You’ve started a business. But so far you’ve only spent money to get your business running.
So when do you actually have a business for tax purposes?
For tax purposes you officially have a business when you make your first dollar in revenue for your business.
Once you start bringing in cash, even if it is only a dollar and you only receive $.30 of that dollar because of merchant fees, you are still responsible for reporting the income on your tax return.
Some businesses will make money right away, others won’t make money for a little while.
This really depends on you and the type of business you have started and so many other factors.
You have a business from the time you decide to start it. Don’t allow your business to be a hobby and it won’t be.
Having a business that is actually a business and makes the money you really want to generate in your business is a mindset shift that you need to make.
Know that your business is going to generate the cash you want it to. Then do the work to make your business a business that generates cash like you want it to.
It really doesn’t matter what you sell
When it comes to taxes, it doesn’t matter what you sell at all. All that matters is that you are making money.
The second you start making any kind of money in your business, you now have a business for tax purposes.
You can spend more than you make
Yes you really can spend more money than you make in your business. But you still have to report the total amount of money you made before you subtract those expenses out.
You are expected to have a profit for at least 3 of the first 5 years, according to the IRS, but there are also exceptions to that rule as well. Unwritten exceptions, but the exceptions are there.
Do you have a business for tax purposes?
So do you yet have a business for tax purposes?
If you haven’t made any money, but have spent quite a bit of money on your business, then you do not have a business for tax purposes. It is still a hobby.
When you start making money, even just a dollar, you have a business for tax purposes.