Are you paying for invention expenses from your personal checking account?

If so, shame on you!

Inventing is a business  and must be treated like one.

Read on.

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3 Steps Your Should Take Now

So, how do you take action to treat your invention as a business? Here's three steps to take now.

Step 1: Create a business entity for your invention

I am not an attorney or a tax professional, but I did work at the Small Business Development Center for 14 years assisting thousands of small businesses. So, I'll pass on the advice I gave to all of them to you as well. 

The simplest business entity you can establish is a sole proprietorship.

Requirements will vary from state to state, but in Texas, for example, it is very simple: apply for an assumed name certificate with the county clerk's office. It could be any name (that is not already in use), such as Bradley Innovation. The assumed name certificate costs very little (less than $20 when I did it years ago). I also recommend you get some business cards printed (though this is not required). 

You might consider setting up your business as either an S Corporation or an LLC (limited liability corporation) instead of going forward as a sole proprietorship.

Why? As a sole proprietor, you and the business are one and the same. If someone were to sue your business, for example, this could put all of you personal assets in jeopardy. When you are set up as either an S Corporation or an LLC, however, you get a degree of separation between your personal assets and those of the business.

Confer with your tax professional on the best way to set your business up as an S Corporation or an LLC. There is more cost and complexity than for a sole proprietorship, but it is worth the cost and benefits in my opinion. Many of your costs could be deductible from your taxes or at least depreciated over time (as I believe patent expenses are). This could actually save you money.

Step 2: Open a separate business checking account

Now that you have a business enterprise set up, it needs its own checking account. Of course, this will cost you a bit each month in maintaining a separate checking account for your business, but it allows you to separate your personal expenses from your business ones. 

We all know that your invention will consume money for quite some time before it actually may generate income in any form for you. That is the reality of being an inventor. That is not a problem, just make sure to deposit funds by writing a check from your personal account to your business account. Now you have captured that capital injection.

Your tax professional can advise you on the details. This separation of functions and funds between personal and business will also make it much easier for you at tax time.

Step 3: Hire an accountant to assist you

As inventors, we are always looking for ways to save money and; hiring an account or CPA, seems to go in the wrong direction. The reality is, though, an accountant can advise you ways to structure transactions and handle business expenses where you may actually save money.

Furthermore, your accountant will ensure that you are handling business expenses properly and give you peace of mind that your business is set up appropriately. Most, if not all, of the costs for the accountant will be deductible expenses for your business.

By taking the above three steps, you have established the foundation for treating your invention as a business enterprise, 

Stay tuned!

______________________________________________________________________________________

Would you like some small business startup tips for success?

Grab your FREE copy of – Small Business Startup Tips – cheat sheet now.

Just click on the blue button below to get your copy now.

Would you like to learn how to make money from your invention? Tired of just spending money?

Attend the next FREE live webinar – How to License Your Invention for Royalties.

All you need is your cell phone, laptop or desktop computer to attend this LIVE webinar. Get all your questions answered.

Just click on the orange button below to sign up for the next FREE live webinar – License Your Invention for Royalties