Most business start out with losses. This includes craft businesses as well. It is just a fact of being in business.

It is usually inevitable that there will be losses because you usually have to spend money first in order to start your business. Whether its supplies, stock, rent or equipment, you will likely be spending more money in the first few months than you earn.

Unfortunately, this situation is usually not taken full advantage of because the people who start business either haven't gotten good professional advice or any advice whatsoever.

The result is that they end up paying more in taxes than they might otherwise have to. And who are we kidding, the money you make is not what is important… it's the money you have after taxes that is vital. There is a way, potentially that you can use your startup losses to your personal advantage.

One of the things that you can take advantage of in a number of jurisdictions (check with a tax professional in your own jurisdiction) is the tax loss provisions of your local and national tax laws. In most places, personal tax rates are higher than corporate tax rates for small businesses. This is done by governments to try and encourage entrepreneurs to start businesses and hirer employees. This, though, may give you the opportunity to maximize the deductibility of any startup losses.

Essentially what you can do is claim tax losses on your personal taxes until you start earning income. Once you start earning money, you can then incorporate to take advantage of potentially lower tax rates and other income saving options. The process can be complicated if you end up purchasing a number of assets to get started because the assets will ultimately have to be transferred from your name into the name of your new company.

This is simply one reason why you might incorporate. There are a number of reasons why you would and would not incorporate your business so you should talk to a local lawyer to understand whether you should be incorporating. Also, you should check it out with a tax professional in your area prior to starting any new venture as to whether these roll-over provisions apply to you.

Ron Thibeault is a lawyer with LeClair Thibeault and contributing Editor to St. Nick Studios. His extensive experience in business startups including ThinkRelo.com and commercial law gives him valuable insight into the needs of small business owners.