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Member Workshop: Fundamentals of Running a Business - January 19th
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Last Post Jan 19, 2006 11:16 AM by: deirdre@ebay.com
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deirdre@ebay.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 1, 2006 11:38 PM
Topic: Member Workshop: Fundamentals of Running a Business

Host: dkennedycpa
Date: Thursday 01/19
Time: 10:00 to 11:00 PST
Location: Workshop Board

Description: Learn how the IRS views your eBay sale and how you can turn a few sales into financial freedom with your own business. Best-selling author and CPA Diane Kennedy will take you through, step by step, the fundamentals you need to know to set up your eBay business easily and legitimately!

Cheers,

Deirdre
eBay Community Development
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dkennedycpa
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:23 AM
Hello. My name is Diane Kennedy. I’ve been a CPA and Tax Strategist for over 25 years. My specialty is working with small business owners and real estate investors. My tax education company, Tax Loopholes, teaches people through books like “Tax Loopholes for eBay Sellers”, tapes and seminars on how to take advantage of the legal tax loopholes available to everyone. First though, the stuff that our lawyers make us say: Laws and practices vary from state to state and if tax, accounting, legal and other specific expert advise is required, the services of a professional should be obtained.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:23 AM
eBay has generously set aside time for me to present this tax-related session on a monthly basis through tax season. Mark your calendars! Today we’re going to talk about the Fundamentals of Business in five parts. First, let’s talk about what it takes to have a business on eBay.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:23 AM
Part One: Turn eBay Sales into a Business I get a lot of questions at TaxLoopholes from eBay users regarding tax requirements when you make a sale on eBay. Let’s start there. Is there a “garage sale” exemption? No. Is it true if I just sell personal type items, I never have to report to the IRS? No.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:24 AM
If you sell something, you need to report it. Now, in practicality, most people don’t need to file a tax return for their eBay sales when they sell personal items occasionally. The key word is “occasionally.” Although, technically, if you sell something, you have to report it. In reality, though, most times when you sell something that you have used personally, you will sell it for less than you paid for it. That means you have a loss

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:24 AM
If you sell something and make money on it, then the profit will be taxable. If you choose to not report it, hoping that the IRS will never find out, you’ve now crossed over from tax avoidance to tax evasion. The difference is penalties and maybe even a jail term. We NEVER advocate using illegal or unethical means to pay less tax.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:25 AM
Now, here’s the good news. If you have legitimate business, and can prove it, chances are you’re going to pay even less tax than you do now – even if your products sell at a profit. That’s because you can now take write-offs for many of the expenses that you used to pay with after tax money.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:25 AM
In order to prove you have a legitimate business, you’re going to need to prove that you can pass the Nine Steps test from the IRS. In Tax Loopholes for eBay Sellers, I talk about how to make sure you pass this 9 step test. Because I don’t have time or space to reproduce a 280+ page book, I’ll just hit highlights. The first of the 9 Steps are: (1) Carrying on in a businesslike manner, (2) Take time and effort to operate profitably, and (3) Depend on the income you make in your eBay business.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:25 AM
The rest of the 9 Steps are: (4) Business losses are normal, or beyond your control, (5) Operating or change operations in an effort to make money, (6) You or your advisors have the knowledge to operate a business profitably, (7) You have prior experience in running a profitable business, (8) The business has made a profit in the past, and (9) You anticipate that the business will continue to make a profit in the future.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:25 AM
If you don’t take your eBay business seriously, why should the IRS? If you have a business, and take your legal deductions, you can have a loss. That loss is deductible only if you can prove you have a business

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:25 AM
Part Two: Picking the Right Business Structure. I reviewed business structures in last month’s workshop and received a lot of questions about that topic. I’ll just go through the quick review of business structures today.

There are good, bad and really bad business structures. For businesses, the good structures are S-Corporations, C-Corporations and LLCs that elect to be taxed as S-Corporations and C-Corporations. In some cases, an LLC might be a good choice for partners who want a business together.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:26 AM
A bad business structure is a Sole Proprietorship. I know that most businesses start this way, because it’s easy. Still, there are three reasons why I don’t like the Sole Proprietorship. (1) You’ll pay more tax because you pay self-employment tax of 15.3% on your earned income from the activity. (2) You’ll put all of your other assets at risk if you get sued through the business. (3) You’re more likely to get an IRS audit. In fact, you’re 10 times more likely to have an audit.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:26 AM
A really bad business structure is a General Partnership. A general partnership doubles your risk and cuts your profit in half. Plus, you’ll have all the same problems that I talked about in the previous posting

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:26 AM
Which is the best business structure? I’m personally fond of an LLC that elects S Corp or C Corp status. The LLC provides asset protection from actions you might do. Say you’re in an automobile accident personally, no one can attach the business if it’s inside an LLC. The S Corp or C Corp status will protect you from excess tax as well. Generally, the S Corp tax status is the best way to start out. A C-Corporation is best where you are looking for a lot of tax benefits as the owner and/or you have a lot of income from the business or other enterprises.

Diane Kennedy, CPA
www.taxloopholes.com
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Member Workshop: Fundamentals of Running a Business - January 19th

Jan 17, 2006 9:26 AM
Part Three: Running Your Business. Now let’s get into the nuts and bolts of actually getting this all going. Here’s a list of 16 items to consider. (1) Decide on the right business structure. (2) Form the business structure – either yourself or by using a qualified practitioner. (3) Apply for a Federal Tax ID Number with the IRS and file any other paperwork necessary with the IRS. (4) Open a business structure. (5) File state-level business registrations to register for state business tax, Unemployment Insurance, and Worker’s Compensation. (6) Check with local municipal office to see if you need a business license for your home based business

Diane Kennedy, CPA
www.taxloopholes.com
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