TAX TIPS AND TRICKS ON OWNING YOUR OWN MULTILEVEL MARKETING BUSINESS

0 Posted by - June 30, 2016 - Business Development

Multilevel marketing, also referred as network marketing, is an attractive and interesting form of business engagement. It’s liked by many because of the benefits it accrues; one doesn’t have to rely solely on the sales they make only but also on the people they recruit into the network.

Each and every person in the network therefore has an opportunity to have their own independent business. Although the products may be of the same product line and are definitely of the same company, every individual can run their own business as they choose. 

What income do multilevel marketers earn?

The success of ones network marketing company does not lean on the individual sales alone; it also depends on their individual efforts and that of the people in their downline. They earn income from the sales they make( by directly selling to the consumers), commissions from recruiting new persons in the business, incentives given from time to time, awards e.g. for excellent performance and prices.

What form of business is multilevel marketing as per the law?

Multilevel marketing involves direct interaction with consumers at a personal level, where the marketer informs the approached consumer about the product they are selling and makes a sale. This form of sole proprietor and self-employment plays a key role since the individual creates the business for themselves and manages their time, money, etc individually. These minimizes joblessness and may create jobs for others. Being a business recognized by the law, an individual is require to file their returns with the Internal Revenue Service (IRS) before the due date and pay taxes.

Taxes paid by a sole proprietor involved in multilevel marketing.

For tax purposes, the federal government expects the marketers to pay three main taxes; 

  • The income tax, from total incomes of the individual,
  • The employment tax, this is for individuals who might have their employees for example, salespersons or secretary. People who you have recruited do not constitute employees.
  • Self-employment taxes

Small businesses

Many people who venture into multilevel marketing end up starting their own small businesses. This could be a little tricky for those just recruited and have no idea on how to run and manage their small businesses. They also lack the knowhow on how to begin and register their business so it becomes recognized by law and have the mandate to run the business. A good tip for someone new to the MLM business is to consult the people in your upline, those that recruited you, let them guide you on how to go about it. Some may be kind enough to help you in the entire process themselves. Remember your success is also theirs. However don’t let anyone manage your business for you, be your own boss and manager of your business.

Tips on managing your business. 

  • It’s a business venture and you expect income to flow into the business, keep a record of all the incomes that flow into your business.
  • Expenses are also part of any business venture be sure to keep a record of them too, whether they are earned directly in the business e.g. wages, rent or indirectly through for example the use of your personal car for business activities, be sure to keep a record of them.
  • Separate your personal expenses and incomes from those of the business.

Are tax deductions allowed on small businesses?

For every business activity that earns business income, the law recognizes that expenses are also incurred in the running of the business; whether there’s a business premise or you carry out the business activities from your home, as long as it’s one that’s recognized as being undertaken with the aim of making a profit.

Deductions from income, are allowed on allowable expenses, and small business owners should take advantage of this. Some of the allowable expenses include;

Home expenses: products purchased for sampling, car miles used in business activities, business rent water, electricity etc.

Business deductions: advertisements, stationary, bad debts, depreciation expense, legal and professional services etc.

These deductions minimize the tax liability of the business owner. Consult your accountant for more advice on the tax deductions and payments also be sure to file your returns on time as penalties for failure are in place.

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