Running your own business is a complicated affair. Not only does it take discipline, innovation, resilience, creativity, and an impregnable work ethic to make it a viable success in the long-term, you also have to deal with the everyday difficulties such as overheads, profit margins, running costs, invoicing, and lest we forget, every business owner’s least favorite thing – taxes.
The founder of Akama Lifestyle, Edikan Adiakpan, values the importance of paying your taxes on time and paying what you owe. He also values ensuring his business has a healthy cash flow at all times and is a big believer in making a profit off a depreciating asset.
Adiakpan explains, “For those who are not sure what a depreciating asset is, allow me to clarify. A depreciating asset is an asset you intend to use in your business for more than the current tax year. This entails you are not allowed to deduct its full cost in the year you purchased it, but instead, you need to depreciate it over time.
“The IRS considers a depreciable asset to be an income-producing property in your possession, whose value will wear out or decline over time. Depreciable assets include an office building, machines, computers, vehicles, and so forth. In short, anything you intend to use for your business for more than one calendar year.”
Now that we’re all familiar with exactly what a depreciating asset is, Adiakpan would like to explain how you can make a profit from them.
“Making a profit from a depreciating asset happens almost naturally,” explains Edikan Adiakpan. “Depreciation is a surefire way to ensure you are getting real value for money from the asset during the course of its life expectancy.
“The asset’s sole purpose is to help your company earn revenue. Depreciation allows you to write off the upfront expense of that as a deductible profit when it comes to paying your taxes. In essence, the asset pays for itself over the years and creates a win-win situation.”
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