From a tax perspective, if your small business is audited, presenting a business plan to your auditor helps substantiate your "intent" to make a profit.  With a horse business, you must make a profit at least two out of seven years.  For any other livestock business, plan on making a profit at least two out of every five years.  A business plan will help substantiate the fact that you can make a profit.  You can't help it if situations beyond your control inevitably conspire to make sure you didn't make a profit, but a well constructed business plan lends credence to the fact that you had a well thought out plan.  A business plan shows the IRS how you intended to get to where you wanted to go.  A good plan defines your long-range goals. Business plans normally follow a general format.  You can find some wonderful ideas and worksheets on-line with Yahoo, under their small business section.   

The introductory elements of your business plan - your cover page, executive summary, and table of contents - determine what kind of first impression you make. Your table of contents indicates how well you have organized the entire plan.  Your cover page should include the phrase "Business Plan", the date, the company's name, address, phone, fax and e-mail numbers.    Your executive summary should be between one and three pages and should include your business concept, financial features, financial requirements, current state of your business, when it was formed, principal owners and key personnel, and major achievements. Readers will also go first to your executive summary to get a snapshot of your business and to gauge your professionalism and the viability of your business.   The "Sales and Marketing" section of your business plan describes both the strategy and tactics you will use to get customers to buy your products or services.  A strong sales and marketing section can serve as a road map for you, or as assurance to potential investors that you have a workable plan and the resources for promoting and selling your products and services.  Wrap up all assumptions into a cogent sales and marketing strategy. Think of this statement as an action plan for how you will get customers to buy your products. It will support the tactics you describe later on in this section. Your strategy may be only a few sentences in length, or it can be a couple of paragraphs. Important elements for a sales and marketing strategy include who you are targeting with your initial push and what customers you have designated for follow-up phases. 

Sample Table of Contents
1.  Executive Summary………….Pages 1-6
2.  Business Description Page…...Pages 7-9
     *The Equine Industry
     *Company Profile
     *Products
3.  The Market
     *Customers
     *Market Size and Trends
     *Competition
     *Estimated Market Share
     *Sales Projections
4.  Development/Production
     *Development Status
     *Production Process
     *Cost of Development
     *Labor
     *Expenses and Capital Requirements
          -Operating Expenses
          -Capital Requirements
          -Cost of Goods
5.  Sales, Distribution and Marketing
     *Sales
     *Distribution
     *Marketing

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CPA stands for Certified Public Accountant.  Learning to prepare tax returns is a miniscule part of their education.  Some CPA's are too busy keeping books to go to school or attend seminars every year and keep current on all of the new and ever changing tax laws. Every time a new case is won in tax court, it changes the way the courts view deductions.  Expenses that may not have been deductible in the past, may be deductible this year.  Every person who prepares taxes should have "errors and omissions" insurance to cover penalties and interest you might owe, if they make a mistake.  If you want to really qualify a person quickly, ask them how they would depreciate a three year old show horse?  The IRS has only just recently included show horses in the 3 year property depreciation class.  If they tell you "7 years", call someone else!  How would they report the sale of this horse?  If they don't ask you how long you've had this horse, and if the horse was held for, or converted to breeding purposes, so you can sell it on a 4797 and avoid self employment taxation if the sale resulted in a profit, this person is not an equine, or farm specialist, and will probably cost you money in the long run.  I hope this information has been helpful.  Call me if I can help you with your income taxes.  I prepare taxes for horsemen and women who live all over the country.  I hope this information has been helpful.  Contact me if I can be of assistance.

Sincerely,
Michelle A. Stallings

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