Today TaxMama hears from Bradley in the TaxQuips Forum with a business idea. “I’m thinking about starting a business like Groupon. My partners and I are planning on sharing the cost of the coupon with the company offering it. We want to know if we will be taxed on the full amount, or just the portion we keep?”
But I am not clear on your question. Do you mean that customers would pay for the full price of the coupon, yes? And you would pay the restaurants their share, correct? So you would report the full amount of the income you receive.
You would deduct your expenses (the money paid to the restaurants or merchants) as cost of goods sold.
You would deduct your other expenses. And you would pay tax on the difference.
If you are going to start a business, put together a good outline of what you plan to do, and what your real costs are going to be. Chapter 1 of Small Business Taxes Made Easy points out costs that most people overlook when they do their budgets – and helps you identify where and how to register your business, if applicable. It will help you avoid surprise expenses.
I also recommend that you and your partners decide if you will incorporate, form an LLC, or what? And write up a detailed partnership agreement, spelling out who will be doing what, and when. And who will provide funds when the company needs them.
And remember, you can find answers to all kinds of questions about starting a business and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
Please post all Comments and Replies in the new TaxQuips Forum .
One thought on “New Business Taxation”
Pingback: Ask TaxMama Issue 610 – Keep Your Fork