Posts Tagged ‘Irs’

Profit motive according to the IRS is the intent to make money with your business venture within a reasonable time. And for some, they want to enhance their lives, gain independence, and have control over their future and to enjoy the horse and the lifestyle that accompanies that enjoyment.

For others, in the horse industry, they have a substantial primary income; lots of disposable funds and a tax bill that is 40 to 50% of their gross. So, having heard that you can lose lots of money with horses and deduct the expenses, they become involved in horses.

This way of reducing your tax bill is not recommended by me or any of the professionals, (attorneys, accountants, business advisers) I know, for the simple reason that sooner or later, the tax man will want to know how you lost so much money and are still in business. A prudent business owner will want to make a profit in a reasonable amount of time or sell the business venture to someone who thinks that they can make it go or more simply just close the doors.

To have a profit oriented motive does not mean that you can or have to accomplish that in the first year. In fact, you may not be able to accomplish it for a period of years. Depending on what part of the industry you enter, there will be a period of time in which you have to acquire a location to conduct your business, hire and train employees, build improvements, do research on market conditions relating to the business, etc. These items can be capitalized over a minimum period of 60 months.

A person that opens a boarding barn or becomes a trainer has a better chance of achieving a profit in a shorter period than a person who wants to build a breeding program involving a particular breed and bloodline achieves. One who opens a feed and tack store or becomes a farrier will be able to show a profit within a few months if they have done the initial steps to opening a business.

If you have done all the things that are necessary to opening a business and it is not going to make a profit for some time, you may want to consult with your accountant about filing a Form 5213 with the IRS at the end of your tax year. The rules are that the business cannot have been operating for more than three years. It will extend the time for a determination by the IRS as to whether your activity is a for-profit or not-for-profit business. This applies to breeding, racing, training or showing horses. The period is extended until the sixth year of the business in these cases. If your business is not any of the above, it will extend the determination until the fourth year of that activity. It will also extend the period that the IRS has to audit your operation as to whether it is a profit making business or not.

Some professionals consider that doing this may red flag your business at the IRS but in this time where the economy is in a state of turmoil, it may give you the needed time to start making a profit.

I would urge you not to waste the time gained in hoping that the enterprise will become profitable during that time. An owner should be looking at the changes that are occurring in the marketplace and developing a plan to counter the results of those changes.

I am particularly aware that some disciplines and horse business ventures are still making a profit even in a down economy. Additionally the horse population has expanded by 2 million in the last 10 years increasing the work force necessary to service that growth and the economy surrounding it.

If a business is nearing it’s third year of being in operation and the expenses are still way ahead of income, the owner should be looking at the business and analyzing what can be improved or changed to reach a profitable year more quickly. They should be looking for ways to increase their customer base, pare costs and overhead, and overhaul their advertising to respond to the current market.

Your location, (urban, suburban, or rural), choice of venture, (breeding, boarding, training, etc.), market conditions for your business in the region or area that your business is located in are factors to be reviewed with your board of advisors.

Market conditions differ greatly from one area to another. Registered working horses at one sale may be $2500 or less and five hundred miles away, the same horse will bring double or triple that price. Show horses are always in a state of flux depending on who is winning with what horse, changes in the breed association rules, (excessive white rule, one registered parent rule, how many ounces in the shoe, length of toe, use of aids (gimmicks), etc.) and the list goes on and on.

Marketing outside of the auction or show arena is important. You should not depend on one avenue of advertising to establish your training, boarding or breeding programs. One must have a realistic advertising budget that will entice the buying public to consider buying a horse from you, having you train a horse, boarding their horses with you or breeding to your stallion..

Your business should be guided towards being profitable from the very beginning. If the sole purpose of the business is to provide you with a way to pursue your favorite horse activity, you may want to reconsider whether you are a business or just a hobbyist looking for a way to deduct your horse expenses from your gross income. Before the IRS determines it for you.

M. R. Bain has been a horseman all his life and a professional trainer since 1955. He is an owner and breeder and has been employed as a breeding and stable manager. His intent on writing these articles is to educate horse people on how to operate a successful horse business. You may contact him at MRBAIN@msn.com with your questions and comments. Also, look for his upcoming book, The Business of Horses–Creating A Successful Horse Business

Author: Ralph Bain
Article Source: EzineArticles.com
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Business filing for a non-profit corporation is very similar to that of a regular corporation. There are a few extra steps in the business incorporation filing process to gain tax exemption from the IRS and your state tax division. Here are the basics:

Choose a business name that complies with your state laws
Appoint your board of directors
File Articles of Incorporation and pay your business filing fee
Apply for federal and tax exemptions
Write corporate bylaws
Hold your first board of directors meeting
Secure all required licenses and permits

Business filing begins with choosing an available business name for your non profit. Typically, the same rules apply to choosing a business name for a non profit. But, always check with your state’s corporation division office for specific rules.

Your corporation name cannot contain any word that suggests your business is associated with the federal government such as, National, Reserve, Federal or United States.
You business name should end with a corporate designator or its abbreviation. For example, corporation or corp., incorporated or inc. or limited or ltd.

In some states, for a fee you can reserve a name for your non profit while you are completing your business filing.

Appointing the board of directors for your non profit is the next step in business filing. Owners often appoint themselves as directors but can choose to appoint others. Directors are responsible for most major policy and financial decisions for the non profit.

The third step in your business filing is your non profit Articles of Incorporation. Although it sounds complex, it does not have to be a difficult task. This can be done by filling out a form and paying a filing fee at your state’s corporate filing office or with the help of an incorporation service. The form requires basic information about the non profit such as, it’s name, main address, directors and registered agent (often a director).

A large benefit of being a non profit is your 501(c)(3) tax exempt status. To apply for tax exempt status you must complete IRS form 1023. To get the full benefit of your tax exempt status you must file your 1023 form within 27 months of the date you file your non profit articles of incorporation.

The next step of business filing for your non profit is drafting bylaws. The bylaws are the rules the non profit will use to govern its day to day operations.

After drafting bylaws, your non profit will need to hold the first board of directors meeting. A typical agenda for this first meeting may include:

Adopting bylaws
Appoint corporate officers
Determining the corporation’s fiscal year

Your non profit organization needs business permits and licenses like a regular corporation. The types of licenses and permits your non profit will need will depend on your business but could include:

A tax registration certificate
A seller’s permit from your state
An employer identification number from the IRS

Business filing for a non profit can be as complex as a business incorporation filing for a regular corporation. Be sure to utilize you web resources such as, on-line incorporation services or your secretary of state’s office.

To learn more about Business Filing for a Non Profit Corporation click here: http://www.ezonlinefiling.com/incorporate-1.php

Mark Thomas: Mark has served in various roles in corporate America over the last 25 years, most notably in charge of large organizations with over 1000 employees. During this time, he has also owned several small businesses and has developed a keep awareness of how different the two worlds are and the special challenges faced by entrepreneurs. Because of his background, Mark is able to bring a unique perspective to new business owners and his addition to our team has all of us excited. Look for his posts to cover anything and everything related to business. He has also said that he is looking forward to hearing questions and comments from you, so please leave comments!

Author: Mark A. Thomas
Article Source: EzineArticles.com
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For people new to the world of nonprofits, there is often significant confusion about the use of the terms “nonprofit” and “not-for-profit”. Many organizations insist on referring to themselves as one or the other, and even some legal and accounting professionals attempt to draw a bright line between the organizations that fall under these terms. Though there are some technical differences between the two, they are generally used interchangeably.

There are some who argue that “not-for-profit” should refer to organizations that operate with the intention of never turning a profit at all — every penny that comes in is used for the primary purpose of the organization. Essentially, this encompasses every charity, NGO, civil society, private voluntary organization, and every other type of nonprofit. Often, what is intended is to clarify that the company only solicits what it needs to survive — an attempt to reassure potential members and donors that no one person is profiting from the money that comes in.

Some attempt to distinguish not-for-profits as unchartered groups, such as social clubs, civil societies, professional organizations and the like, while placing publicly-supported, charitable organizations under the nonprofit umbrella. While this distinction can make sense, the inconsistency of definition makes it difficult to apply. Often, the bottom line is the intention of the group to emphasize its inherent definition — an organization that, by design, does not distribute a profit to individuals at the end of the year.

Legal statutes (both federal and state) actually clarify that “not-for-profit” and “nonprofit” are synonymous. However, the IRS does offer a practical distinction in their own definitions. According to the Infernal Revenue Service, “not-for-profit” refers to a specific activity, such as a hobby. “Nonprofit” refers to an organization established for purposes other than turning a profit. This definition does not necessarily mean charitable, but encompasses any organization that does not intend to turn a profit. Amateur athletic leagues, quilt guilds, social clubs, and charitable organizations all fall under this definition.

Beyond the IRS, a distinction between the terms can also be found in the background of the folks who use them. Lawyers, accountants, and academics tend to prefer the term nonprofit, while experienced fundraisers (and many people involved in the nonprofit realm) prefer to use not-for-profit. Again, it is likely that the fundraisers prefer not-for-profit because it more clearly denotes the fact that no individual is profiting from the fundraising efforts. Or, it could just be an exclusionary tactic that helps those in-the-know to identify outsiders…but that is unlikely to be an organized conspiracy!

The final issue that raises unreasonable disagreement is whether nonprofit should have a hyphen or not. Non-profit does not have an inherently different meaning than nonprofit, but with-the-hyphen is often used in non-nonprofit references. Active philanthropists tend to leave out the hyphen. Technically, the hyphen denotes one adjective modifying another. Here, “non” is modifying “profit”…not that this clarification provides any particularly useful knowledge, except that the single word nonprofit is a noun, while non-profit would technically be a modified adjective, so an additional noun would need to be attached, such as non-profit organization.

Whatever term you intend to use for your nonprofit, just be sure you have a well-developed argument at the ready. Somebody will ask about it…probably several people. As long as you sound like you know what you are talking about, your argument will be repeated when they are asked about the difference.

About the Author – K. MacKillop, is founder of LaunchX and blogs about starting a non-profit. The LaunchX System for Non-Profits includes step-by-step instructions, key software, and more to help you start a nonprofit successfully.

Author: K. MacKillop
Article Source: EzineArticles.com
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If you are considering forming a company that acts as a charitable organization, serves to promote the public arts, or acts as a trade union, then you are actually looking to form what is known as a “non-profit.” Non-profit businesses, in general, work to promote the good of the general public. Some examples of non-profit corporations include the American Red Cross, the American Civil Liberties Union, and religious organizations like churches.

Non-profit employees, in general, are not working for their companies in order to get rich. They do so because they believe in the cause and improving the way it benefits society. Overall, non-profit companies have a lot to offer. They provide support to those who otherwise would have great difficulty obtaining the help they need.

Non-profits may become corporations. In fact, the majority of these organizations do choose to incorporate because there are a number of benefits to be gained by doing so:

• Granted permission to have its own property
• Granted permission to have its own bank account
• Organization becomes free-standing
• Protect the owners from liability

Non-profit organizations can file for tax exemption. If they meet certain standards that have been established by the Internal Revenue Service (IRS), then they will be granted a tax-exempt status and will be considered free from paying federal income taxes.

Forming a Non-Profit Corporation

There are certain steps all non-profit founders must take in order to successfully form their operations. In order to successfully form a legally-recognized non-profit corporation, you must take all of the following steps:

• Select an available name that will be approved by the state filing office
• File the articles of incorporation and pay the associated fee
• Select your board members and directors
• Hold the first meeting with the board to determine where you will incorporate the non-profit and to draft the bylaws
• File for tax exemption, if you so desire
• Make sure you have all of the necessary and required licenses and permits
• Open a bank account for the company

Once these steps have been successfully carried out, then you will have a legally-functioning non-profit corporation.

Contact Us

Sometimes, those collaborating to form a non-profit will disagree over company ideals, basic ground-rules, or how they believe the corporation should be run. In these situations, the help of an experienced business attorney can be invaluable. If you are currently engaged in a business dispute over your non-profit organization, then Ellen Rothstein, Manhattan business lawyer, can help you come to a resolution. Contact her today by visiting http://www.erothsteinlaw.com/.

Joseph Devine

Author: Joseph Devine
Article Source: EzineArticles.com
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