Need Extra Cash? Start Your Own Business

You'll need to do some research to develop a business plan. Who are your customers, how will you find them, what should you charge, how much money will you have to invest, and when might you start to make a profit?

If possible, go to a local community college or the business school at a university and take a course on how to start and run a small business. You'll most likely cover a number of subjects that may be unfamiliar, from legal requirements to sales taxes and bookkeeping. And having others in the class to talk to and brainstorm with can be useful.

Be sure to get a separate business bank account and phone line, and set up a simple website where customers can find you.

You can write off your direct business expenses against your business and personal income, which gives start-ups a tax break (for details, go to irs.gov and download Publication 535). If you use a portion of your home exclusively as an office, you can also deduct a percentage of your home upkeep costs, such as utilities and insurance. But home office costs are deductible only against your business income, not your personal income; see IRS Publication 587.

You can't keep deducting expenses against your personal income forever. To remain a legitimate operation, not just a hobby, you'll need to make money in three of your first five years, according to IRS rules. You might get a grace period, however, if it's clear that you're really working at it.

You'll have to bootstrap the cost of your business start-up yourself. Banks generally won't give loans for modest part-time operations.

Retirees in their 50s might dream of building a small business into something really big — moving from their kitchen cookie sheet straight to a Mrs. Fields kind of operation. That usually takes a larger investment, by you and perhaps by friends and contacts who believe in what you're doing. You might even find a lender, if you have a solid business plan and paying customers in view.

One important warning, though, before you launch your new enterprise: Have a Plan B. What will you do if the business doesn't work? You can probably afford to lose a small investment, but don't endanger your home or wipe out your 401(k). Always look ahead to what you'll be doing the rest of your life.

Jane Bryant Quinn is a personal finance expert and author of Making the Most of Your Money NOW. She writes regularly for the Bulletin.

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