allfreechips:
Rob472 is correct. Deduct all of you legitimate expenses regardless of the percentage of your income. Every year many business report losses for various legitimate reasons. Just make sure you can document your expenses.
As far as documentation goes; keep copies of canceled checks, bank statements, credit card receipts and statements for starters. Try to avoid paying cash where possible as the service tends to be suspicious of cash transactions. If you has to contribute money to your business make sure that you keep documentation of it so that you can prove it is not income.