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Usually The IRS Gives Small Business Startups Three Years To Become Profitable

Life is not a beach for an entrepreneurial small business startup, especially in these times.

Typically, any entreprenuerial small business startup has three years to invest money (time, energy, etc) into creating a profitable business plan. And in this usual and customary time frame, startup expenses are tax deductable. After that, the IRS will ask a simple, and appropriate question: Is this a hobby or a business?

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By jeff noel

Retired Disney Institute Keynote Speaker and Prolific Blogger. Five daily, differently-themed personal blogs (about life's 5 big choices) on five different sites.

4 replies on “Usually The IRS Gives Small Business Startups Three Years To Become Profitable”

My husband has his own marketing business — he works six days a week, usually ten or twelve hour days. Imagine a hobby with that much time and energy invested!

Natalie, very interesting. So now I have many questions, like”
When did he start?
Why?
How long before he became profitable?
What’s his biggest challenge(s)?
Biggest joy(s).
Knowing what he knows now, what would he have done differently in the early stages?
etc, etc…

Don’t know if I can keep this short and pithy… 🙂

For 35 years, Mark worked for other people. His last corporate adventure was doing educational marketing for Rasmussen College (Deltak). Interestingly, they sent Mark and several of his coworkers to a Disney Institute workshop to develop their teamwork skills in the fall of 2009. Five months later, Mark’s entire department was “let go”… Regarding this we can only say, “hmmmm…”

Mark had kept a “hobby” business website for several years, doing occasional marketing side jobs for local companies — designing logos, building brands, developing websites, etc. When he became officially unemployed, he threw all of his energy into creating his own marketing business, drawing on his huge history in advertising and marketing and a substantial network of contacts and references.

So we are actually in the “start-up” phase of our small business. This is the first year that he’ll actually be filing taxes as Beyond Big Marketing — and unfortunately I don’t think the IRS will consider this a profitable year for us.

Mark would never ever go back to working for someone else. He’s a great strategist and dreams big dreams. He loves the challenge of finding the next BIG idea for his clients and then finding the next BIG client. Being his own boss has pushed him completely out of his comfort zone and has caused his faith in God’s sovereign love to increase exponentially as the months go by.

Sometimes he worries about making the finances all work out — who doesn’t? His business is our only source of income at this time. But his dedication to being an honest businessman and living out his faith with integrity and hard work will have its rewards in the coming years.

Mark uses business associates on a freelance basis — writers, sales, developers and SEO managers, photographers and artists — people he knows and trusts to do exemplary work for him.

This past August, we converted the back half of our garage into some really nice office space for Mark’s work. All part of our start up expenses, but well worth it as our home is rather small and filled with kids. We laugh about the tough commute — sometimes it takes him thirty seconds to get to his desk. But it’s much better than working out of our bedroom which is how this all began twenty months ago…

So, in a nutshell, that’s our story. I’ve never asked Mark what he’d do differently in starting his own business, but I’ll put that on my list of discussion topics today. I really don’t have a clue how he’d answer that question! As usual, jeff noel, you’ve given me reason to think, smile and be thankful today. 🙂

Natalie, this is an awesome story. Thank you for being kind enough to share it. It inspires me. For real. Please give my best to Mark and please tell him to keep on keeping’ on.

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