THE NINE STEPS TO BUSINESS

BUSINESSLIKE MANNER

1. Do you have a separate bank account for your business? Yes / No
2. Do you (or does your CPA) keep accounting records for your business? Yes / No
3. Do you keep copies of receipts in a filing system? Yes / No
4. Do you make an effort to collect accounts receivable? Yes / No
5. Do you review profit and loss statements regularly? Yes / No

Time and Effort

6. Do you keep track of time spent in your business activity Yes / No
7. Do you keep track of business appointments in a schedule or diary? Yes / No
8. Do you have notes of conversations you have had with consultants
    or experts to enhance your business? Yes / No
9. Do you keep evidence from business seminars you have attended? Yes / No

Depend on Income

10. Will you need the income from your business for your lifestyle? Yes / No
11. Do you intend to replace your current job with this business? Yes / No

Reasonable Losses

 If you have losses, do you have documentation that:

12. They are normal for the type of business you are in at the beginning? Yes / No
13. Or: Others have experienced the same kind of downturn? Yes / No

Effort to Make Money

 If you have losses, do you have evidence that:

14. You have made changes to try to improve the business? Yes / No
15. You have investigated ways to make your business profitable? Yes / No
16. You have consulted with experienced business owners or other
advisors regarding your business? Yes / No

Experienced Advisors

17. Have you identified the advisors you need for your business? Yes / No
18. Do your advisors have the business experience needed to give
you good advice? Yes / No

Your Experience

19. Have you been successful in this kind of business before? Yes / No
20. Have you been successful in a similar business? Yes / No

Past Profit

21. Has the business been profitable in previous years? Yes / No
22. If so, has the profit been enough to make it sensible to continue? Yes / No

Asset Appreciation

23. Is the business building assets that will have future appreciation? Yes / No

Scoring the Test

For each of the nine sectors, rate how strong your case is as to business purpose on a scale of 1 to 5, with 5 being the strongest. For the weakest elements, what can you do to strengthen your point?

Businesslike manner              1    2    3    4    5

Time and effort 1    2    3    4    5

Depend on Income               1    2    3    4    5

Reasonable losses                1    2    3    4    5

Effort to make money            1    2    3    4    5

Experienced advisors             1    2    3    4    5

Your experience 1    2    3    4    5

Past profit     1    2    3    4    5

Asset appreciation               1    2    3    4    5

Example: You may have shown a slight profit in your business and thus answered "yes" to both questions 21 and 22. But you don't feel totally confident in this area, so you rate "Past profit" only a 3 or 4. (From "Loop-Holes of the Rich, by Diane Kennedy, CPA)

What can you do to improve your position?  ______________________________________________________________________________________

______________________________________________________________________________________

_____________________________________________________

Please contact our Web master with questions or comments.

Copyright 1999 Jerry E. Bartram, CPA All rights reserved.

Web designed and authored by Jerry E. Bartram, CPA Last Updated 02/08/08

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, I inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matters addressed herein."