Trading one product or service for another has become increasingly popular in recent years. If you barter, you should know that the value of products or services from bartering is taxable income. This is true even if you are not in business.
Here are some things you should know about bartering per the IRS:
Bartering income. Both parties must report the fair market value of the product or service they get as income on their tax return.
Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some operate out of an office and others over the internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. Exchanges must give a copy of the form to its members who barter each year. They must also file a copy with the IRS.
Trade Dollars. Exchanges trade barter or trade dollars as their unit of exchange in most cases. Barter and trade dollars are the same as U.S. currency for tax purposes. If you earn trade and barter dollars, you must report the amount you earn on your tax return.
Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.
Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.
For questions about bookkeeping or taxes contact Elite Bookkeeping & Services directly at (800) 416-3820. Visit their web site at http://www.elitebookkeeping.biz
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Get online– More people are likely to go to the internet to search for businesses than ever before. It’s important to establish an online presence in order to maximize your exposure. Be sure to consider your long term plans for SEO before you establish a web site. Many companies offer free or low cost web sites, but much of the SEO tools are either not available or they do not directly benefit your company. Also many of them do not allow you to keep the domain if you decide to change service providers.
Target new markets- Your current market may indeed be serving you well, but might there be others you can explore? Get creative and do some research.
Diversify- This is a great way to increase your business as it creates additional streams of income that can increase sales and profit margins. Here are some examples:
Accept paid speaking engagements or start your own expert blog
Import others’ products and/or export yours
Sell products or services that compliment yours
Form an alliance– Look for similar types of businesses or ones that offer complimentary services or products.
Utilize an Executive Suite– If your business is growing, but you’re not quite in a position to hire full time staff, this can be an excellent stepping stone. Most come with built in staff that can assist with receptionist services and use of equipment that you may not be ready to purchase. As your business grows you can then take on additional sales and support staff to further grow. Many Fortune 500 companies use them to establish additional locations.
License your product– If you have a service or branded product, this can be an effective and low cost growth strategy. Licensing helps you to open up additional forms of income without having the expense of starting another business.
Franchise your business– This allows you to grow without directly having to manage new locations while also giving you an opportunity to improve in other ways.
Open a second location– If your current business location is under control, you may consider establishing a second location.
Obtain a government contract– This can be one of the best ways to grow your business.
Merge or acquire another business– Look for companies that are similar or complimentary to yours. Your established clientele can grow exponentially by combining forces.
Go global– Locate foreign distributors with a U.S. representative that can help you get your product distributed internationally.
A corporation doing business in one state when incorporated in another is considered a foreign corporation and must qualify as a foreign corporation to legally do business in that state. For example, a business incorporated in Nevada that wants to do business in California would be considered a foreign corporation in California, and as a result, the Nevada corporation must qualify (or register, depending on the state) as a foreign corporation to do business in California and then becomes responsible for the California state taxes including the Franchise Tax.
“Doing Business” can be nothing more than having a bank account in a state other than the home state.
States generally have a similar filing process to qualify (or register) as a foreign corporation, but some states may require a bit more (please refer to the specific Secretary of State to get the detailed requirements for that state). However, here are the general requirements that almost all states will demand. The Secretary of State will require a foreign corporation to fill out a form, commonly called the Foreign Corporation Certificate or Qualification to do Business. This form will ask for: the name of the corporation, the state of incorporation, the address of the principal office in the state of incorporation, the address of the principal office in the foreign state, and the name and address of the registered agent for that state. Every state will require a foreign corporation to provide the name and address of a registered agent in order to give the state a means to communicate with the foreign corporation. The registered agent (an individual or corporation) must generally reside within the state and provide a physical address (no P.O. Box). The form must be signed and dated by a corporate officer. Also note, there will be a filing fee for registering as a foreign corporation.
Many states also require a Certificate of Good Standing (or “Certificate of Existence” depending on the state) to be filed by the foreign corporation along with the form described above. This Certificate is used as evidence that the foreign corporation exists and is authorized to conduct business in that foreign state / country. This Certificate is issued by a state official from the state of incorporation.
Some states may require the foreign corporation to list its assets and liabilities as well as the assets and liabilities within the state it wishes to qualify to do business in. Also, some state may have stricter requirements regarding the registered agent.
Always consult an accountant or attorney regarding the tax implications of conducting business in another state.
We are always available to assist you with all your corporate needs.
California- Fraudulent letters are being sent to California businesses instructing them to remit fees for a “Certificate of Status”. The letters are made to look as though it is a government notice, when it is not. Only the Secretary of State’s office issues certificates of status. Read more
Effective May 2014, the Secretary of State’s office no longer issues individual Certificates of Filing. They may be requested but will now include all filed documents, or you may request certified copies of individual documents.
Connecticut- A new bill was proposed to help clean up the public records by allowing the state to administratively dissolve entities that have not filed Annual Reports. Those entities may reactivate by paying reinstatement fees.
Maryland- Effective July 1, 2014 Limited Liability Companies may claim an exemption from recordation and transfer taxes for the transfer of real property as part of a reorganization under IRC Section 368 (a). Previously this was only available to Corporations. Read more
Mississippi- Effective July 1, 2014 procedures for name reservations were modified to make them the same for all entity types. They may also be renewed thirty days before they expires. Read more
Virginia- Effective July 1, 2014the state Corporation Commission may refuse to file documents submitted for filing if they are not prepared or submitted by an authorized representative of the entity. Read more
Washington- Effective June 12, 2014 Corporations, Limited Liability Companies and Limited Partnerships may convert between entity types. Also Corporations and Limited formed in other states may now convert to Washington. Read more