Make Your Craft Business Legal

To be Legal or Not? That is the Question!

When they work at home, the British call it "fiddling." Here in America, a lot of people earning money at home are just fiddling, too.

They may put in long, hard hours on a moneymaking activity, yet fail to generate a true profit. Some people simply don't know what to do to make more money; others know, yet are reluctant to do anything about it.

Some people fear failure; others fear success. Still others simply have their minds set on staying small. But even small, part-time businesses can generate a fair amount of capital and profit if they are properly managed and promoted.

If you'd like to make more money from your small business endeavor, the first thing you need to do is stop fiddling around. It's a trap to think small. If you think small, you'll stay small.

But if you dare to think big, you have at least a chance of making it big, financially speaking. That's why I encourage you to E-X-P-A-N-D your thinking, S-T-R-E-T-C-H your capabilities, and R-E-A-C-H farther than you have reached before. Accept the fact that you know more than you think you know, and you can do more than you may now believe possible.

To successfully position yourself and your business for success, you must develop a professional attitude about business.

Do you operate an underground business or think of your income as "money under the table"? This is both an unprofessional attitude and a self-defeating trap.

No business can grow if it remains hidden; it needs visibility to survive and prosper.

But why should you be legal, especially when so many others are obviously "getting away with it"? Even if you think the chances are pretty good you won't be caught, I think it boils down to whether you want to be an honest or dishonest individual.

Do you prefer the feelings of pride and accomplishment that are the rewards for honest actions, or shall you live instead with Fear and Guilt, companions to Dishonesty?

As ordinary people, we have enough feelings of guilt in our everyday lives without having to worry about the fact that we're cheating on our taxes and could get caught and be publicly embarrassed--and possibly punished--at any moment.

I recall one woman who told me she finally was going to "go legal" simply because she was beginning to wake up in the middle of the night in a cold sweat, convinced the IRS would soon be knocking on her door. Surely no amount of taxes saved could be worth this kind of anxiety.

What too few people realize is that self-employed individuals qualify for many breaks that substantially lower their taxes. You see, once you are "in business," and not just "fiddling around," you'll find you are entitled to many tax deductions that can offset a sizable portion of your annual gross income.

In fact, in the early years of a business, it is quite likely you will end up with a business loss, at least on paper, that can be used to offset income from salaries and other income sources, and thus cut taxes.

"Taxes are the price we pay for a government that guarantees us the freedom to earn enough money to pay our taxes," someone once said. Once you begin business operations, it will not seem at all unusual to the IRS that you need to buy office equipment, a computer, or a new car to advance your business.

Lo and behold, a large percentage of such costs can immediately be offset against receipts, or written off (depreciated) over a specified number of years. Once you qualify for the home office deduction, you become entitled to deduct a comparable percentage of your regular living expenses, from rent or mortgage interest to utilities, repairs and maintenance on your home.

Another way to get legal tax deductions is to hire your spouse or children. Many books and Web sites, including mine, offer helpful tax tips that will save you money. Make a point to become aware of them.

Who but a fool (and a dishonest fool at that) would continue to hide his or her income and give up all the delicious and perfectly legal tax deductions to which a legitimate home-business owner is entitled?

Besides, if you're trying to prove your credit worthiness--possibly to get a business loan or a home mortgage--you will want your gross income (and net profit) to be as high as possible.

As your business grows, be sure to keep careful records. Make sure your business income and expenses are never mixed with personal income and expenses. This means having a separate checking account for your business and appropriate books that will satisfy the IRS. Failure to do this may cause the IRS to disallow your home-business deductions.

_____________ Excerpted from HOMEMADE MONEY: Starting Smart! - How to Turn Your Talents, Experience, and Know-How into a Profitable Homebased Business That’s Perfect for You! ©2003 by Barbara Brabec.

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