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SMALL BUSINESS
TAX DEDUCTIONS
THE BENEFITS OF FORMING AN LLC
FOR YOUR ONLINE COURSE OR
COACHING BUSINESS
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Small Business Tax Deductions

Any entrepreneur will know creating a business is not an easy job.

Apart from the time and energy the company requires, there are also

many costs involved - from initial start-up costs to running the day-to-

day business - even if it's online. Below you will find different

examples of what a small business can deduct from the taxable

income and, ultimately, lower its tax liability.

Prior to divulging into the numerous business deductions, we should

look into the different categories of deductions recognized by the

Internal Revenue Service (IRS). First, the IRS divides expenses into two

categories, ordinary and necessary . Ordinary deductions are those

common for your trade or business, like coaching. Necessary

deductions are whatever is appropriate and helpful for your trade or

business. The latter is not scrutinized, however, should be kept in mind

when analyzing expenses. Second, the IRS sub-categorized these

expenses as follows:

Capital Expense: the costs of start-up, assets, and/or investments.

Please note that the start-up costs may only be deducted the first

year the company is formed.

Costs of goods sold: any and all costs incurred by the business to

make and market the item.

Business Expenses: any expenses that are necessary to conduct

business. At times, you may only deduct a portion of the expense.

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Start-Up Costs

This expense can be fully deducted from the business’ taxes the first

initial year. The Start-Up Costs can be for work supplies, rent, office

furniture, and anything else that your company needs to begin doing

business.

Costs of Goods Sold

While this number changes on an annual basis plus business to

business, a company will always be able to deduct the amount it took

to produce a good and place it on the market. This includes

maintenance of machinery, advertisement and marketing, labor costs,

and costs of raw materials.

Business Expenses

The list of deductible business expenses is quite long and can vary

from company to company. However, below you will find the most

common expenses:

Business Use of Home - if you work from your home office area,

you will be able to deduct up to 300 square feet of your home

office space. However, if you work from your dining table, you will

not be able to deduct that area. Make sure you have an office /

work space!
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Business Expenses

Business Use of Car - if your company requires you to have a

specific vehicle, which is only used for work purposes, then you

may be able to deduct this entire expense. However, if you use

your personal vehicle for business matters, then you will be able to

deduct a specific mileage given by the IRS. Please note the IRS

mileage calculator changes on an annual basis, therefore, always

refer to it prior to deducting any mileage.

Employee Salary and Benefits -

you can deduct employee salary,

retirement plans, health insurance

benefits, and any other employee

benefit offered at your company.

Business Travel Expenses - when traveling for at least one

overnight stay away from your tax home, for the purpose of

conducting business, your company can deduct any costs incurred,

such as lodging, car rental, air fare, and meals.

Business Insurance - if your

company purchases renters

insurance, car insurance, or any

other insurance, you will be able

to deduct this expense.

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Business Expenses

Office Supplies & Utilities - any item necessary for your office /

space will be deductible. This includes the smallest items such as

paper clips to big ticket items like computers and printers.

Additionally, if your company requires the employees to have a

company cell phone, this will also be deductible. In addition to

supplies, your office will be able to deduct any utility cost

necessary for purposes of conducting business.

Professional Services - if your business will ever use a certified

public accountant, attorney, or any other professional, you will be

able to deduct their costs/fees from your annual tax liability.

Education - if your business

requires your employees to

continue their education, then any

fees/costs incurred for those

programs may be deducted.

Client or Employee Entertainment - business can be conducted in

different locations. There are times where you may have to take a

client out to dinner or some other type of entertainment setting. This

type of expense is deductible. Moreover, any events for your

employees are deductible.

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Business Expenses

Charitable Contributions - If your business donates money to a

501C3 organization, those donations are deductible on your

company’s tax returns.

Interests - if at any time during the year your company pays any

type of interest, whether it is for a bank account, business loan, or

mortgage loan, it is tax deductible. Additionally, any fees paid in

connection with these types of interests are also deductible. Some

examples are banking fees, property taxes, etcetera.

As you can see, many different items can be written-off to lower your

taxable income. In order for you to properly include these deductions is

to keep everything documented! Receipts are key!

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Forming an LLC

A Limited Liability Company, or LLC, comes with these above

potential tax benefits that allow you to save money. In addition,
they come with these other important benefits too:

Signal to your customers that you're a legitimate business and ensure

you’re protected from lawsuits by having a separate business entity.

The flexibility in managing LLCs are numerous, from less paperwork to

member-managed profit sharing. LLCs are not required to elect

boards, hold meetings, or enact bylaws. In fact, the only thing that

corporations have in common with LLCs is that they both file articles

of organization with the secretary of state. From that point forward,

LLCs can structure how they manage their company using their

Operating Agreement.

LLCs also maintain the flexibility on how to distribute its profits. In

general partnerships, the partners distribute their share equally. In

LLCs, the members choose which is the best manner to distribute

profits, so long as making a distribution does not endanger the

company’s solvency.

Advantages for Members LLCs provide

three specific advantages for the owners:

An LLC is not legally required for a no cap as to number of members allowed,

business, but most business owners
you have foreign members, and other
find the benefits of having an LLC

far outweigh any money and time

corporations can be members. Since LLCs
spent setting one up. That's why

it's the most common business permit nonresident aliens to be owners,

entity in the U.S!
this promotes business growth from

individuals abroad investing their monies

in the United States.