Myth – Anyone can enjoy success in a franchise business

Actual fact – Investing in a franchise business is a good option to enjoy success in business. But, remember success is never guaranteed. For the success of any business there are many factors responsible for it like market saturation, training, support, location, the economy, and how hard you are working to make your business successful.

Myth – Franchising is best way to earn money

Actual fact – To make a franchise business profitable, both time and dedication is required. Thus, if you think that just investing money in a franchise business will make you richer, then you are having a wrong approach. You need to treat a franchise business as your own and put in hours of hard work in order to make it successful.

Myth – Investing in top franchise concept means success

Actual fact – Going for an established and easily recognizable top franchise options has got many benefits. But this never means that you will enjoy success. A lot depends on the kind of training and on-going support you will receive from the franchisor. Only when you will able to offer quality services to your customers, success will come in your way.

Myth – High cost franchise means higher return

Actual fact – Higher investment in franchise business does not guarantee higher returns. It has been found that high-cost franchise opportunities at time may get you less money as compared to a low cost franchise business. 

Myth – Franchising business is less expensive

Actual fact – The startup costs for starting a franchise and starting your own business from scratch are often the same. Remember in a franchise business you need to invest money in an appropriate location plus you need to pay franchise fees and royalties to the franchisor for using their trademark and business model.

Myth – In franchising you will be your own boss

Actual fact – Certain amount of freedom and flexibility is there in a franchise business but remember you will always need to work within the company system and follow the pre-set standards for wages, suppliers, the price of the products, norms related to working hours and so on.

Myth – I don’t need any help from a lawyer to start a franchise business

Actual fact – For starting a franchise business, a legal contract is signed between the franchisor and a franchisee. To ensure you understand all legal and financial liabilities it is advisable to take help from a lawyer before you sign any papers. This will ensure smooth functioning of your franchise business.

Well, there are some more franchising myths, but never forget that the benefits of franchising are immense. These benefits cannot be ignored and if you really wish to get the best values of your money start looking for top franchise opportunities in the market.

Myth Number 1 – The home office deduction is a red flag for an audit.

Twenty years ago, this might have been true, simply because it was unusual. Now, the home business seems to be almost as popular as home ownership! Millions of individuals operate some kind of business activity out of their homes. Others telecommute, and deduct their home office expense as an itemized deduction. The home office deduction is no longer an automatic flag for an audit.

The key to avoiding an audit is reasonableness. The IRS uses computer analysis on all tax returns. Any deduction that is excessive on your income and the benchmarks for your industry may be questioned.

Bottom line: Deducting a portion of your home expenses as a cost to operate your home-based business is expected!

Myth Number 2 – If I take a home office deduction, I can deduct all the costs of my home.

You deduct a portion of your home expenses as a home office expense based on the square footage of your home office space. If you have a 2000 square foot home, and a 200 square foot office, you could deduct 10% of your home expenses.

Unless you operate a day care center, your home office space must be exclusively used for business. Your kitchen will not qualify as home office space simply because you use the table to complete paperwork. If you use the space for personal and business, it does not qualify.

The easiest way to keep track of this is to designate a room or rooms for home office purposes. If you don’t have a complete room to use as office space, use furniture to separate the personal part from the business space.

Of course, there is an exception to this rule. If your business is wholesale or retail and you do not have any other fixed location, you can include any space you use for storage of inventory or product samples as part of your home office. This space does not need to be used exclusively, but must be used regularly, and be suitable for storage.

Bottom line: Calculate the square footage you use exclusively for business and the square footage of your storage space for inventory to determine your home office deduction.

Myth Number 3 – I can only take the home office deduction if I work at home exclusively.

Old rule! Congress expanded the home office deduction to allow business owners without any other fixed business location to take a home office deduction regardless of the number of hours they spend at home. If you provide services to customers or clients at their location, you can still qualify for the home office deduction. You simply must use your home office for administrative and management duties.

Bottom line: You can deduct your home office as long as you don’t pay for other office space to run your business.

Myth Number 4 – The home office deduction will make me lose my tax exclusion on the sale of my home.

The rules have changed here, too. If you use 10% of your home for business purposes, you no longer have to recognize 10% of the gain on the sale that could have been excluded if you meet the requirements for the sale of your principal residence.

What you do need to do, however, is include any depreciation deduction you took in prior years as a taxable capital gain. You still benefit, because your capital gain rate is most likely lower than your ordinary income tax rate. You are able to take the original depreciation deduction at ordinary income tax rates, and bring it back into income when you sell your home at the lower capital gain rate. Your depreciation deduction can also reduce your self-employment taxes.

Bottom line: You can still save taxes overall by taking the home office depreciation deduction each year.

Operating your business from home is a very smart move financially for the new or small business owner. You can save yourself thousands of dollars in rent by operating at home rather than renting business space.

But the cost of housing your business is an expense, and should be treated that way. You would not hesitate to deduct rent expense for your business. Treat your home business expense the same way. The tax money you save can be used to grow your business, or even to fund your family vacation! Talk to your tax preparer if you have more questions, and get ready to take that home office deduction on your next tax return!