Are You Running One Person Business?

Do you own a business where you’re the employer as well as employee? If yes! Then you must be looking for options to save your money especially on accounting and taxes. Most of the times, one person business comes under the category of small business. If you want to save your hard earned money that you’re paying in taxes the most basic thing that you need o follow is a good accounting system.

Most of the people must be thinking that every business owner uses an accounting system so, what’s new in this! A good accounting system does not only mean that you have software that keeps records however, you should get familiar with the recent changes in tax laws, deductions and credits. Besides, technology you’d also need to keep track of your expenses and deductions on your own. Some of the famous and reliable accounting systems are Microsoft Money and Quicken. If you find book keeping hard to handle let software packages handle them. You can use Microsoft small business accounting or Quickbooks for this purpose.

In one person business, business owners tend to use their kids and spouse to complete some of the tasks. However, they never hire them legally. If your kids are minor and help in your business or completing tasks related to your business, you should hire them. And if you keep their wages less than $5000 per annum, they are not liable to pay any taxes on their income.

Everyone in this world wants to climb up the ladder and reach at the top. The dream of growth makes several small business owners to incorporate with big giants of the market. They do grow but tend to loose their identity. Not only small business some new business owners also find opportunity to incorporate with some big name in the market. However, according to tax experts, one person business or any of the small business refrain from incorporation with any other business as the accounting and taxes will face severe complications.

As a new business owner, you just need to form LLC (Limited Liability Company) in order to pay taxes. LLC gives you only the liability protection which will be free from any complexities that will be there in corporate taxes. And if you own a one person business, you just need to file a simple tax form with the state revenue authority or the IRS. Regular IRA allows you to save money however, if you want to increase your savings, you should set up a pension plan for your one person business. SEP-IRA is such kind of pension plan in which you can contribute 20% of your profits and you’ll get 100% tax relief on this amount.

One person business owners use some portion of their home for their business on regular basis. If you’re also following the same thing, you’re entitled for home office deduction. Some of the owners don’t use this deduction as an audit can occur afterwards. However, there is no need to be scared the deduction meant mainly for one person businesses.