13 Mar, 2018

Efficient Ways To Cut Down And Deduct Start-Up Costs

Cost Deducting

Starting a business can be quite expensive and you may find yourself drained of all your savings. Even before your business starts operating you need to figure out a few ways through which you can save money. If you have already created an elaborate business plan that helps you cut your startup costs, next, you can start researching and thinking about efficient ways to deduct costs.

We have narrowed down a few great options from which entrepreneurs can benefit when it comes to deducting costs. Make every cent count and learn about these methods!

 

First you may be wondering what deductible startup costs actually are. According to the IRS the following costs are considered to be deductible capital expenses:

·         Costs of getting your business operate (which can include - employee training, salaries and wages, consultant fees, incorporation fees, advertising, travel expenses)

·         Research costs (these can include – market surveys, product analysis, looking for potential business locations and other similar costs)

 

In the first year of operations you may be able to deduct about $5,000 if your startup costs are $50,000 or less. You can deduct these costs from your business tax return. Other costs that cannot be deducted in the first year of starting your business can eventually be amortized in a few years.

However there’s another option that can be even more advantageous on the long term. Instead of deducting $5,000 in your first year of operations, you can deduct all your start up costs in a matter of 15 years. This means that if you initially invested $50,000, you can deduct taxes each year and get a little more than $3,000 per year.

 

Here are the expenses that are not included in Startup Costs:

·         Costs regarding qualifying for a certain type of business

·         Buying assets expenses

 

Now that we have got that cleared up, let’s see how the process of actually deducting your startup costs looks like.

Claiming deductions is made through Part V of Schedule C "Other Expenses", where the total amount needs to be added on line 44. For more information you can check IRS’s website anytime.

 

Cutting Down on Startup Costs

An excellent way to save money when starting a business is to figure out a great ways of cutting down expenses before your company starts running. Being more efficient with your funds can be very beneficial for your business’s development on the long-run.

Experienced entrepreneurs already know that sometimes every penny counts, so cost effective solutions is what every aspiring entrepreneur should be looking for.

 

Try starting from your home

Until you have the funds to work from a highly equipped office, you do initial operations from the comfort of your home. Cheap, familiar and easy, it will help you save money and also a lot of time in the beginning as your business starts developing.

 

Reducing supply costs

You can significantly reduce your supply costs by finding the right vendors. Browsing around can be all it takes.

 

Smart marketing

Choosing efficient ways of marketing can actually be cheaper than traditional advertising. Try focusing on networking, email marketing and increasing social media use for your business. Leaving traditional marketing behind and replacing it with good content and quality branding, can cut down quite a lot.

 

Hire freelancers

When it comes to specific area of your business you can choose hiring a freelancer. They are much cheaper than employees who work full-time on a fixed salary. Also, you won’t need to pay their insurance and other costly benefits.

 

Take advantage of technology

Living in a digital world, we need to take into consideration all the benefits the technology offers us. Using different platforms can aid you in several ways.

·         Skype – excellent for virtual meeting. Instead of travelling for meetings you can have conferences without paying a cent. You’ll also be saving plenty of time.

·         Google Docs – can help you store information in a digital way, helping you avoid the need of extra space for different documents.

 

Always try negotiating

When it comes to certain services that your business will require you can always try negotiating which will ultimately get you the best prices.

 

Rent rather than buy

Most of the times renting is more accessible and cheaper than actually buying a space. First of all you don’t have the guarantee that your business will succeed so staying on the safe side is definitely the best choice. You can even negotiate your rent with the landlord.

 

Benefit from anything that’s free

Whether it’s advice or software, anything that’s free – even for a limited period of time – can help you save at least some money that will surely come in handy. Also connecting with more people in the industry is absolutely essential for your business’s success. You’ll probably get a lot of tips when it comes to saving money from other experienced entrepreneurs.

 

Saving recipes can save you money as well

You should always remember that every cost related to your business is tax deductable. So saving recipes like electricity or the internet bill can bring you money. Although you won’t be to save money right away, when tax season comes you’ll be happier than usually.

 

Create a business budget

Always keeping track what you are spending your money can help you save a lot. Creating a business budget is most often the best choice here. Sticking to this specific budget most of time will keep your business on the right track of development and success.

 

Try to minimize your personal expenses

Keeping your personal expenses at a minimum can help you a lot especially in the first months of your business operations. Chances are your business will start slow, so until your company starts bringing in a steady income try to reduce business expenses as much as possible unless they are quite necessary.

 

Using these valuable strategies will sure help you decide which ones are the most effective for the type of business that you have started running. In the long-term you will see excellent results and through patience you will get the chance to save up and reinvest in your company.

Mastering the art of cutting down your startup business costs is not easy, but it is worth trying to improve your methods.