Do You Really Need Commercial Space for Your Business?
Updated: May 29, 2018
One of the biggest overhead costs for businesses is commercial office and/or storage space. Do you really need that cost cutting into your profits? Moreover, commercial space is generally more expensive per square foot than your own residential space.
If you have an online business or conduct your business virtually, you probably don’t need commercial space. Even if you have a service-based business, you may not need a commercial office. Instead, as your principle place of business, a portion of your home can be used for exclusive and regular business use, AND/OR to store products you sell or product samples on a regular basis. As a result, you may be able to deduct a portion of home expenses used for your business on your tax return. These expenses could include rental payments OR mortgage interest, qualified mortgage insurance premiums, real estate taxes, and depreciation. They could also include utilities and insurance you already pay. See IRS Publication 587 for more information about the Business Use of Your Home deduction. Just ensure you have the appropriate local and state business permits and licenses necessary to operate your business out of your home, and if you rent, make sure you have the homeowner’s permission. You can contact your local Small Business Development Center for legal requirements in your area.
If you occasionally meet with clients in-person and would prefer to do so outside of your home, there are cheaper alternatives to leasing or buying commercial space such as renting temporary office space. If you think that having a commercial space legitimizes your business in some way think about this: Even large companies are realizing the cost savings of reducing commercial office space and having employees telecommute at least part of the time. According to Global Workplace Analytics, 20 to 25 percent of the U.S. workforce teleworks at least part-time and a typical business saves $11,000 a year per employee who telecommutes at least half the time.
Find out what other cost-savings measures we can help you identify for your small business by contacting us today.
Disclaimer: I am not an attorney or CPA (yet) and this information is meant as a general guide. It is not intended to be used as legal or tax advice.