# Does your business act like a business?

- Link: https://www.lumlawgroup.com/does-your-business-act-like-a-business/
- Published: 2020-01-17T11:11:28-08:00
- Author: Albert J Lum

Don’t say we didn’t warn you, but the [implementation of new tax regulations](https://www.google.com/amp/s/www.marketwatch.com/amp/story/guid/AADC546A-554D-11E8-B33C-EAA26AF53803)
may cause many business owners to lose their business deductions when their “business”
is reduced to a mere hobby.  Budding entrepreneurs need to ensure their business
is set up correctly. Meanwhile, existing business owners need take a magnifying 
glass to their business to ensure their businesses are both set up and run like 
a business. In this article we’ll outline the basics of what it means to own a business
that’s correctly set up as a business, as well as what it means to act like a business.

### 1. **Form a business entity**

 It’s more challenging to prove your small business isn’t a hobby if it’s not registered
as it’s own entity.  Hire a professional to determine which business type would 
be most suitable before registering with your local government.

### 2. **Create a professional website**

 Whatever your business may be, a professional website will help validate it for
your customers.

### 3. **Open a separate business account**

 Keeping your business and personal expenses separate will simplify your year-end
bookkeeping—especially come tax time. Open a business bank account and credit line
to ensure they’re separate.

### 4. **Open a business email at a professional domain**

Many of our clients already have separate business emails but at the same email 
server as their personal email.  To solidify your professional business image, and
to ensure it’s security, open a new email account with a professional domain, such
as your own company’s dot com.

### 5. **Draft written contracts**

Don’t allow your clients to weasel out of contracts or make last minute changes.
Hold them accountable by drafting written contracts and requiring your clients to
sign them prior to beginning work.

### 6. **Provide invoices**

After you’ve completed work, always invoice your clients, and ensure that the invoices
match incoming payments.

### 7. **Advertise your product or services**

Even if you rely on word-of-mouth to obtain new customers, try listing your business
with a business registry if advertising is out of your budget.  The purpose is to
prove that your running your business with the intention making a profit, and advertising
your product or services plays a large part in it.

In order to “act like a business” and deduct relates business expenses on your taxes,
even the smallest side business must follow the above rules.  If you’re still a 
freelancer thinking about expanding to a full-fledged business, or want to be treated(
taxes) as a business, then start right from the beginning and follow our tips to
avoid issues years down the line.