Small Business Reading Room

Wednesday, December 29, 2004

The Home Based Business

The Office of Advocacy of the U.S. Small Business Administration recently unveiled a new federal government report- The Small Business Economy, 2004.

The report is based on 2003 data and outlines the state of small business and its contributions to the economy.

The findings revealed one fact that I think is interesting regarding home-based businesses.
  • Home-based businesses make up 53 percent of the small business population of the U.S.
While I do find this fact informative; I don't find it at all surprising. After all, many small businesses start in the homes, garages and dorm-rooms of America.

I know, because I talk to people like this every day.

The owners of home based and small business frequently take the step of incorporating to help separate their personal assets from their business liabilities. Oftentimes, the owner(s) of home based businesses go even further and elect to be taxes as a subchapter "s" corporation with the IRS by filing form 2553 within the first 90 days of the tax year.

Making the "s" election allows for this, helps them to eliminate the infamous "double taxation" that a regular C-corporation is subject to, and allows profits or losses to flow directly to the owner(s).

If you are starting a new home based business be sure you've looked into the advantages and protections of being an incorporated entity.


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