Are You a Freelancer? You Do Plan to File Taxes for Your Business, Don’t You?

By Randall Orser | Personal Income Tax

Woman working on her laptop at sidewalk care TNTo work independently is more popular now than ever before. There are millions of Canadians and Americans who work full time as consultants, freelancers and as owners of tiny one-man businesses. While working this way can be greatly empowering, there are certain compromises that one needs to accept. A slightly difficult tax filing process is one of the areas that present a challenge.
When you just work a regular job at a company, you only need to fill out a tax return and you’re done. When you work for yourself, though, there’s far more to filing a tax return than this. The upside of the deal is that independent workers get many more deductibles than people who work for others. Any business travel or money spent on office equipment and supplies, for instance, is a possible deductible.
If this is your first year filing taxes as an independent worker, this is what you need to know.

Reporting what you’ve made to the CRA

If you are the sole proprietor of your business you need to file a regular tax return including a Schedule T2125 Statement of Business Activities to report whether your business has been profitable. The Gross receipts or sales field on the first line of the Schedule T2125 form asks for information on the income made through the previous tax year. Your annual revenue, as evident in your clients’ invoicing, needs to appear here. The CRA expects you to keep track of it all – cash, checks or anything else (including barter transactions).

Reporting what you’ve spent

Independent workers are only expected to pay taxes on their net profits. If you can keep track of every business-related expense you make over the year, the Schedule T2125 is a very generous tax form. It gives you many ways to reduce your taxable income with deductible expenses. Here are a few examples of the kind of business expenses you get to deduct.
Travel expenses – When you need to travel to another city for business, the plane tickets, airport parking, hotel rooms and restaurant meals are fully deductible.
There are fixed allowance limits for travel expenses of different kinds. If you often drive on business, for instance, you are allowed a deduction based on the percentage of business kilometers compared to total kilometers driven in the calendar year (this is all you get for everything you spend on the car – for gas, wear and tear, insurance and so on).
Office expenses – Guide T4002 details what you get to deduct of your office-related expenses. In general, anything that you spend on office equipment, furniture and consumables is acceptable. With large purchases that last years, the convention is to amortize the cost of each purchase over its life.
Miscellaneous deductions – There are many other areas that offer potential deductions to the independent sole proprietor. If you buy individual health insurance for yourself or your family, the premiums paid are completely deductible. Gifts to other businesses and contributions to a tax-deferred retirement plan are possible deductions, too.

What you do next

If this is your first filing, you could get overenthusiastic about putting in every claim you can think of. It is generally considered a good idea to be conservative about the deductions you claim, though. If you have a question about whether something is deductible, you need to find a good tax preparer familiar with freelancers and small business to help navigate these complex laws. Poorly thought out deductions could invite a CRA audit.

The Importance of Disaster Recovery Plans for Small Businesses

By Randall Orser | Small Business

capsized-piggy-2015-12-09Disasters can strike any time or anywhere, and they can impact businesses of all sizes. Small business owners who think they don’t need disaster recovery plans are likely to find themselves struggling to recover in the event of a natural, economic, or other type of disaster.

The purpose of a disaster recovery plan is to spell out the actions that should be taken to protect the interests of the business, its employees, and its customers in the event that a serious problem impacting the company’s operations arises. Business owners who fail to plan for disaster recovery are at a loss regarding how to proceed when things go wrong.

Once a disaster strikes, it’s too late to stop and go through the planning process. To be effective, a disaster recovery plan must be in place before a problem arises. While it may not be possible to plan in advance for every possible situation that can harm a business, some problems are more likely to occur than others. By coming up with contingency plans for the most likely disasters, the negative effects of such events can often be mitigated.

The first step in creating a disaster recovery plan is to create a list of the events that are most likely to interfere with the company’s operations. For example, businesses located along the Gulf of Mexico need to have plans in place for handling a hurricane strike. Companies in parts of California need to have contingency plans in place for dealing with earthquakes and wildfires. All business that depends on access to data and information technology need to prepare for how to continue operations in the event of a server failure.

An effective recovery plan will list each possible type of problem and specify the steps that should be taken in the event that disaster strikes. Details about who is responsible for carrying out each step of the recovery plan should be specified very clearly, so there is no confusion regarding who is accountable for each task. When recovery plans can be implemented immediately, the process of returning to normal operations can be expedited.

Communicating the disaster recovery plan to everyone involved is very important. The plan itself isn’t what will help your business bounce back as quickly as possible from a disaster. It is the implementation of the plan that will help the company recover. When your disaster plan is written, it’s important to make sure that each employee knows his or her responsibilities and is prepared to act quickly and decisively toward the end purpose of helping the company return to business as normal.

What Determines Tax Withholding Amounts?

By Randall Orser | Personal Income Tax

taxpie TNThe Canadian Parliament and Provincial Legislatures establish federal and provincial tax-withholding rates. Procedures for determining your withholding amounts vary by tax. Sometimes withholding amounts depend on the type of wages being deducted.

TD1 Form

Your TD1 form form helps your employer to determine the amount of federal income tax to subtract from your wages. For this reason, your employer must give you the form to complete when you’re hired. Your withholding amount depends on the number of credits and filing status you claim on the form. Each credit gives you a sum that reduces your wages subject to taxation. The more allowances you claim, the less tax you pay; the fewer allowances you claim, the more tax you pay.

Note there are a Federal and a Provincial TD1, and you, the employee, must fill out both.

Taxable Wages

Federal income tax withholding is also based on your taxable wages. The more you earn, the more tax you pay; the less you earn, the less tax you pay. To arrive at your taxable wages, determine your gross pay, which is your entire pay before deductions. Then subtract nontaxable wages, such as qualified business expense reimbursements, and pretax deductions, such as qualified health insurance, from your gross pay.

CRA Guide T4032 Payroll Deductions Tables

Once taxable wages have been determined, withholding depends on CRA Guide T4032 Payroll Deductions Tables. Apply the withholding table that goes with your filing status, taxable wages, pay period and number of allowances. The table gives the exact amount that should come out of your paychecks. The CRA updates its tax tables periodically, typically semi-annually, so use the tax rate that applies to the tax year in question.

Flat Percentage Rates

Canada Pension Plan (CPP) and Employment Insurance (EI) are federal payroll taxes that are withheld at flat percentages of your wages. These rates are subject to change, usually annually. As of 2015, Canada Pension Plan tax is withheld at 4.95 percent of your taxable wages, up to the annual wage maximum of $53,600. Employment Insurance is withheld at 1.88 percent of taxable wages to a maximum of $49,500.

Supplemental Wages

Supplemental wages are payments you receive from your employer that are not regular wages. They may include overtime pay, bonuses, commissions, severance pay, sick pay, awards, prizes and retroactive pay increases. For federal income tax purposes, if supplemental wages are paid in addition to regular wages, they’re taxed as though the total were a single payment for the regular payroll. If supplemental wages are paid separately from regular wages, federal income tax may be subtracted at a flat 25 percent. If supplemental wages exceed $1 million for the calendar year, the excess amount is taxed at 35 percent.

Provincial Taxes

Every province has an income tax rate and the amounts differ from Province to Province. If you are using CRA’s tax tables then both the federal and provincial amounts will show and are added together. Some Provinces do have additional taxes, such as Ontario’s health tax. Quebec has different rates for CPP and EI.

Some People Just Don’t Have a Work Ethic

By Randall Orser | Small Business

staffmoraleOften a manager will come across an employee who doesn’t seem to make as much of an effort as others. Perhaps he will even show up late, have a poor attendance record or seem to take his job less seriously than everyone else. Maybe the manager will even talk to the employee regarding his less than stellar job performance. Unfortunately, some people just don’t have a work ethic.

A manager might talk to the subordinate a number of times about coming in late or goofing off or whatever his problems may be. Yet the subordinate doesn’t modify his behavior. He just doesn’t seem to “get it.” Perhaps he may not get it any time soon. The fact is that he may just never get it.

A good work ethic is often viewed as someone caring about the quality of his work and making an honest effort to do his job to the best of his abilities. That employee will show up on time and will maintain a good attendance record. Obviously this is the total opposite approach of the person who seems to lack a good work ethic. But why is this? A person with a good work ethic feels guilty when he falls short on his job performance whereas the one without might not feel bad at all.

Quite often, a work ethic is something that is developed prior to adulthood. It is a frame of thought and a way of thinking. Somehow, the individual either acquired a good work ethic in his youth or didn’t. A boss can’t instill a work ethic into his employees. That quite often is the job of the worker’s parents during his childhood or the end result of the employee’s upbringing.

Perhaps the employee’s parents never required him to do anything around the house when he was growing up. Yet they gave him everything he wanted. This may have led him to believe that his whole life would be like that. That he would never really have to work in order to receive anything. Then he reaches adulthood. Now, all of a sudden, he is actually expected to do something before he receives rewards or compensation. Imagine the nerve of his boss! Actually expecting him to work for his salary! What nerve!

Now someone like that may eventually develop a decent work ethic but it usually takes a while for that occur. It usually takes the loss of a job or two. Then they may go through a period of self analyses. They may eventually come to the conclusion that maybe it’s not the rest of the world that is wrong. Maybe there is something wrong with them. A termination or two actually serves as a wakeup call.

If that individual doesn’t change after you, as a concerned manager, inform him of his shortcomings. You just might have one of those individuals who has not yet gone through that period of self analyses. Perhaps the loss of his current job may serve as the catalyst for him to want to modify his approach to work. At any rate, you probably aren’t going to instill a work ethic into this person as he continues to work for you.

The telltale sign would be a lack of repentance. If they aren’t going to take you serious after a few reprimands for the same offenses, chances are they never will. After a while, if the employee is often warned of consequences that never seem to happen, he just won’t take any of the warnings serious at all. You may then have no other choice at that point other than terminating the employee.

The consequences of not terminating an individual who doesn’t take his job serious are many. Those working around him may think that there is no point in working hard themselves if he is allowed to get away with his sloppy work ethic. If you are expecting everyone else to pick up the slack, then you are, in fact, being unfair to those of whom you are requiring to work harder.

You tried to correct the problem. It didn’t work. It’s time to cut this person loose. It’s not your fault. It’s just that some people don’t have a work ethic.

Tax Deductions for Consultants

By Randall Orser | Personal Income Tax

How to Find Tax Breaks - Magnifying Glass TNIf you are a self-employed consultant, you can claim most business-related expenses against your revenues from clients. There are several allowable deductions that can help you save on your income taxes at the end of the year. If they create a net loss, you may even be able to claim the loss against other sources of income.

Home Office Expenses

If you operate your consulting practice from your home, you may be able to claim some of your house expenses, such as mortgage interest, property taxes, insurance and utilities. You can claim home office expenses if your home office is your only one or if you regularly meet with clients there. The portion you can claim is based either on how many rooms the practice takes out of all the rooms of the house or how much square footage is used versus the entire livable square footage of the house. For example, if you used one room (100 square feet) out of 8 in total (1,200 square feet) for your home office, you could either claim 1/8th of your eligible house expenses based on number of rooms or 100/1,200, or 8.3 percent, based on square footage. You can use the calculation that provides you the largest benefit so, in the above example, you would use the number of rooms formula. If your home office expenses would create or increase a net loss, you can carry them forward to use in future years.

Vehicle Expenses

If you use your personal vehicle partly for your consulting business, you can claim a portion of its usage as a business expense. If you are incorporated, you can track all of your business mileage by date and purpose and allows you to claim a cents-per-mile rate for all of that mileage. The detailed method requires that you total up all of your vehicle’s expenses, such as financing interest, repairs, gas and insurance, and allows a deduction for the portion of those expenses related to the business versus total mileage in the year. For example, if you drove 20,000 miles in total in a year and 4,500 of them were for business purposes, you could claim 22.5 percent of your total vehicle expenses.

Research Materials and Subscriptions

This is an often-missed consultant tax deduction. If you buy books, CDs or DVDs, downloads, and other research materials that are business-related, you can deduct them in full as a business expense. This is also true for magazine and other subscriptions. For example, if you subscribe to a trade magazine that helps you keep up with news and current trends in the industry, you can deduct the total subscription amount paid in the year. Keep all receipts and credit card statements to be able to back up your claim. You can also claim educational courses, conferences and other continuing education programs that are directly related to your consulting practice.

Meals and Entertainment

Many consultants buy meals for and entertain clients, potential clients, referral sources and business advisers. The IRS allows a deduction for these expenses at 50 percent of the actual cost, including taxes and tips. The reason for the partial deduction is that the IRS assumes that you would have had to eat anyway, so part of the expense is deemed personal. The meal or entertainment must be connected to business purposes or occur directly before or after a business event. These are often-audited expenses, so keep all receipts filed and mark on the back who was there and how it related to your business.

Other Deductions

Consultants, like other business owners, can deduct all directly business-related expenses from their revenues. This includes travel expenses, the business portion of phone expenses, office supplies and advertising expenses.

Gearing Up for the Busy Season

By Randall Orser | Small Business

Business concepts TNWhether you are in an industry that gets busier in some seasons or experiences fluctuations year round, there are some times when you will be busier than others. There are things that you as a manager can do to gear up for those busy times and perhaps find better ways of operating during the busy days. The best time to devise a strategy to deal with this is during the slow times.

When things get hectic, all of the problems seem to be magnified. What was a slight problem in the slow times became a huge nightmare when things got busy. What you and your subordinates need to do at that time is to keep track of all of those problems. Chances are they will show themselves once again the next time things get busy. That is, if no changes are made to prevent it from happening again.

When things get slow, inform all your subordinates that you would like them to think of everything that went wrong and every problem they encountered when things got busy. Tell them to compile a list. Also to write down everything they can think of that can be done to resolve the issue or to at least improve the situation. Then arrange a meeting where everyone will have an opportunity to present the information they have to offer.

During the meeting, go around to each person and give them the opportunity to present their information to the group. The group should then discuss the issues presented by that person and then move on to the next person in the group. Do this until you are finished.

You will probably notice that more than one person may have encountered each issue and each person may have something to offer as a suggestion for the resolution of the problem. Perhaps some changes can be made that may require some sort of authorization from upper management or certain details have to be researched. You may need another meeting later after those things are addressed.

After the various problems are addressed and there are different procedures or changes in the methods of operation, you may have to have some form of formal training sessions where everyone can learn of the details regarding the changes. Again, this all takes place during the slow periods.

Now when things pick up again, see how the new changes in operation work out for you. Things will probably improve but you may now notice other problems or bottlenecks that weren’t as noticeable because of the more noticeable ones that were worse, the last time around. You may even have new bottlenecks now because the old ones were resolved. Keep track of those problems. The important thing is to work out all of the kinks in your day to day operations and to streamline whatever processes you can.

After this busy period is over, repeat the process. Do this over and over again on a continual basis. This will help you to develop better operating procedures and operate more efficiently. You may even be able to address safety issues or other concerns. Hiring issues may come into play. Perhaps you should hire people with a different skill set than you’ve already been hiring. Perhaps skills that would enable future employees to perform the various job duties better or more efficiently.

The point is to constantly strive to improve upon the methods and procedures you use in your day to day operations. Once these improved procedures are developed, each member of your team can be trained in them. After that, every new hire should be taught how to use the new and improved methods. However, that should not be the end of it. New hires come with different backgrounds and experiences, and may themselves have unique ideas for improvements to offer. It’s all a little something for everyone to do, to gear up for the busy season.

What is a Non-refundable versus a Refundable Tax Credit?

By Randall Orser | Personal Income Tax

Deduction Save on Taxes Loopholes Exemptions on Calculator TNTax credits can greatly decrease the amount of taxes you have to pay. If you don’t fully understand them, you could be missing out on large cash opportunities. One aspect that often goes unexplained is the difference between refundable and non-refundable tax credits. What is the difference between the two, and how do they affect the amount of tax you owe to the government?

A tax credit is very different from a tax deduction. A deduction is a reduction in the gross income. For example, if you have a gross income of $50,000 for the year, total itemized deductions of $10,000 would make the adjusted gross income $40,000. You have the option to use the standard deduction or itemize your deductions if your total itemized deductions exceed the standard deduction. By increasing the value of your deductions, you lower your taxable income, therefore lowering the amount of total tax you owe.

Tax credits have a larger advantage. After you have calculated your total taxable income and determined how much you owe in taxes, a tax credit will be deducted from that total amount. For example, if you owe the government $3,000 and you qualify for a $1,000 tax credit, you now only owe $2,000. It is a 100% reduction in taxes owed whereas deductions reduce the taxes owed by a much smaller percentage. Basically, you want to get as many deductions and credits as possible, but credits have a larger impact.

Tax credits have nothing to do with how much money was withheld from your check each month for taxes. Don’t even think about how much money is withheld until the very end. The withheld amount also has nothing to do with whether a tax credit is refundable or not. These are two different aspects; do not confuse them.

Many people don’t know that tax credits can be either refundable or non-refundable. If they aren’t done in the right order, you could be losing money owed to you. Fortunately, the forms are set up so that you will automatically calculate them in the right order. However, understanding the difference between the two is beneficial.

First, calculate non-refundable tax credits. A non-refundable tax credit is a credit that cannot exceed your total tax owed. For example, if you owe $3,000 in taxes and your total non-refundable tax credits equal $4,000, your tax owed is $0. You cannot receive back an extra $1,000. There is no refund to the total tax you owe.
Non-refundable credits include education credits; child and dependent care credits, adoption credits, etc. Subtracting non-refundable credits first will minimize your total taxes owed.

Now you will have a new taxes-owed amount. Using the above example, you have $0 owed. Calculate your total refundable credits. These included the earned income tax credit, making work pay credit, first time home buyers credit, etc. Let’s say these come to a total of $2,000. These are refundable credits meaning you will have a result of -$2,000 tax. In other words, the government owes you $2,000.

Once you have calculated your taxes owed after subtracting all qualified credits, calculate your entire refund or taxes owed. If you get $2,000 from the government and $5,000 was withheld from your check, your total refund is $7,000. Notice that the amount withheld from your check is separate from the $2,000 refundable credit. You receive an extra $2,000 in addition to the money returned to you that was withheld for tax purposes throughout the year.

Calculating non-refundable credits before refundable credits maximizes your total credit potential. Non-refundable credits are used first, whether they bring your taxes owed down to zero or just reduce them. Refundable credits are calculated last to ensure that all possible refunds are realized. The above example is exaggerated to make the discussion easier. This amount in tax credits is not typical. It depends on what you qualify for. However, make sure you check out each credit thoroughly to ensure you get your maximum return or minimize your taxes owed as much as possible.

Accomplishing More Through Setting a Time Limit

By Randall Orser | Small Business

critical thinking-TNAmong the many methods that professionals use in time management is what’s called “Time framing”. In a nutshell it’s giving yourself a limit on the time you employ to do a certain task. For example, if you need to write a report, you give yourself no more than an hour to complete the task. If you finish the report within that time frame, you have the extra time that can be employed for another task. Or you can reward yourself in some way for accomplishing the job so soon. If the job takes longer, you drop the assignment and move on to the next assignment you have scheduled. You can give your first task time to develop overnight until you schedule it for another time. You don’t abandon your report; you’ve only given it a time limit.

This method of setting a time limit can be used anytime for most projects, excluding those that simply must be finished by a deadline set by your peers. Of course, this method won’t work for a surgeon who can’t leave the operating table in the middle of performing a heart bypass. But time boxing is effective for most short-term projects and those requiring a few days for completion. In both cases, creativity is enhanced and the act enforces discipline.

Working this way has several advantages. Among them:

More Creativity

The closer your set deadline approaches the more likely you are to find a creative way to complete the project to your satisfaction. That sense of urgency helps stimulate your creative faculties to find effective methods to complete the task within the allotted time frame. It’s likely you’ll finish the project much sooner than you anticipated.

A Better Way to Find a Solution

There’s no shame in delaying a project if it doesn’t meet your deadline. A breather before taking up the project can help you find a solution that you wouldn’t otherwise discover if you bulled your way through the project. We all tend to see the proverbial forest for the trees. Solutions often come at those moments when you’re most relaxed.

A Sense of Urgency

Once you’ve given the job a time limit, you’ve created an atmosphere of urgency. This allows you to give full attention to the job and removes distractions. For those projects that require more than a day, the unfinished task creates an urgency that must be resolved. Writers often use this technique, stopping at a point where they know what follows next. This gives them the incentive to pick up where they left off and continue the momentum from the day before. While stopping a project in the middle of the task may keep you awake at night, you won’t lack for creativeness and imagination.

Enhances Organization Skills

If you’ve placed a time frame on your project, you’re better organized. It makes scheduling easier. Many business people wear many hats, so they must organize their time for maximum effectiveness. They have to schedule their tasks around those areas where they have little control. Staff and executive meetings can’t be delayed waiting for them to finish off a project past the start of the business meeting. The benefit of time framing is that it allows you the comfort of not having to work overtime hours. Carrying work home with you will likely mark you as inefficient. Overtime should be reserved to projects that have short time limits set by your employer or company, which you cannot control.

Establishes professionalism

If you consistently finish your projects ahead of your set deadline, you’ll likely impress your boss. Promotion and higher pay are the rewards for those who use their time wisely. Time framing enforces discipline. All successful people have learned the habit of discipline. They’ve increased their sense of self-importance and become an asset to their employer as well as their families.

So the next time you tackle a project, set yourself a time limit to complete it unless that time limit is enforced by your employer. You will find more joy in accomplishment and create a sense of happy fulfillment.

Put Money Back in Your Pocket with the Home Office Deduction

By Randall Orser | Personal Income Tax

Canadian dollars money TNIf you perform any type of work from home, whether as a freelance writer or selling merchandise via shopping or auction websites, the expenses you incur at home could save you a bundle on your taxes. Here are the things that you need to know and have available in order to reap all of the benefits of home office expense tax deductions:

Determine if your home office is actually an “office”.

In order to take this type of deduction, the area of workspace must be exclusively used for your business or you must be able to determine what percentage of the time you use that workspace for your business. For instance, if you have one room where your computer sits and you use that area only for conducting your business, that is considered your home office and is used 100 percent of the time for that purpose. If you conduct your business in your living room via a PC or laptop and you also use that room for entertaining guests, spending time in front of the television with friends and family, or you sleep there, your living room can still be considered your home office, but only at a fraction of the time. Let’s say your room is available 24-hours a day to use as an office, but you work 6 hours on a laptop and the other 18 hours, the room is used for watching television, playing video games, or sleeping on the sofa, your percentage of use for home office would be 6 out of 24 hours or 25 percent.

You will need these types of information to deduct your home office expenses.

Whether you own your home or rent, you will need to know how much money in total that you spend on either your mortgage interest or rent payments throughout the past year. Utility bills that you paid during the previous year for electricity and natural gas or propane can be used as a deduction. Repairs or maintenance that was conducted on any part of your home, indoors or outdoors, is deductible. These amounts are for your entire home and are separate from any purchases you made or bills that you paid exclusively for a home office.

Expenses that were solely for your home office.

Although it is rare, if you pay extra rent for an outbuilding where you live and you use that as your home office, that would be considered rent that is exclusive to your home office and is fully deductible. Lines of communication such as telephone, Internet or a separate line for a fax machine that are used exclusively for your home office are deductible and separate from the full home expenses.

Expenses that pertain solely to your business.

Certain expenses that incur in order to conduct your business, prepare for opening / starting a business, or drum up new business are deductible. Advertising costs, office supplies, computer equipment and software, purchasing new furniture for your home office, snow removal / trash removal that is exclusive to your home office and certain meals and entertainment expenses are deductible. Purchases of software, furniture, or equipment that you paid more than $100 for are depreciable. What this means is that over time, these items will lose their value or become obsolete. In such cases, you are allowed to deduct the amount of value that is lost whether you decide to take the depreciation deduction all at once or spread it out over time.

Vehicle expenses when you use your car, truck or van for business use.

Whether you drive children to school as part of your childcare service or you use your vehicle to drive to the post office to purchase stamps that you will use in your business, the expenses of powering and or maintaining your vehicle are deductible. The catch here is that you must keep written records of your mileage that pertains to the use of your vehicle for business purposes. When filing your taxes, determine which method will grant you the larger return: a) deducting standard mileage amounts or b) actual expenses for gasoline, oil, tires, and repairs. Another important factor to remember is that if you will be conducting the same type of business the following year, you must use the same method of deduction (standard mileage or actual expenses incurred) each year.

Home office expenses are often over-looked and not taken as deductions toward tax liability. These important tax credits and deductions could put as much as $500 – $5,000 or more in your pocket based upon your personal income, home, and home office situation. It is worth your time and effort to keep accurate records and explore all of your tax avenues before you file.

Why a Joint Venture Could Save Your Small Business

By Randall Orser | Small Business

joint venture solution 10-14 TNIf you are a solo entrepreneur, creating a Joint Venture with other businesses can give your business access to needed resources and can help you to grow your business at a much faster rate than you can do alone. Joint Ventures allow each business involved in the project to maintain business integrity, while gaining the benefits of working within larger organisations.

Many internet entrepreneurs have created joint ventures with other entrepreneurs to expand access to customer databases and to generate mutually beneficial sales leads. While many entrepreneurs started a Joint Venture to combat the tiny marketing and advertising budget available, some of the millionaire entrepreneurs continue to use Joint Ventures even when a larger advertising budget becomes available. This means there are other benefits to working within a joint venture.

A joint venture may give you access to a wealth of ideas and a collaborative team spirit that can help you to take your own business to the next level. You can use the joint venture to gain credibility, data lists, and access to advertising. If you have a brilliant product idea, and are starting out your small business to sell your product, a joint venture with a respected company in the industry can help you to get your product out into the public sphere or into a new market.

Usually, a company will recommend your product, in return for a sales commission when you sell. This means you can enter a joint venture with no money upfront and no risk. Joint ventures can save you money as a solo entrepreneur and you may not need to borrow money from banks to advertise and market your product.

You need to make sure the joint venture is mutually beneficial, so negotiating a win-win situation with the company you are proposing to enter into a joint venture agreement is essential. Research is the most important first step in setting up a joint venture, as the right research will ensure you know the business you are planning to have as a partner. If you want to establish business credibility for your product, you need to be sure your business partner has the consumer credibility you want.

If you are entering a joint venture with a business offering a product or service, ensure the product is quality and suits your own company’s market list. A joint venture is reliant on trust. If you are recommending another company or product to your customers, you need to be sure that the company will deliver on the promises made; otherwise, your customers may leave you too.

When you are discussing a joint venture proposal with a prospective business, you need to clearly outline each partner’s responsibilities, roles, and the rules surrounding profit sharing within the joint venture.

Build a quality joint venture relationship based on trust, solid ethics, and mutual understanding. Your joint venture partnership may continue for many years, so put the effort into establishing and maintaining a trustworthy relationship with your new business partner.

A joint venture could save your small business, especially in this economic climate. Mutually beneficial joint ventures can make a big difference to your cash flow, credibility with customers, and building a reputation for delivering quality products.

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