

• Does your business make a profit in some years?

• Can you expect to make a profit in the future from the appreciation of assets used in the activity?

There are many legitimate business expenses that can be written off on tax returns, such as the pur¬chase or upgrading of essential computer equipment.

There are many legitimate business expenses that can be written off on tax returns, such as the purchase or upgrading of essential computer equipment.

Can I deduct expenses to offset taxes if I own my own company?

In general, you may deduct many categories of ordinary and necessary expenses to conduct a trade or business. An ordinary expense is one commonly used and accepted in your trade or business. A necessary expense is one that is appropriate for your business. Generally, an activity qualifies as a business if you operate it with a reasonable expectation of earning a profit. For more information on business expense deduction guidelines, see IRS Publication 535, Business Expenses.

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