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| Starting a business from home (a small business from home) is a great oportunity. Before You start a working from home business read this report, how to start a business from home.
Starting and Managing a Business From Your HomeRecordkeepingKeeping accurate and up-to-date business records is, for many people, the most difficult and uninteresting aspect of operating a home-based business. If this area of business management is one that you anticipate will be hard for you, plan now how you will cope. Don't wait until tax time or until you are totally confused. Take a course at the local community college, ask a volunteer SCORE (Service Corps of Retired Executives) representative from the Small Business Administration to help you in the beginning, or hire an accountant to advise you on setting up and maintaining a recordkeeping system.Your records will be used to prepare tax returns, make business decisions, and apply for loans. Set aside a special time each day to update your records. It will pay off in the long run with more deductions and fewer headaches. If your business is small or related to an activity that is usually considered a hobby, it's even more important that you keep good records. The IRS may decide that what you are doing is only a hobby, and you won't be allowed to deduct expenses or losses from your home-produced income at tax time. So keep records of all transactions in which you spend or bring in money. Pick a name for your business and register it with local or state regulatory authorities. Call your city hall or county courthouse to find out how. Your records should tell you these three facts: How much cash you owe, How much cash you are due, and How much cash you have on hand. You should keep five basic journals: 1.Check register--Shows each check disbursed, the date of disbursement, number of the check, to whom it was made out (payee), the amount of money disbursed, and for what purpose. 2.Cash receipts--Shows the amount of money received, from whom, and for what. 3.Sales journal--Shows the business transaction, date, for whom it was performed, the amount of the invoice, and the sales tax, if applicable. It may be divided to indicate labor and goods. 4.Voucher register--A record of bills, money owed, the date of the bill, to whom it is owed, the amount, and the service. 5.General journal--A means of adjusting some entries in the other four journals. Choosing a Recordkeeping System Set up your records to reflect the amount and type of activity in your particular business. There are a wide range of pre-packaged recordkeeping systems. The SBA's pamphlet Small Business Bibliography No. 15 (see "For Further Information") lists many such systems. The most useful system for a small, home-based business is usually based on what is called the "One-Write System." It captures information at the time the transaction takes place. These One-Write Systems are efficient because they eliminate the need for recopying the data and are compatible with electronic data processing if you should decide to computerize. Even though you may be small and just beginning, it is probably wise to consult an accountant to help you decide which recordkeeping system is best for your business. Once it is set up, you can record the daily transactions or periodically have a bookkeeper post your daily transactions in your General Ledger and prepare your financial statements. Be sure to establish a separate bank account for your business--even before the first sale. Then you will have a complete and distinct record of your income and expenditures for tax purposes, and you won't have to remember which expenses were business and which were personal. It is important to choose a recordkeeping system that you understand and will use. It will help you see how well the business is doing and is the first step in responsible financial management.
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