I was wondering if anyone could tell me how to go about starting a part time shop up? I would not be doing a lot of work, but would like to do this proper, and legal so as not to worry about the IRS or anything like that. Im a machinist full time but get request for machine work and welding on occassion. I know a lot of people say "just take cash" but that doesnt seem like the best solution. What are the correct steps? I do not have an accountant yet, and I dont know anything about running a buisness. Any help would be great, Thanks, Craig
On 2 Oct 2006 19:43:34 -0700, monkers <monk...@novocon.net> wrote:
> I was wondering if anyone could tell me how to go about starting a part > time shop up? I would not be doing a lot of work, but would like to do > this proper, and legal so as not to worry about the IRS or anything > like that. Im a machinist full time but get request for machine work > and welding on occassion. I know a lot of people say "just take cash" > but that doesnt seem like the best solution. > What are the correct steps? I do not have an accountant yet, > and I dont know anything about running a buisness. Any help would be > great,
I would a) open an S corporation or another legal entity (I have an S corp) and b) if you make any money at all, get a tax advisor who cares about you and your deductions, not ust about getting a yearly check from you. The amount of tax deductible things that you can do if you turn your hobby into business, is considerable.
On 2 Oct 2006 19:43:34 -0700, "monkers" <monk...@novocon.net> wrote:
>I was wondering if anyone could tell me how to go about starting a part >time shop up? I would not be doing a lot of work, but would like to do >this proper, and legal so as not to worry about the IRS or anything >like that. Im a machinist full time but get request for machine work >and welding on occassion. I know a lot of people say "just take cash" >but that doesnt seem like the best solution. > What are the correct steps? I do not have an accountant yet, >and I dont know anything about running a buisness. Any help would be >great, > Thanks, > Craig
============ It is *ALWAYS* easier to get forgiveness that it is permission.
>I was wondering if anyone could tell me how to go about starting a part > time shop up? I would not be doing a lot of work, but would like to do > this proper, and legal so as not to worry about the IRS or anything > like that. Im a machinist full time but get request for machine work > and welding on occassion. I know a lot of people say "just take cash" > but that doesnt seem like the best solution. > What are the correct steps? I do not have an accountant yet, > and I dont know anything about running a buisness. Any help would be > great, > Thanks, > Craig
Hi Craig
Most cities will make your life miserable with regulations you never thought of if you notify them that you are opening a machine shop. From my experience, you would be well advised to start your shop in a location that is as stealth as possible. Dont decline cash. I'd advise that you do your own accounting till that task is too burdensome. You will soon know if the shop is profitable enough to seriously effect your income and what you need to disclose to the governments, city, state, and federal.
I have one bit of advice. If you do get a shop going well enough to register it with the city, buy the property where your shop is.
monkers wrote: >I was wondering if anyone could tell me how to go about starting a part >time shop up? I would not be doing a lot of work, but would like to do >this proper, and legal so as not to worry about the IRS or anything >like that. Im a machinist full time but get request for machine work >and welding on occassion. I know a lot of people say "just take cash" >but that doesnt seem like the best solution. > What are the correct steps? I do not have an accountant yet, >and I dont know anything about running a buisness. Any help would be >great,
Hmm, so many questions! I don't use any outside accountants, lawyers, etc. anymore. They just cost too much. I did use a lawyer and an accountant to set up everything, but have been winging it for about the past 18 years.
You may want to get a ficticious name registration to allow you to operate under a company name. Corporations are a LOT of paperwork hassle for very little benefit to a one-man shop. My lawyer told me that was a waste of time, if you are really just one guy then a corporation gives no immunity to suit, etc. You need to apply for a FEIN from the IRS, and a state tax number from your state. A merchant's certificate or whatever it is called in your state allows you to buy materials without paying sales tax. (In MO, and many other states, you can get all sorts of things tax exempt. For instance, if I buy a drill bit for use in my shop, I have to pay tax on it. When I use it up and replace it, I am not liable for tax! Also, if you buy something that adds, enhances or extends tha capability of a machine, you don't pay tax on it. So, a tool holder, arbor, whatever, shouldn't be taxed. This applies to MO, may or may not apply in your state.) A city business license may be required.
God only can help you if you hire a part time employee. I got a computer program that does the insane calculations on withholding, etc. but it is a major pain, with paperwork, constant filing deadlines, etc. You have to do nearly as much paperwork, it seems, as GM, just for one employee!
Another pitfall is selling to a state entity. Some states make you enroll your business is all sorts of sales tax systems to be paid by a state entity. MO is not a big problem, and I do all my manufacturing, sales, etc. out of MO. But, sell ONE LITTLE BOX to Indiana, and I have to go through hell. I refused to do their paperwork, because the way the forms are written, there's no way to indicate I'm out-of-state, and therefore not liable for sales tax UNLESS I sell something to an end user within IN. So, they let this sit for a couple of years, and then send me a bill for $124,800! And, they can't see why I have a problem with this! They've just been quietly adding $7500 a month to my tax liability for over a year. SO, after filling out monthly forms covering a year+, I will have to continue this idiocy for the rest of this year, then petition them to PRETTY PLEASE move me to yearly filing - as I have NEVER, in 20 years, EVER made a taxable sale to an Indiana customer. If I had to do this much paperwork for 50 states, I'd need a full-time accountant just to handle this paperwork! (I'm a REALLY small part-time business, just one guy, and in a really GOOD year I sell $50K worth of stuff. One spectacular year I broke $100K, but that may never happen again!)
> Another pitfall is selling to a state entity. Some states make you > enroll your > business is all sorts of sales tax systems to be paid by a state > entity. MO is > not a big problem, and I do all my manufacturing, sales, etc. out of MO. > But, sell ONE LITTLE BOX to Indiana, and I have to go through hell. > I refused to do their paperwork, because the way the forms are > written, there's > no way to indicate I'm out-of-state, and therefore not liable for > sales tax UNLESS > I sell something to an end user within IN. So, they let this sit for > a couple > of years, and then send me a bill for $124,800! And, they can't see > why I have > a problem with this! They've just been quietly adding $7500 a month to my > tax liability for over a year. SO, after filling out monthly forms > covering a year+, > I will have to continue this idiocy for the rest of this year, then > petition them to > PRETTY PLEASE move me to yearly filing - as I have NEVER, in 20 years, > EVER made a taxable sale to an Indiana customer. If I had to do this > much paperwork > for 50 states, I'd need a full-time accountant just to handle this > paperwork! > (I'm a REALLY small part-time business, just one guy, and in a really GOOD > year I sell $50K worth of stuff. One spectacular year I broke $100K, > but that may > never happen again!)
> Jon
7000 taxing districts within the USA. It's virtually impossible for any smaller business to 1) Do the paperwork involved and 2) Pay the "franchise" fees that many states will come after you for in order to register to do business in their state.
This has long been a problem. Not only is it nearly impossible to keep track of all the convoluted laws involved, they change month to month and YOU are responsible for knowing they changed. One current example in CA (one of the worst) is that if you advertise on matter printed in the state, you are considered to have a nexus in the state. Take out an ad in a local newspaper or locally printed magazine and your business is a resident of that state. Most magazines (national) send them to local printers for printing and distribution so you can be screwed without even knowing it.
A second example (again, CA) is with drop-shippers and sales tax. If you sell something to someone in CA, and have the maker ship directly for you, the drop-shipper is responsible for collecting tax. So, if you don't stock a part, order it from XX company to ship to your customer in CA for you, XX company is supposed to send your customer a tax bill based on the cost plus 10% (assumed to be standard mark-up). Would you want your supplier sending a tax bill to your customer????
If the Govt had any interest at all in "small business" as they claim, they'd enforce a standard interstate commerce taxation/reporting law to make trade possible. They can bust their ass to make "free trade" agreements nationally but ignore interstate trade problems related to this kind of thing.
Koz (who gets REALLY hot with regards to this issue)
Craig, unfortunately, much of what has been written is true, we are a nation of 50 states, and thousands of municipalities, and they each think they know how to do things the right way so there is no one national law that applies. Assuming you hire no helpers, I agree that in most instances, setting up a corporation is not a big benefit for the cost. Instead, the first thing I would do is check with an insurance agent about the costs to insure your products . If something you sell breaks and someone gets hurt, you better have insurance - if the price seems too high, strongly consider what you want to do - is it worth it to make a little money by doing a side job ( considering the risk) or instead tell them you can run it through your employers co ( assuming you work in that trade) and the extra markup is what the boss uses to cover the insurance and other expenses. If you can swing the insurance, call your local town or city and ask for the economic development dept ( may have a different name). Their job is to help businesses relocate to your area and expand and create more jobs - obviously they would much rather talk to a new Walmart or Toyota plant, but they should be able to start you on your way with pamphlets or talking to the right people about how to start up your business - they may also have a lead to SCORE which is a group that lets you talk to retired excutives for free to get ideas about how to run and expand your business - they can also be found through the Small Business Administration of the US govt. If neither of those help, my few tips would be 1. get a bookeeper or accountant to explain the ground rules for your city and how to keep your books (like when you have to charge taxes, how they are calculated, how paid,etc,) 2, open a separate bank accoutn for your buisiness and keep copies of everything , especially receipts, 3. register with the local city or town to get a business license ( despite the stereotypes, they can be very cooperative ). At the end of the year, take a look back and see if you think it was worth it - if not, tell people you will make something only if they buy the materials and you will do the labor for free, when you get around to it, because it didn't make sense to be in business. If you decide to go in with your eyes closed recognize that a few years down the road someone can knock on your door and put you in a bad way - because if you didn't collect the sales tax, you still have to pay it. Barry
> >I was wondering if anyone could tell me how to go about starting a part > >time shop up? I would not be doing a lot of work, but would like to do > >this proper, and legal so as not to worry about the IRS or anything > >like that. Im a machinist full time but get request for machine work > >and welding on occassion. I know a lot of people say "just take cash" > >but that doesnt seem like the best solution. > > What are the correct steps? I do not have an accountant yet, > >and I dont know anything about running a buisness. Any help would be > >great,
> Hmm, so many questions! I don't use any outside accountants, lawyers, etc. > anymore. They just cost too much. I did use a lawyer and an accountant to > set up everything, but have been winging it for about the past 18 years.
> You may want to get a ficticious name registration to allow you to operate > under a company name. Corporations are a LOT of paperwork hassle for > very little benefit to a one-man shop. My lawyer told me that was a waste > of time, if you are really just one guy then a corporation gives no immunity > to suit, etc.
There is at least one advantage to incorporating a one-man operation, and that is the ability to make profit distributions to shareholders (you being the sole shareholder) that are not subject to SS taxes. Of course you have to be making a profit to do this, and you can't get away with taking no wages and all distribution, but I've been advised that as long as the distribution is not more than 20-25% of wages the IRS is generally happy.
To decide whether this makes sense you need to weigh the expected tax savings against the additional expense and hassle of maintaining a corporation. For me it amounts to a yearly filing with the Secretary of State that costs $65 and perhaps another $100 to my tax preparer for a somewhat more complicated tax return. I figure a distribution a bit over $1000 is my break-even point. I've heard the fees to maintain a corporation are considerably higher in some states, which would of course shift the balance.
This is for an S corp, I can't imagine a situation where a C corp makes sense for a one-man shop.
On Wed, 4 Oct 2006 00:09:23 -0400, Ned Simmons <n...@nedsim.com> wrote: > In article <4522C7C4.3060...@artsci.wustl.edu>, jmel...@artsci.wustl.edu > says...
>> monkers wrote:
>> >I was wondering if anyone could tell me how to go about starting a part >> >time shop up? I would not be doing a lot of work, but would like to do >> >this proper, and legal so as not to worry about the IRS or anything >> >like that. Im a machinist full time but get request for machine work >> >and welding on occassion. I know a lot of people say "just take cash" >> >but that doesnt seem like the best solution. >> > What are the correct steps? I do not have an accountant yet, >> >and I dont know anything about running a buisness. Any help would be >> >great,
>> Hmm, so many questions! I don't use any outside accountants, lawyers, etc. >> anymore. They just cost too much. I did use a lawyer and an accountant to >> set up everything, but have been winging it for about the past 18 years.
>> You may want to get a ficticious name registration to allow you to operate >> under a company name. Corporations are a LOT of paperwork hassle for >> very little benefit to a one-man shop. My lawyer told me that was a waste >> of time, if you are really just one guy then a corporation gives no immunity >> to suit, etc.
> There is at least one advantage to incorporating a one-man operation, > and that is the ability to make profit distributions to shareholders > (you being the sole shareholder) that are not subject to SS taxes. Of > course you have to be making a profit to do this, and you can't get away > with taking no wages and all distribution, but I've been advised that as > long as the distribution is not more than 20-25% of wages the IRS is > generally happy.
> To decide whether this makes sense you need to weigh the expected tax > savings against the additional expense and hassle of maintaining a > corporation. For me it amounts to a yearly filing with the Secretary of > State that costs $65 and perhaps another $100 to my tax preparer for a > somewhat more complicated tax return. I figure a distribution a bit over > $1000 is my break-even point. I've heard the fees to maintain a > corporation are considerably higher in some states, which would of > course shift the balance.
> This is for an S corp, I can't imagine a situation where a C corp makes > sense for a one-man shop.
For me, being a corporation is highly worth it. The tax deductions (all legal) are great. The expenses are not huge, just $100 per year for filings. If I was not incorporated, I would still have to do my taxes on my business income.
> >> of time, if you are really just one guy then a corporation gives no immunity > >> to suit, etc.
> > There is at least one advantage to incorporating a one-man operation, > > and that is the ability to make profit distributions to shareholders > > (you being the sole shareholder) that are not subject to SS taxes. Of > > course you have to be making a profit to do this, and you can't get away > > with taking no wages and all distribution, but I've been advised that as > > long as the distribution is not more than 20-25% of wages the IRS is > > generally happy.
> For me, being a corporation is highly worth it. The tax deductions > (all legal) are great. The expenses are not huge, just $100 per year > for filings. If I was not incorporated, I would still have to do my > taxes on my business income.
> i
What deductions do you take as a small corporation that are not available to a proprietorship?
On Wed, 4 Oct 2006 10:48:25 -0400, Ned Simmons <n...@nedsim.com> wrote: > In article <bs1vn.57p.1...@news.alt.net>, ignoramus906 > @NOSPAM.906.invalid says... >> On Wed, 4 Oct 2006 00:09:23 -0400, Ned Simmons <n...@nedsim.com> wrote: >> > In article <4522C7C4.3060...@artsci.wustl.edu>, jmel...@artsci.wustl.edu
> My lawyer told me that was a waste >> >> of time, if you are really just one guy then a corporation gives no immunity >> >> to suit, etc.
>> > There is at least one advantage to incorporating a one-man operation, >> > and that is the ability to make profit distributions to shareholders >> > (you being the sole shareholder) that are not subject to SS taxes. Of >> > course you have to be making a profit to do this, and you can't get away >> > with taking no wages and all distribution, but I've been advised that as >> > long as the distribution is not more than 20-25% of wages the IRS is >> > generally happy.
>> For me, being a corporation is highly worth it. The tax deductions >> (all legal) are great. The expenses are not huge, just $100 per year >> for filings. If I was not incorporated, I would still have to do my >> taxes on my business income.
>> i
> What deductions do you take as a small corporation that are not > available to a proprietorship?
I just have a clean legal entity that receives all revenues, in a separate account from my personal account, and pays for things that I need to run a business. I suppose that I could possibly do the same with some other legal entity, that's not a corporation, but being a corporation works out okay for me.
Ignoramus32140 wrote: > On Wed, 4 Oct 2006 10:48:25 -0400, Ned Simmons <n...@nedsim.com> wrote: > > In article <bs1vn.57p.1...@news.alt.net>, ignoramus906 > > @NOSPAM.906.invalid says... > >> On Wed, 4 Oct 2006 00:09:23 -0400, Ned Simmons <n...@nedsim.com> wrote: > >> > In article <4522C7C4.3060...@artsci.wustl.edu>, jmel...@artsci.wustl.edu
> > My lawyer told me that was a waste > >> >> of time, if you are really just one guy then a corporation gives no immunity > >> >> to suit, etc.
> >> > There is at least one advantage to incorporating a one-man operation, > >> > and that is the ability to make profit distributions to shareholders > >> > (you being the sole shareholder) that are not subject to SS taxes. Of > >> > course you have to be making a profit to do this, and you can't get away > >> > with taking no wages and all distribution, but I've been advised that as > >> > long as the distribution is not more than 20-25% of wages the IRS is > >> > generally happy.
> >> For me, being a corporation is highly worth it. The tax deductions > >> (all legal) are great. The expenses are not huge, just $100 per year > >> for filings. If I was not incorporated, I would still have to do my > >> taxes on my business income.
> >> i
> > What deductions do you take as a small corporation that are not > > available to a proprietorship?
> I just have a clean legal entity that receives all revenues, in a > separate account from my personal account, and pays for things that I > need to run a business. I suppose that I could possibly do the same > with some other legal entity, that's not a corporation, but being a > corporation works out okay for me.
> i
First off, let me say thanks to everyone for their input. I learned that I really dont know a thing. Secondly, it may be more bother than its worth for the couple dozen jobs I`ll do in a year. I dont sell any products, but Im sure insurance would be a good idea if you weld something for somebody and it breaks or whatever. I was just concerned with the idea of taking checks from people & municipalities and such. Sounds like I should abondon the idea. Are you allowed to make up to a certain amount (as shown through checks) before the IRS gets a hold of you? ( Im in NY by the way, forgot to mention that before) Thanks again guys, Craig
On 4 Oct 2006 09:08:54 -0700, "monkers" <monk...@novocon.net> wrote:
>First off, let me say thanks to everyone for their input. I learned >that I really dont know a thing. Secondly, it may be more bother than >its worth for the couple dozen jobs I`ll do in a year. I dont sell any >products, but Im sure insurance would be a good idea if you weld >something for somebody and it breaks or whatever. I was just concerned >with the idea of taking checks from people & municipalities and such. >Sounds like I should abondon the idea. Are you allowed to make up to a >certain amount (as shown through checks) before the IRS gets a hold of >you? ( Im in NY by the way, forgot to mention that before) > Thanks again guys, > Craig
You can do this as an individual, but don't even think about getting cute with the IRS. Bad trouble! Declare all revenues and take deductions on schedule C of your 1040.
An advantage to a sub-S is that you can take deductions greater than revenues some years (net loss) as long as you show a net profit now and then -- I think the window is 5 years but I'm no tax advisor. They can require full disclosure, good recordkeeping and payment of all taxes due, but they can't mandate biz strategy in terms of investment vs profit-taking.
Another advantage is that it just keeps everything nice and tidy so if you are audited, it's easy to prove everything. You can set up a checking account and Visa card for the sub-S and run everything thru that. Let the bank do your bookkeeping and the bank statements be your documented proof of all financial activity. You can pay yourself a (taxable) salary. As owner of the biz, it's best to pay as little salary as is defensible under Bureau of Labor statistics for given activity as in "welder" or "grade III engineer" or whatever. You'll still pay taxes on profits via the owners' K-1's, but profits (if any) are after expenses and deductions. Sub-S corps are not taxed directly; it all comes from witholding from salaries and from the owners' K-1s -- and FUTA and FICA. NY state may have additional rules.
Yet another advantage is that some vendors and customers feel more comfortable dealing with a business entity like XYZ Inc, rather than an individual. Make things cleaner for them. Microsoft got their tit in a wringer some years ago by using individuals as subcontractors. The IRS claimed they were dodging FICA that way. Other corps noticed, some decided they would only do business with consultants or subcontractors that were incorporated, so it was very clear what entity was responsible for FICA, FUTA and W-4 witholding. Some vendors like Grainger don't want to deal with individuals as in retail, but are happy to sell to a bona fide bidness entity.
The disadvantage is that there's another whole set of paperwork at tax time -- FICA, FUTA, quarterly reports and an annual 1120 return.
Ignoramus32140 wrote: > On Wed, 4 Oct 2006 10:48:25 -0400, Ned Simmons <n...@nedsim.com> wrote: > > In article <bs1vn.57p.1...@news.alt.net>, ignoramus906 > > @NOSPAM.906.invalid says... > >> On Wed, 4 Oct 2006 00:09:23 -0400, Ned Simmons <n...@nedsim.com> wrote: > >> > In article <4522C7C4.3060...@artsci.wustl.edu>, jmel...@artsci.wustl.edu
> > My lawyer told me that was a waste > >> >> of time, if you are really just one guy then a corporation gives no immunity > >> >> to suit, etc.
> >> > There is at least one advantage to incorporating a one-man operation, > >> > and that is the ability to make profit distributions to shareholders > >> > (you being the sole shareholder) that are not subject to SS taxes. Of > >> > course you have to be making a profit to do this, and you can't get away > >> > with taking no wages and all distribution, but I've been advised that as > >> > long as the distribution is not more than 20-25% of wages the IRS is > >> > generally happy.
> >> For me, being a corporation is highly worth it. The tax deductions > >> (all legal) are great. The expenses are not huge, just $100 per year > >> for filings. If I was not incorporated, I would still have to do my > >> taxes on my business income.
> >> i
> > What deductions do you take as a small corporation that are not > > available to a proprietorship?
> I just have a clean legal entity that receives all revenues, in a > separate account from my personal account, and pays for things that I > need to run a business. I suppose that I could possibly do the same > with some other legal entity, that's not a corporation, but being a > corporation works out okay for me.
On 4 Oct 2006 10:58:59 -0700, Too_Many_Tools <too_many_to...@yahoo.com> wrote:
> Ig raises a very important point....keep the business and personal > stuff SEPARATE.
> It is the first thing the IRS checks for.
Also makes dealing with them easier. I pay only my business expenses from my business account, so if IRS asks me to prove my numbers, I will have an easy time. My profit numbers agree with what my bank says. Mixing personal and business banking is a bad idea.
> Ignoramus32140 wrote: >> On Wed, 4 Oct 2006 10:48:25 -0400, Ned Simmons <n...@nedsim.com> wrote: >> > In article <bs1vn.57p.1...@news.alt.net>, ignoramus906 >> > @NOSPAM.906.invalid says... >> >> On Wed, 4 Oct 2006 00:09:23 -0400, Ned Simmons <n...@nedsim.com> wrote: >> >> > In article <4522C7C4.3060...@artsci.wustl.edu>, jmel...@artsci.wustl.edu
>> > My lawyer told me that was a waste >> >> >> of time, if you are really just one guy then a corporation gives no immunity >> >> >> to suit, etc.
>> >> > There is at least one advantage to incorporating a one-man operation, >> >> > and that is the ability to make profit distributions to shareholders >> >> > (you being the sole shareholder) that are not subject to SS taxes. Of >> >> > course you have to be making a profit to do this, and you can't get away >> >> > with taking no wages and all distribution, but I've been advised that as >> >> > long as the distribution is not more than 20-25% of wages the IRS is >> >> > generally happy.
>> >> For me, being a corporation is highly worth it. The tax deductions >> >> (all legal) are great. The expenses are not huge, just $100 per year >> >> for filings. If I was not incorporated, I would still have to do my >> >> taxes on my business income.
>> >> i
>> > What deductions do you take as a small corporation that are not >> > available to a proprietorship?
>> I just have a clean legal entity that receives all revenues, in a >> separate account from my personal account, and pays for things that I >> need to run a business. I suppose that I could possibly do the same >> with some other legal entity, that's not a corporation, but being a >> corporation works out okay for me.
> On 4 Oct 2006 09:08:54 -0700, "monkers" <monk...@novocon.net> wrote:
> >First off, let me say thanks to everyone for their input. I learned > >that I really dont know a thing. Secondly, it may be more bother than > >its worth for the couple dozen jobs I`ll do in a year. I dont sell any > >products, but Im sure insurance would be a good idea if you weld > >something for somebody and it breaks or whatever. I was just concerned > >with the idea of taking checks from people & municipalities and such. > >Sounds like I should abondon the idea. Are you allowed to make up to a > >certain amount (as shown through checks) before the IRS gets a hold of > >you? ( Im in NY by the way, forgot to mention that before) > > Thanks again guys, > > Craig
> You can do this as an individual, but don't even think about getting > cute with the IRS. Bad trouble! Declare all revenues and take > deductions on schedule C of your 1040.
> An advantage to a sub-S is that you can take deductions greater than > revenues some years (net loss) as long as you show a net profit now > and then -- I think the window is 5 years but I'm no tax advisor. They > can require full disclosure, good recordkeeping and payment of all > taxes due, but they can't mandate biz strategy in terms of investment > vs profit-taking.
> Another advantage is that it just keeps everything nice and tidy so if > you are audited, it's easy to prove everything. You can set up a > checking account and Visa card for the sub-S and run everything thru > that. Let the bank do your bookkeeping and the bank statements be > your documented proof of all financial activity. You can pay yourself > a (taxable) salary. As owner of the biz, it's best to pay as little > salary as is defensible under Bureau of Labor statistics for given > activity as in "welder" or "grade III engineer" or whatever. You'll > still pay taxes on profits via the owners' K-1's, but profits (if > any) are after expenses and deductions. Sub-S corps are not taxed > directly; it all comes from witholding from salaries and from the > owners' K-1s -- and FUTA and FICA. NY state may have additional > rules.
> Yet another advantage is that some vendors and customers feel more > comfortable dealing with a business entity like XYZ Inc, rather than > an individual. Make things cleaner for them. Microsoft got their tit > in a wringer some years ago by using individuals as subcontractors. > The IRS claimed they were dodging FICA that way. Other corps noticed, > some decided they would only do business with consultants or > subcontractors that were incorporated, so it was very clear what > entity was responsible for FICA, FUTA and W-4 witholding. Some > vendors like Grainger don't want to deal with individuals as in > retail, but are happy to sell to a bona fide bidness entity.
> The disadvantage is that there's another whole set of paperwork at tax > time -- FICA, FUTA, quarterly reports and an annual 1120 return.
One advantage of being a sole proprietor is that you can hire your kids. Because they are your kids, you don't have to worry about child labor laws. Assuming they are in school full time, you can pay them a pretty good chunk of money without having to pay taxes on it. Let your kids use the money they earn to buy their own school clothes, or take the family on vacation. Or anything else that the kids may need.
>> >First off, let me say thanks to everyone for their input. I learned >> >that I really dont know a thing. Secondly, it may be more bother than >> >its worth for the couple dozen jobs I`ll do in a year. I dont sell any >> >products, but Im sure insurance would be a good idea if you weld >> >something for somebody and it breaks or whatever. I was just concerned >> >with the idea of taking checks from people & municipalities and such. >> >Sounds like I should abondon the idea. Are you allowed to make up to a >> >certain amount (as shown through checks) before the IRS gets a hold of >> >you? ( Im in NY by the way, forgot to mention that before) >> > Thanks again guys, >> > Craig
>> You can do this as an individual, but don't even think about getting >> cute with the IRS. Bad trouble! Declare all revenues and take >> deductions on schedule C of your 1040.
>> An advantage to a sub-S is that you can take deductions greater than >> revenues some years (net loss) as long as you show a net profit now >> and then -- I think the window is 5 years but I'm no tax advisor. They >> can require full disclosure, good recordkeeping and payment of all >> taxes due, but they can't mandate biz strategy in terms of investment >> vs profit-taking.
>> Another advantage is that it just keeps everything nice and tidy so if >> you are audited, it's easy to prove everything. You can set up a >> checking account and Visa card for the sub-S and run everything thru >> that. Let the bank do your bookkeeping and the bank statements be >> your documented proof of all financial activity. You can pay yourself >> a (taxable) salary. As owner of the biz, it's best to pay as little >> salary as is defensible under Bureau of Labor statistics for given >> activity as in "welder" or "grade III engineer" or whatever. You'll >> still pay taxes on profits via the owners' K-1's, but profits (if >> any) are after expenses and deductions. Sub-S corps are not taxed >> directly; it all comes from witholding from salaries and from the >> owners' K-1s -- and FUTA and FICA. NY state may have additional >> rules.
>> Yet another advantage is that some vendors and customers feel more >> comfortable dealing with a business entity like XYZ Inc, rather than >> an individual. Make things cleaner for them. Microsoft got their tit >> in a wringer some years ago by using individuals as subcontractors. >> The IRS claimed they were dodging FICA that way. Other corps noticed, >> some decided they would only do business with consultants or >> subcontractors that were incorporated, so it was very clear what >> entity was responsible for FICA, FUTA and W-4 witholding. Some >> vendors like Grainger don't want to deal with individuals as in >> retail, but are happy to sell to a bona fide bidness entity.
>> The disadvantage is that there's another whole set of paperwork at tax >> time -- FICA, FUTA, quarterly reports and an annual 1120 return.
> One advantage of being a sole proprietor is that you can hire your kids. > Because they are your kids, you don't have to worry about child labor laws. > Assuming they are in school full time, you can pay them a pretty good chunk > of money without having to pay taxes on it. Let your kids use the money they > earn to buy their own school clothes, or take the family on vacation. Or > anything else that the kids may need.
Hm, can you hire a 5.5 year old and a 9 month old? (for tax purposes, as they are both good for nothing so far)
> >> >First off, let me say thanks to everyone for their input. I learned > >> >that I really dont know a thing. Secondly, it may be more bother than > >> >its worth for the couple dozen jobs I`ll do in a year. I dont sell any > >> >products, but Im sure insurance would be a good idea if you weld > >> >something for somebody and it breaks or whatever. I was just concerned > >> >with the idea of taking checks from people & municipalities and such. > >> >Sounds like I should abondon the idea. Are you allowed to make up to a > >> >certain amount (as shown through checks) before the IRS gets a hold of > >> >you? ( Im in NY by the way, forgot to mention that before) > >> > Thanks again guys, > >> > Craig
> >> You can do this as an individual, but don't even think about getting > >> cute with the IRS. Bad trouble! Declare all revenues and take > >> deductions on schedule C of your 1040.
> >> An advantage to a sub-S is that you can take deductions greater than > >> revenues some years (net loss) as long as you show a net profit now > >> and then -- I think the window is 5 years but I'm no tax advisor. They > >> can require full disclosure, good recordkeeping and payment of all > >> taxes due, but they can't mandate biz strategy in terms of investment > >> vs profit-taking.
> >> Another advantage is that it just keeps everything nice and tidy so if > >> you are audited, it's easy to prove everything. You can set up a > >> checking account and Visa card for the sub-S and run everything thru > >> that. Let the bank do your bookkeeping and the bank statements be > >> your documented proof of all financial activity. You can pay yourself > >> a (taxable) salary. As owner of the biz, it's best to pay as little > >> salary as is defensible under Bureau of Labor statistics for given > >> activity as in "welder" or "grade III engineer" or whatever. You'll > >> still pay taxes on profits via the owners' K-1's, but profits (if > >> any) are after expenses and deductions. Sub-S corps are not taxed > >> directly; it all comes from witholding from salaries and from the > >> owners' K-1s -- and FUTA and FICA. NY state may have additional > >> rules.
> >> Yet another advantage is that some vendors and customers feel more > >> comfortable dealing with a business entity like XYZ Inc, rather than > >> an individual. Make things cleaner for them. Microsoft got their tit > >> in a wringer some years ago by using individuals as subcontractors. > >> The IRS claimed they were dodging FICA that way. Other corps noticed, > >> some decided they would only do business with consultants or > >> subcontractors that were incorporated, so it was very clear what > >> entity was responsible for FICA, FUTA and W-4 witholding. Some > >> vendors like Grainger don't want to deal with individuals as in > >> retail, but are happy to sell to a bona fide bidness entity.
> >> The disadvantage is that there's another whole set of paperwork at tax > >> time -- FICA, FUTA, quarterly reports and an annual 1120 return.
> > One advantage of being a sole proprietor is that you can hire your kids. > > Because they are your kids, you don't have to worry about child labor laws. > > Assuming they are in school full time, you can pay them a pretty good chunk > > of money without having to pay taxes on it. Let your kids use the money they > > earn to buy their own school clothes, or take the family on vacation. Or > > anything else that the kids may need.
> Hm, can you hire a 5.5 year old and a 9 month old? (for tax purposes, > as they are both good for nothing so far)
> i
My kids started work at 5 years old sweeping the floors and cleaning the bathrooms. And, yes, they really did come in and sweep the floors.
>>> >First off, let me say thanks to everyone for their input. I learned >>> >that I really dont know a thing. Secondly, it may be more bother than >>> >its worth for the couple dozen jobs I`ll do in a year. I dont sell any >>> >products, but Im sure insurance would be a good idea if you weld >>> >something for somebody and it breaks or whatever. I was just concerned >>> >with the idea of taking checks from people & municipalities and such. >>> >Sounds like I should abondon the idea. Are you allowed to make up to a >>> >certain amount (as shown through checks) before the IRS gets a hold of >>> >you? ( Im in NY by the way, forgot to mention that before) >>> > Thanks again guys, >>> > Craig
>>> You can do this as an individual, but don't even think about getting >>> cute with the IRS. Bad trouble! Declare all revenues and take >>> deductions on schedule C of your 1040.
>>> An advantage to a sub-S is that you can take deductions greater than >>> revenues some years (net loss) as long as you show a net profit now >>> and then -- I think the window is 5 years but I'm no tax advisor. They >>> can require full disclosure, good recordkeeping and payment of all >>> taxes due, but they can't mandate biz strategy in terms of investment >>> vs profit-taking.
>>> Another advantage is that it just keeps everything nice and tidy so if >>> you are audited, it's easy to prove everything. You can set up a >>> checking account and Visa card for the sub-S and run everything thru >>> that. Let the bank do your bookkeeping and the bank statements be >>> your documented proof of all financial activity. You can pay yourself >>> a (taxable) salary. As owner of the biz, it's best to pay as little >>> salary as is defensible under Bureau of Labor statistics for given >>> activity as in "welder" or "grade III engineer" or whatever. You'll >>> still pay taxes on profits via the owners' K-1's, but profits (if >>> any) are after expenses and deductions. Sub-S corps are not taxed >>> directly; it all comes from witholding from salaries and from the >>> owners' K-1s -- and FUTA and FICA. NY state may have additional >>> rules.
>>> Yet another advantage is that some vendors and customers feel more >>> comfortable dealing with a business entity like XYZ Inc, rather than >>> an individual. Make things cleaner for them. Microsoft got their tit >>> in a wringer some years ago by using individuals as subcontractors. >>> The IRS claimed they were dodging FICA that way. Other corps noticed, >>> some decided they would only do business with consultants or >>> subcontractors that were incorporated, so it was very clear what >>> entity was responsible for FICA, FUTA and W-4 witholding. Some >>> vendors like Grainger don't want to deal with individuals as in >>> retail, but are happy to sell to a bona fide bidness entity.
>>> The disadvantage is that there's another whole set of paperwork at tax >>> time -- FICA, FUTA, quarterly reports and an annual 1120 return.
>> One advantage of being a sole proprietor is that you can hire your kids. >> Because they are your kids, you don't have to worry about child labor >> laws. >> Assuming they are in school full time, you can pay them a pretty good >> chunk >> of money without having to pay taxes on it. Let your kids use the money >> they >> earn to buy their own school clothes, or take the family on vacation. Or >> anything else that the kids may need.
> Hm, can you hire a 5.5 year old and a 9 month old? (for tax purposes, > as they are both good for nothing so far)
Of course. Why do you think there are so many kids in ads? You pay them a modeling fee, then invest their income in a Roth IRA for them.
>"Ignoramus32140" <ignoramus32...@NOSPAM.32140.invalid> wrote in message >news:btqr3.ka0.19.2@news.alt.net... >> On Wed, 04 Oct 2006 20:20:43 GMT, Dave Lyon <lct.produ...@mchsi.com> >> wrote:
>>>> >First off, let me say thanks to everyone for their input. I learned >>>> >that I really dont know a thing. Secondly, it may be more bother than >>>> >its worth for the couple dozen jobs I`ll do in a year. I dont sell any >>>> >products, but Im sure insurance would be a good idea if you weld >>>> >something for somebody and it breaks or whatever. I was just concerned >>>> >with the idea of taking checks from people & municipalities and such. >>>> >Sounds like I should abondon the idea. Are you allowed to make up to a >>>> >certain amount (as shown through checks) before the IRS gets a hold of >>>> >you? ( Im in NY by the way, forgot to mention that before) >>>> > Thanks again guys, >>>> > Craig
>>>> You can do this as an individual, but don't even think about getting >>>> cute with the IRS. Bad trouble! Declare all revenues and take >>>> deductions on schedule C of your 1040.
>>>> An advantage to a sub-S is that you can take deductions greater than >>>> revenues some years (net loss) as long as you show a net profit now >>>> and then -- I think the window is 5 years but I'm no tax advisor. They >>>> can require full disclosure, good recordkeeping and payment of all >>>> taxes due, but they can't mandate biz strategy in terms of investment >>>> vs profit-taking.
>>>> Another advantage is that it just keeps everything nice and tidy so if >>>> you are audited, it's easy to prove everything. You can set up a >>>> checking account and Visa card for the sub-S and run everything thru >>>> that. Let the bank do your bookkeeping and the bank statements be >>>> your documented proof of all financial activity. You can pay yourself >>>> a (taxable) salary. As owner of the biz, it's best to pay as little >>>> salary as is defensible under Bureau of Labor statistics for given >>>> activity as in "welder" or "grade III engineer" or whatever. You'll >>>> still pay taxes on profits via the owners' K-1's, but profits (if >>>> any) are after expenses and deductions. Sub-S corps are not taxed >>>> directly; it all comes from witholding from salaries and from the >>>> owners' K-1s -- and FUTA and FICA. NY state may have additional >>>> rules.
>>>> Yet another advantage is that some vendors and customers feel more >>>> comfortable dealing with a business entity like XYZ Inc, rather than >>>> an individual. Make things cleaner for them. Microsoft got their tit >>>> in a wringer some years ago by using individuals as subcontractors. >>>> The IRS claimed they were dodging FICA that way. Other corps noticed, >>>> some decided they would only do business with consultants or >>>> subcontractors that were incorporated, so it was very clear what >>>> entity was responsible for FICA, FUTA and W-4 witholding. Some >>>> vendors like Grainger don't want to deal with individuals as in >>>> retail, but are happy to sell to a bona fide bidness entity.
>>>> The disadvantage is that there's another whole set of paperwork at tax >>>> time -- FICA, FUTA, quarterly reports and an annual 1120 return.
>>> One advantage of being a sole proprietor is that you can hire your kids. >>> Because they are your kids, you don't have to worry about child labor >>> laws. >>> Assuming they are in school full time, you can pay them a pretty good >>> chunk >>> of money without having to pay taxes on it. Let your kids use the money >>> they >>> earn to buy their own school clothes, or take the family on vacation. Or >>> anything else that the kids may need.
>> Hm, can you hire a 5.5 year old and a 9 month old? (for tax purposes, >> as they are both good for nothing so far)
>Of course. Why do you think there are so many kids in ads? You pay them a >modeling fee, then invest their income in a Roth IRA for them.
Unka George (George McDuffee) ............................. I sincerely believe . . . banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. Thomas Jefferson (1743–1826), U.S. president. Letter, 28 May 1816, to political philosopher and Senator John Taylor
> > > One advantage of being a sole proprietor is that you can hire your kids. > > > Because they are your kids, you don't have to worry about child labor > laws. > > > Assuming they are in school full time, you can pay them a pretty good > chunk > > > of money without having to pay taxes on it. Let your kids use the money > they > > > earn to buy their own school clothes, or take the family on vacation. Or > > > anything else that the kids may need.
> > Hm, can you hire a 5.5 year old and a 9 month old? (for tax purposes, > > as they are both good for nothing so far)
> > i
> My kids started work at 5 years old sweeping the floors and cleaning the > bathrooms. And, yes, they really did come in and sweep the floors.
I hope you gave each a $400 (tax free) safety prize every year ;) Guns, TVs, etc.
monkers wrote: > Sounds like I should abondon the idea. Are you allowed to make up to a > certain amount (as shown through checks) before the IRS gets a hold of > you?
Income is income. The IRS wants to see ALL of it included somewhere in your tax return. Opening a business allows you to list a huge number of things as EXPENSES to offset the income. I deduct business use of part of my home (shop and office). That includes a ton of stuff, mortgage, utilities, property taxes, on and on.
All long distance phone calls, internet service, tools, parts and materials, etc. gets expensed. ( Im in NY by the way, forgot to mention that before) Arrghhh, the taxes must be sky high there! You definitely want to do the business use of home deal. All you need is a FEIN and a legitimate business (ie. not a hobby).
On Wed, 04 Oct 2006 20:33:42 -0500, Jon Elson <el...@pico-systems.com> wrote: > monkers wrote: >> Sounds like I should abondon the idea. Are you allowed to make up to a >> certain amount (as shown through checks) before the IRS gets a hold of >> you? > Income is income. The IRS wants to see ALL of it included somewhere > in your tax return. Opening a business allows you to list a huge number > of things as EXPENSES to offset the income. I deduct business use of > part of my home (shop and office). That includes a ton of stuff, > mortgage, utilities, property taxes, on and on.
> All long distance phone calls, internet service, tools, parts and > materials, etc. gets expensed. > ( Im in NY by the way, forgot to mention that before) > Arrghhh, the taxes must be sky high there! You definitely want to > do the business use of home deal. All you need is a FEIN and a > legitimate business (ie. not a hobby).
And the criteria, I think, is turning a profit.
That means that for "businessmen/hobbyists", as long as they turn some profit, the rest of expenses that are business expenses, can be deducted even though in fact we make them not necessarily for immediate profit.
E.g. if you are in a hobby business of making wrought iron, and also have a hobby of metalworking, and buy, say, a mill, it is very hard for the IRS to argue that the mill is for your fun and not for profit.
> That means that for "businessmen/hobbyists", as long as they > turn some profit, the rest of expenses that are business > expenses, can be deducted even though in fact we make them not > necessarily for immediate profit.
> E.g. if you are in a hobby business of making wrought iron, and also > have a hobby of metalworking, and buy, say, a mill, it is very hard > for the IRS to argue that the mill is for your fun and not for > profit.
He he he! SHHHhhhh! Don't tell anyone you are having FUN doing this stuff!
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