"I am a business." Take that thought to heart and take it to the limit.
If you, as a a self-employed, are to succeed there must be a moment of illumination, a vision of yourself, as a business. It's an Indie Power Mindset: a way of thinking that is essential for an independent professional.
Whenever you reach into your pocket for money, write a check, purchase on your iPad, or slip out your credit card you may be engaging in a business transaction. In the instant that you come to understand what it means to profess that you are a business, and that the work is blended into every aspect of your life - that may be the most important moment of your indie business life!
I say a bit more about Indie Power Mindset on on the home page of my site and in my new book, The Confident Indie: A Simple Guide to Deductions, Income and Taxes for The Creatively Self-employed.
This mindset guides you to embrace a new and powerful way to relate to your business, your work, your creativity. Here are three guidelines to help you make that happen.
First: Define your business as broadly as you honestly can.
The more multi-faceted and inclusive your field of endeavor, the more wide-ranging your expenses can be and therefore the less taxes you'll likely end up paying!
- A digital presentation consultant has more diverse expenses than does a website developer.
- A human resources advisor has more assorted expenses than a headhunter.
- A photojournalist can deduct a more extensive variety of expenses than can a wedding photographer.
Second: Look at all your activities from the vantage point of your new entrepreneurial mindset.
Don't be so sure that there is a well-marked difference between work and family, and play and chores, or that you know what the difference is. The business life of an employee has clearly established boundaries, but the business life of a self-employed like yourself is intertwined with your personal life. If your business is broadly defined and your life is richly complicated, it can get pretty tangled.
If you're caring for your parents while running a day care business, or dropping off your children at different locations while delivering products to clients, or struggling to find time for your new independent venture while holding down a full-time job, the interplay of your business and other interests can be intricate.
Whether an expense is personal or business is often decided by circumstances.
- A musician who is single and without children may do very little that is not considered ordinary and necessary to his business - travel, purchase entertainment equipment, attend concerts.
An alarm-system installer with four children who spends all his free time fishing, by himself, will have limited business expenses.
- A structural engineer drives through Millionaire's Mile looking at the period architecture of the houses. Stops to sketch and take notes. Since this is research for him the drive is a business event and the mileage there and back is a business AUTO expense.
The proprietor of a shop that sells hand-made clothes for children deducts as a PUBLICATION expense every magazine she purchases that has any clothing, children, or textile industry trends in it.
Third: Review your relationships.
Your new indie power mindset reconfigures the link between what you do and the people with whom you do it. Anyone who has a connection with your business may be primarily a business associate even though in some cases he or she may also happen to be a college classmate, friend, parent, or spouse. Friendship with a business associate does not necessarily rule out a business deduction. You'll just have to show that the predominant motive for the activity that warranted the expense was business-related.
A dance instructor calls his friend to invite her to a movie and, also, to ask her to bring her notes from the marketing webinar she attended so that they can discuss whether he should attend the next webinar session to get ideas for promoting his business. The movie tickets and phone call are business expenses. And so too are the drinks they had afterward where the business discussion continued.
- A carpenter deducts not only the tools that she buys, but also the expense of dining out. Why? Because during the meal with her husband, an ad agency exec, she explains the timetable for her new business, gets his input on questions of scheduling, picks his brain about various proposals, and tests his reaction to her brochure. She could not have had this business discussion at the family dinner table with her three children in attendance and so the gift given to her brother as thanks for baby-sitting while she was at this business dinner is also a business expense.
This is an excerpt from my new book, The Confident Indie: A Simple Guide to Deductions, Income and Taxes for The Creatively Self-employed.