Business expenses are the costs associated with operating a business. The expenses are either tax deductible or non-tax deductible. National tax laws determine which expenses can qualify as deductions, such as those that are ordinary and necessary to conducting that type of business. Some of the categories for business expenses include rent, wages, and technology costs. In order to make a profit, the total expenses must be lower than the total income derived from the business.
Many business owners keep track of their business expenses each year in order to take advantage of deductions available to them when it’s time to pay taxes. For example, in the United States, federal tax laws allow business owners to deduct common business expenses. As long as the expenses are necessary to the operation of the business and are ordinary to the type of business in that industry, a business owner can deduct them and reduce the overall tax liability. The Internal Revenue Service Publication 535 details the rules and exceptions for expenses related to business activities and the forms that must be filed for each tax year.
Every trade often has unique expenses associated with running a business, but there are common business expenses that are shared by most business owners. To begin with, telephone expenses, including cell phones, business lines, and personal phone lines used for personal and business use are expenses that are common among many business owners. Marketing costs, such as web design, web hosting, and printing costs related to marketing materials are also common business expenses. Some business expenses are not common or necessary to all business owners. For example, some entrepreneurs work from home and do not need to spend money on renting office space or a building. The same is often true for solo entrepreneurs who don’t spend any money on staff and other business owners who have to pay for employee salaries.
Some business owners who want to write a business plan can often research common expenses in their particular field. There are numerous non-profit trade associations as well as government agencies that keep statistics on various aspects of running a business, including expenditures. For example, an entrepreneur who wants to start a U.S.-based retail business can find a detailed list of expenses for the retail industry on the U.S. Census Bureau website. The information can often be helpful to gauge whether the business owner is overspending or underspending in some areas. It can provide important information to help with future business planning and development.
