Myth: Setting up a corporation will make all my non-deductible expenses deductible.

Truth: Businesses can only deduct expenses that meet the following tests regardless of the entity used to operate. Expenses must be ordinary and necessary to the business (profit-making activity) AND they must also be reasonable.

For example, while boat ownership and upkeep would be ordinary and necessary for a marine salvage company, or a business providing water taxi services, it would not be for a painter or car dealer.

While it would be reasonable for the same marine salvage contractor to charter a private jet to get to the location of a ship grounding with their crew and equipment, for a direct seller or someone in an MLM business it would not be reasonable to buy a coach airline ticket to demonstrate and sell some cosmetics to a customer in another state. The expense is not reasonable for the size of the expected sale and possible profit.

Remember that to be deductible expenses MUST meet the ordinary and necessary to your type and size of business and be reasonable and customary for your type of business. You also must all meet all record-keeping requirements, so you can support the deductions taken.