Legitimate business expenses consist of necessary costs directly related to the business. Typical expenses include advertising, equipment, furniture, a vehicle lease, Internet, office supplies, payroll, rent, telephone, travel and utilities.
The cost of placing an advertisement varies depending on the venue. A business may advertise in the yellow pages, a newspaper, a magazine, or on the radio. Television, till receipts, buses and hoardings are other options. Sponsorships that count as advertising include support for the local t-ball or baseball team, local school sports leagues, middle school bands or membership with the local chamber of commerce.
Businesses must invest in and maintain equipment, which is any kind of machinery or electronic device other than a vehicle. Equipment may include computers, cash registers, a printer, fax machine, telephone, mobile phone, security television with cameras, a point of sale system's hardware, a small office heater and a small office air conditioner. Some equipment is specific to an industry. A blow dryer, curling iron and razor are needed to operate a salon.
In the first year, businesses must invest in furnishings. Desks, chairs, sofas, benches, tables and bookshelves are common items needed for an office.
Many businesses must allocate funds to buy or lease, as well as maintain, a vehicle.
A computer is an essential business tool that also entails maintaining an account with an Internet service provider.
Small businesses must account for utility costs in their budgets. Utilities include water, waste disposal and electricity bills.
Supplies and other expenses
Office supplies and office expenses are two different categories. Office supplies are directly related to everyday operations. Postage, paper clips, pens, staples, paper and ink are office supplies. Office expenses include bottled water, snacks and coffee for employees or customers.
The wages you pay employees and the withholding taxes on the wages are payroll expenses. If you pay your child or spouse wages, this is part of your payroll expense. If your child is between 14 and 18, they do not have to pay National Insurance, saving you money.
Mobile phones and land lines are a small business expense, unless they are used for a home business, where a portion may be for personal use.
Out-of-town business meetings are travel expenses. You can use the cost of your meals and entertainment as an expense, or use the per diem rate instead. The total cost of the hotel is also an expense.