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A business planViews: 201
Jul 19, 2007 10:21 pm re: A business plan

Suzette Flemming
IRS requires business plan? Yes and no.

For most businesses the IRS doesn't require a business plan. However, if you are operating a business that could be classified as a hobby, having a business plan goes a long way toward verifying it as a legitimate business.

For example, if someone is running a horse operation and is audited, a business plan can be used to prove the operation is truly a business and not a hobby dressed up like a business. There was a trend (and still is in some areas) for backyard horse owners to claim they were operating a breeding, training, lesson or boarding business so that they could write off the expenses of having horses. The IRS caught on. In this type of business having a written, printed and bound business plan is the first step to keeping the business owner out of hot water.

One of the tests a business must pass as far as the IRS is concerned is that it must be operated with the intent to produce a profit (not discussing non profit organizations here, they have a totally different set of rules). A business plan goes a long way to proving your intent to make a profit.

Suzette
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