34 APRIL 2025 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Branching Out and Up In today’s sluggish economy, it is not unusual for an existing drilling business to branch out, or for the owner or self-employed professional to start another business in the same or different field. “Uncle Sam” will not only pick up part of the expense of branching out or starting up the new venture, but will often allow the losses from a secondary activity to be used to reduce the tax bills generated by income from self-employment, wages, investments - or the primary business. There are various strategies for and reasons why a drilling business should branch out and expand. However, with most businesses having limited resources and capabilities, it is important to select a suitable means of expansion which can improve recognition, reach, and profits. Anyone who pays or incurs business start-up costs and who subsequently enters the trade or business can choose to expense and immediately write-off up to $5000 of those costs. However, the $5000 deductible amount is reduced, dollar-fordollar, when the start-up expenses exceed $50,000. An incorporated business can also choose to deduct up to $5000 of so-called “organizational” expenses incurred in the tax year the business begins. The balance of start-up or organizational expenses, if any, are amortized (written off) over a period of not less than 180 months, starting with the month in which the business begins. In today’s tough economy, more and more people are using - or forced to use - their hobbies, sports, or secondary interests to generate income. If an activity is operated as a hobby, deductions are limited to its income. With a business, however, the tax laws permit expense deductions to the point where they offset wages, savings, and investment income - and the tax bill on income from other sources. When it comes to determining whether an activity is engaged in for profit, all of the facts and circumstances are to be taken into account. No one factor is conclusive in making this determination. Joint ventures, partnerships, and collaborations involve two similar or complimentary businesses deciding to share resources and reduce costs by creating a branch in a new location or to undertake a specific project. And, of course, collaborations and joint ventures are excellent ways for smaller businesses to compete with much larger and better equipped competitors. Having access to legal, accounting, and other expertise will benefit the drilling business, its owner and, of course, the new venture. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com
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