This week I had the opportunity to share my insights on the tax and other advantages of having a home-based business. Lior Losinsky is a network marketing specialist and a valued client for many years. Even though a home-based business can have many forms, sharing some information with a network marketing expert is very valuable towards the whole spectrum of social entrepreneurship.
Find the full interview below
Below a few points of interest taken from the interview:
What makes a legitimate home-based business a more tax efficient and viable business compared to other companies?
- A home-based business can be started with low cost and at a small risk.
- Expenses incurred within the business may be deducted.
- The average company in South Africa is under tremendous constraints and risks with regards to labour, potential BEE compliance, a lease agreement for the business, etc. With a home-based business, you can spend more time with family and at low risk.
How does the tax differ from being an employee to running my own home-based business?
- An employee pay tax from the very first Rand they earn and are extremely limited to the number of allowable tax deductions. Running your own home-based business allow a variety of deductions, which decrease your effective tax rate.
Do I need to declare my home-based business to SARS right away?
- The moment you earn a business-related income, whether part-time or on a full-time basis, you need to report it to SARS. At the beginning of a new part-time business, you are most likely to incur a net loss after the deduction of allowable deductions. This loss may be used as a deduction against your salary earned, and you will most likely be own tax back from SARS.
- It’s advisable to speak to an accountant as soon as possible when starting a new part-time home-based business.
When is a good time to start transforming your business from part-time to a full-time business?
- Opinions will vary on this, but my take is as soon as your income from your part-time business is twice the amount that you receive from employment, you can take the step to pursue your dream on a full-time basis.
- You can carry on for as long as you can balance everything between employment, your part-time business, and your family.
- A well-known entrepreneur and speaker that also happened to own a network marketing business said it well. His story of earning a more significant income from a part-time business was so good to tell people, that he did not want to lose that, so he just kept going as long as he could “afford” to do so.
The most important point is to start working with an accountant as soon
as possible, to do your planning from day 1.
How can we assist you?
Contact us for your monthly accounting and tax needs.
I have been in the industry for more than a decade and would love to assist you with your start-up or running business needs.
Feel free to send comments and/or questions to my inbox.