Tax advantages/disadvantages of starting a business

[KmH]

Don't forget that your deductions and taxes will vary depending on the accounting method (cash or accrual) you choose to use.

Your best bet is to seek the counsel of a qualified accountant, preferrable a CPA.

To answer your original question: There are no advantages to taxes, only disadvantages.

 

[usayit]

Self employment tax..

Many loopholes have been closed since the 80s.. when people really took advantage of this.


Another snafu.... it can impact unemployment benefits if you work another job and loose it.

 

[orljustin]

I'm not sure if this is true in the OP's case, but I think a lot of people that have little to no business experience misunderstand how writing off equipment expenses really works. A lot of people think that if they buy $10k in lenses then they have a $10k write off for the year and that isn't the case.

Sure it is.

This tax tip outlines Section 179 expensing that allows a business to fully deduct the cost of property in the year it is purchased rather than depreciating the business assets over years.

 

[bentcountershaft]

I'm not sure if this is true in the OP's case, but I think a lot of people that have little to no business experience misunderstand how writing off equipment expenses really works. A lot of people think that if they buy $10k in lenses then they have a $10k write off for the year and that isn't the case.

Sure it is.

This tax tip outlines Section 179 expensing that allows a business to fully deduct the cost of property in the year it is purchased rather than depreciating the business assets over years.

That's true, but not applicable in a start up, which is the situation I was referring to because your depreciation claims can't exceed your previous year's net profit. That's why you wouldn't want to "start a photography business" just to try to reap some tax benefits.

 

[orljustin]

I don't see why it isn't applicable. You spend 2 grand on a new camera. You make 2 grand in profit shooting. You write it off as a wash.

 

[bentcountershaft]

I had to look it up and you're right, the guidlines have been changed on that in the last few years that not only would allow for what you said, but I could theoretically start a business on December 31st of this year and spend the equivalent of my regular job's taxable salary on qualifying equipment and be good to go.

 

[sandersjessica]

In addition to an accountant, I would also recommend talking to a business attorney. It's important to understand all the legal issues that come along with starting a business.