Tax Advantages of Network Marketing

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Network marketing can be a very lucrative income opportunity for the business minded individual and has a far superior tax advantage than most part time jobs.

Although most people can learn to do this kind of business, most do not. Many who do get involved do so primarily for the tax deductions or to obtain the product at wholesale prices.

The income earned from a network marketing enterprise is taxable on a net income basis which means that the expenses incurred to earn this income are tax deductible. Furthermore, since most of these businesses are operated from home, it is possible to convert some personal expenses to tax deductible expenses. The most common are mortgage interest,maintenance and repairs,property taxes and utilities.

See HomeBased Business

This income can be classified as self employment income or business income. Depending on the business structure chosen income earned may be added to personal income. Conversely any business losses will reduce personal income, resulting in lower taxes.

There are also opportunities for income splitting between family members.

Regardless of which opportunity is chosen it is always advisable to do your due diligence to ensure a good fit.

How does one go about choosing the right network marketing company? If you are unsure exactly which route to take or are considering going into business, then you might want to subscribe to a free E-zine. "What you need to Know Before you start a Business"

The 5 Pillars to Success describes the must have pillars to ensure success,in which ever MLM company you choose to be involved. Regardless of which opportunity is chosen it is always advisable to do your due diligence to ensure a good fit.

Network marketing has been around for more than four decades and has evolved and re-invented itself many times. Sometimes known as multi-level marketing, this type of distribution relies on teams of independent distributors to bring the product or service directly to the customer.

In the past, this type of marketing has received some very negative press and is still very much misunderstood,even today. It is, however, a very ethical and legal way of marketing which many main stream companies are adopting. Many entreprenuers are making considerable incomes in this multi-billion industry. Technological advances have also created new opportunities for the small business owner

It is now being recognized by educational institutions and today there is a whole industry of tools and training aids available.

In addition to the retail profits or commissions the distributors are offered financial incentives to find, recruit and train other people to get the products or services to the customer.

The company benefits by the savings in distribution costs, being able to establish a relationship with the customer and increased exposure to its products through leverage of distributorships.

The savings in distribution costs are passed on to the independent agents in the form of higher commissions or invested in improving the quality of the product or service.

The agent benefits from the leverage of the other distributors who he recruits and from the retail profits and commissions that his organization generates. In addition it allows the distributor to create an ongoing, passive and residual income as long as his organization continues to produce.

This way of bringing the product to the end consumer is ideally suited for business owners who work from home. In most cases the business will be a sole proprietorship and will be taxed as a business.

See Also Business income

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