Getting In Too Deep

[Carhartt]

Any or everyone have any advice on whether or not to jump in the pool? With that I mean starting a sole proprietorship business and getting the state ID tax # and dealing with it all. I am wondering if it is worth the headaches. I am looking for it to aid in ordering parts and supplies. What can you use as tax right offs and what not to include into inventory from prior to start up. I am really not interested in getting any larger on customers as I work full time already and just do this for fun. Another one of my issues is I know people are talking and someone might take it to far. I have in the past have had my name and number given out by local Stihl dealers for parts and repairs. Being they cant and wont use aftermarket parts and repair cost is to high for them and customer. Not many but it has happened. Any advice would be helpful.

 

[Larry B]

I am an LLC. You will need a vendor's license to buy product tax free. You will need to charge sales tax for what you resell and any service you charge for. Whatever you charge for parts and labor is declared as personal income you can then deduct what you paid for the parts as expenses. Your TIN, tax id number should be associated with with a checking account and credit card. Keep all business banking separate from personal banking. Get an accountant. $0.02 worth.

 

[jacob j.]

In regard to tax deductions and write-offs, I think that largely depends on the state you live in. The Federal tax deductions for a sole proprietor are fairly standard. You might be best off if you went with an LLC to form your company. As far as the headaches go - there are many and usually people suffer just as much stress (or more) and work more hours than they would at an average day job working for someone else.

 

[Larry B]

If you have stock on hand and you charge a customer for them and charge sales tax like you are supposed to as an LLC unless you have receipts for prior purchase of the parts you can't show them as an expense and deduct them. Running a business is all about keeping receipts. I buy everything with a credit card and pay it off every month. Paper trail for expenses. Anything you buy for the business can be deducted from income. Things like website cost, tools, etc.

 

[Carhartt]

This has been a thought of mine for a while. I can not remember why I thought sole prop, was the way to go over LLC. Some of my thought into this is a neighboring land purchase coming with the thought of bldg. a larger garage so that I can breathe as compared to what I work out of now. Also including some equipment and my Woodmizer sawmill as part of the same business if that's possible. And also full time work retirement is just around the corner at a young age and not sure what I want to be when I grow up.
What is in my best interest to keep separate? At this point everything I have is personally owned. Can you include it in the business all at once or do you add it slowly to have yearly expenses as the business grows?

 

[Philbert]

Some of this varies by state. Get a good accountant, and include their fees into your calculations

As noted, keep track of your expenses: some milage, phone/Internet costs, portions of your home used for business may be counted as business expenses. You may be able to sell some of your equipment to your company, but that money might be considered taxable income to you. As an LLC, with the right insurance, you also may be able to limit some of your personal liability.

Some states have resources for people going into small business (MN examples attached), and there may also be local SCORE seminars on starting a business, which would be worth checking out.

Philbert

https://www.sos.state.mn.us/business-liens/start-a-business/how-to-start-a-business-in-minnesota/

https://mn.gov/deed/assets/guide-starting-business-minnesota-35th-ed-2017_tcm1045-155254.pdf

https://www.score.org/

 

[Larry B]

An LLC can be a sole proprietorship. Mine is. It makes life simpler.
If you already have paid for equipment you probably don't want to sell it to the business to depreciate it. You would have to claim personal income and pay income tax on what you "sell" it to the business for.
If you have people coming to a place of business to drop off and pickup stuff you need an umbrella insurance policy for the LLC. Mine is $2M. If they trip and fall they will own your house if you don't have it and homeowners won't cover a business. If you fix a saw and the first time they use it and chain breaks and cuts them you need an umbrella policy or they will own your house.
You can buy equipment before you start a business and deduct it in a later year.
If you are going to buy land for a shop ask an accountant whether you should own it personally or be part of the LLC.

 

[drf256]

It’s certainly state specific. There are also federal exceptions that occur as stimulus packages. Equipment can’t usually be deducted off expenses immediately. Their was some fed tax law change during Obama that allowed full deduction instead of depreciation over time of equipment.

As people said, ask your accountant how much they will charge you for the year. I’m about to start my 23rd year in business in NY State and I’m on the phone/email/text with the accountant at least once a week to this day. Nothing is static when it comes to running a business.

You can try Quickbooks, but I still run mine old school. Pay bills online and write checks. Then log checks by number by hand onto ledger sheets. Keep all the check stubs. Receipts and 1099’s rarely come up in my business as a tax event, but I scan every single receipt. Then they are backed up to a flash drive and then written onto one of those newer mineral based CD’s that are supposed to last forever.

I have 2 business models, LLP & LLC. I know I have to pay NY State $1500 a year to remain an LLP (Cocksùckers they are), my LLC owns my place of business and I have the maintenance of running it outsourced. I’m sure NY State has their greedy hands in that too, I’m just not sure on the specifics. Both have setup and maintenance fees and may not be right for you as a sole proprietor. I’m not even sure if LLP would be available to you.

Insurance is a wonderful thing as well. It’s probably 15% of my gross when Health/WC/Gen Liabilty/Malpractice is all added up.

Everyone gets their piece, I get mine last. That’s how businesses work. I’m still waiting to write my first paycheck for 2019, the tax man cometh...

 

[Larry B]

Sorry to hear you have to pay extortion money to comrade Cuomo.