It is not rare to see certain Accounting Professionals or others holding a CPA license to start a tax or consulting service out of his or her own home to earn income in conjunction with their full time jobs. This is a very easy practice to start up and can prove to be very lucrative if it is executed properly. This paper will discuss some of the steps you can take to start a consulting service practice out of your personal home. This paper will mainly cover possible tax deductions and ways to remain profitable.
In order to start a consulting service practice, you must first understand the industry
that you are competing in. Chances are you already work for an accounting firm and are looking for extra side income or you once worked for an accounting firm and would like to branch out and start your own. Either way it is imperative that you hold a current and up to date CPA license, meaning you have taken and passed any CPE course needed to keep your license active. The consulting industry is one with a lot of competition and is usually dominated by larger accounting firms with more resources at their disposal, however, don’t get discouraged. People have competed against these firms and have held their own numerous times. The key to success is to find your niche. You must decide where you would like to specialize; whether it be a small business/start ups or struggling businesses just to name a few. Since you will be able to specialize you can put more of an emphasis on your client’s needs; something larger firms will be unable to do.
There is another advantage you have over larger firms that must be noted; you have or had relations with these larger firms. Whether you still work for or previously
worked for a large accounting firm you still understand how they operate. You will have the knowledge of how they are efficient and effective and will know where they fall short. You can then pin that knowledge against the needs of your clients to serve them as best as possible. Another side of this is the advantage of having a client base already built up at your current or previous firm. The clients you served there know what kind of worker you are and continue to do business with you. Chances are if you mention your new endeavor they will be your clients there as well. However, you must tread lightly with this if you are still employed by the firm in which you wish to use clients. Higher-ups in the company may think you are trying to compete with them and that you are shifting your focus; so use discretion when implementing this strategy.
Now that you got some of the preliminary issues out of the way it is now time to start
planning out your business. You must first look at your home and the space you have to work with. The best area to turn into your new office is an unused bedroom; preferably not the master bedroom. You want to make sure you have room for a decent size desk and chair, filing cabinets, bookshelves, sitting area for clients, and hook ups for television and internet. Find out the dimensions of that room in square feet and divide it by the total number of square footage of the whole house. That percentage is now the percent of your home that is dedicated to your home business and that percentage will relate to how much you can deduct on your tax forms. You can deduct almost anything that a regular office has and what you would like in your own home office; just know that you can’t get carried away with this because you run the risk of getting audited by the IRS. However, you can deduct certain business related items. Some of which include your desk, chair, cabinets, and things similar to that. These are known as personal property, meaning they are not permanently affixed to your home. You can also deduct a friendly house party with hopes of gaining potential clients.
You can deduct your total utilities by the percentage of your house that is dedicated to your home office. It is key to remember that you must show any form of profit motive with your actions.
I hope this paper gave you a slight taste of insight into some of the steps it takes to
start your own consulting business out of your home. If you feel that you may be undertaking too much, don’t worry, it’s not for everyone. However, be mindful that nobody has ever succeeded without taking risks.
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