I run a bootstrapped education business, and was told by other bootstrappers that one should convert personal expenses into business expenses, like car payments (make your car a company car) and food (it's for the office, but sometimes certain employees take it home with them, wink wink). Then, pay yourself as little as possible to cover those impulsive purchases that we are all prone to, and focus on building the value of your company.
I later learned from a wise HN'er that you can also claim rent on your apartment as a business expense. Although I'd love to support social welfare and bureaucratic spending with my income taxes, I'd rather maximize how many jobs I can create for hardworking people with my business.
Be careful. Just because you're a business owner doesn't magically make everything you touch a business expense. Claiming the apartment where you live as a business expense sounds like a great way to get audited. But what do I know? I'd strongly suggest talking to a good accountant -- they are worth the money.
Quick update - when I was writing this, I didn't realize the ambiguity of my wording. This isn't stuff I'm doing right now, this is just what I heard could be done. Although I do claim legitimate business expenses, I don't have the audacity to claim things like my rent and car lease. However, the people I heard this from have been doing the management game for quite some time and did bring up the possibility of an audit, but as long as you can provide a reasonable explanation for everything, there shouldn't be any issue. Obviously if anyone is reading this and considering taking their advice, do it at your own risk, because a wrong move could cost you a lot of money to the IRS.
1 - you should weigh the tax implications of a personal car vs business leased vs business owned car
2 - if you manage to convert all of your personal expenses to business expenses and lower your salary to lower your personal taxes (which may not matter depending on the corporate entity you created in the first place) then you need to realize when you go for a credit check all anyone will care about is your salary, not your business income. So let's say I'm self employed as an hourly contractor and bill @ $150/hr, but I pay myself a 'lowly' $30/hr to dodge taxes. The mortgage company only cares about that $30/hr and may not loan me anything. (also, if you start a business you need to be solid for two years before anyone will loan you anything for the most part, just fyi)
3 - you can claim a portion of rent/mortgage/etc as a business expense if you have a legitimate home office or conduct business of some sort in it.
> you can claim a portion of rent/mortgage/etc as a business expense if you have a legitimate home office or conduct business of some sort in it.
One thing to point out about this - if you use the space for any purpose other than for your business, it doesn't count as a home office. Additionally, you cannot claim shared utilities like phone lines and Internet as a business expense unless they are for exclusive use in the home office space.
> The mortgage company only cares about that $30/hr
That's not true in my experience. When I was looking for a mortgage a few years back, the lender was practically throwing money at me once I presented my business financials. Perhaps it depends on who you are dealing with?
I later learned from a wise HN'er that you can also claim rent on your apartment as a business expense. Although I'd love to support social welfare and bureaucratic spending with my income taxes, I'd rather maximize how many jobs I can create for hardworking people with my business.