(NC)-Consider taking the plunge and get ready to dive into your own home-based business. But, before you make your final decision, be sure to weigh all of the costs and benefits.
You will need supplies, a separate business telephone line, a computer, software and a high-speed Internet connection. But that's just the beginning.
"People tend to focus on office costs, such as equipment and supplies," says chartered accountant Bruce Ball, partner, National Tax of BDO Dunwoody LLP in Toronto. "But one of the biggest costs involved, if you are making the transition from being an employee to starting your
own business, is that you will no longer receive vacation pay and
have pension, life insurance, or health/dental care benefits."
Keep in mind that you will be performing most tasks by yourself. "There are significant costs associated with the time required to perform the necessary 'administrivia' related to any business," says chartered accountant Garnet Lasby, CEO of Integrated Business Intelligence Corporation in Hamilton. "Even the smallest business needs to perform bookkeeping tasks, manage payroll and look after tax filings."
Home business owners often neglect to purchase insurance or forget to factor in marketing costs. "Product liability or errors and omissions insurance can be very expensive, and is often overlooked until there is a problem, such as a lawsuit, by which time it is too late," says Lasby. "Marketing can also be costly, but customers have to be able to find your products and services."
Be sure to set aside enough money to pay your income taxes, since
they will no longer be deducted automatically from a paycheque. "You may also want to adjust your spending habits and establish a larger rainy
day fund to help manage dry spells," says Ball.
Benefits associated with starting a home-based business include flexible hours, being your own boss, and saving the time and money associated with commuting.
"You will also be able to take advantage of a wider variety of tax deductions, including deducting
costs relating to your home office," says Ball. Deductible home-office expenses include rent, mortgage interest, realty taxes, insurance, utilities and maintenance. The percentage of space in your home that you use for your office will determine the amount you can claim.
Many home-based business owners do earn as much or more than they did when they were employees. "And even if their paycheque is slightly smaller, the additional family time and flexibility often make up for it," says Lasby.
Before you start your home-based business, consult a chartered accountant.
"Your CA can help you make sure you receive all the tax deductions you are entitled to," says Ball.
Adds Lasby, "CAs can advise you on almost any facet of your home-based business, from initial business planning, to start-up, to operation."
Credit: www.newscanada.com