Personal Vs Business Finance/Accounting

Igal

Hi guys,

As i work on setting up quickbooks i encountered the issue of personal vs business finances.

Our company operates from home. so i'm not sure if I should include items such as utilities, internet, cell phone etc... as personal or business expense.

My goal is to figure out the company's overhead.

how did you guys handle it when you started it up?

rbsremodeling

I have a home office. My company writes a check to me for rent.

I have a seperate phone, internet for the office which the company pays

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orson

We do the same as Rory, pay ourselves rent for the office. This is a good tax move too because you don't pay self-employment tax on the rent income.

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Lancaster Remodeling Contractor - Lancaster Remodeling
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DavidC

How long have you been in business?

Good Luck
Dave

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www.CookContractingLLC.com

rbsremodeling

Buy Micheal stone's Mark up and profit book and mark up calculator cd. The best money you will ever spend

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DavidC

I'll second that in favor of the answer I was considering. That is where I learned to do it myself.

Good Luck
Dave

__________________
www.CookContractingLLC.com

Mike Finley

Internet - biz expense
Cell phone - biz exspense
utilities - % based on square footage of your office

genecarp

4. IRS pays more attention to the filers who claim home business in addition to their regular salary income or if you claim excessively high deduction. Remember, the room has to be exclusively used for business office purpose. You cannot put a desk in the corner of your home and claim it as a home office. The best way to avoid this is to measure the portion of the home you are using for business and calculate the percentage with respect to the total area of your home. Suppose if you get 20%, then you can only deduct 20% of your mortgage in your tax returns. Another important point to keep in mind is that if you incur losses year after year in a home business which is your hobby but not sole propriety and when you report them on Schedule C, you are once again prone to get audited, so stay as far as away from Schedule C, as the Schedule C Filers are among the most likely people to get audited.

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Igal

My dad started on his own this this January and i joined him 3-4 weeks ago.

Igal

I was just about to ask that. Are there any other tax consequences such as would this turn the house to an income property rather than owner occupied that might create an issue when selling the house (capital gain)?

Thanks again for all the great advice.

DavidC

Congratulations to you both.

Get and read the book. You can use what you learn and look over your records from Jan. to today and you will have a close picture of what your overhead is now. You will also learn what to identify as overhead and what to identify as job related expenses. This will allow you to predict your overhead going forward, according to your plans and goals.

You'll also be aware of what to include over and above materials and labor when quoting a job.

I took M. Stone's advice in chapter 1 and suggest you try it also.

How is your workload now? Hopefully your busy.

Good Luck
Dave

__________________
www.CookContractingLLC.com

Double-A

This is a question for your CPA based on how he would like to do your taxes.

You can pay yourself check for rent per year or declare a portion of your home as a business expense.

They are the ones that will tell you what your options are.

One way to deal with all this is not to worry with it and if you're a corp, then you can move a portion or all of the disallowed expenses the company has paid into a note to shareholders account in your chart of accounts and claim it as income from the company.

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"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

DavidC

Them questions are best directed at your own accountant/tax adviser. The answers are too important.

Good Luck
Dave

__________________
www.CookContractingLLC.com

72chevy4x4

I've also read that running a deduction for business use of your home raises a red flag-if you're looking for fewer red flags, eat the cost. It's not that much anyway-figure your office is 150sqft of a 2200 sqft home and mortgage is $1400, you're looking at $96/month. I think its the idea of paying yourself $500/mo for rental of the space that raises the red flag...but I'm not a CPA.

I believe they do calculate the square footage when determining value.