Fulltime Makers: Fears and Satisfaction

Originally posted by TimWieneke
"Black Crow Forge" - Would a bladesmith typically need to file for a dba to use a name like this? Also, what type of incorporation do you prefer for the knifemaker (llc?) and why?
Tim
Click to expand...

Tim,

I registered my business name with the state of New Hampshire. When I got back into knifemaking, my intent was to only do knifemaking as a side to ornamental ironwork. That's why I invented Black Crow Forge because I envisioned an actual storefront some day. As things would have it, I mostly do knives, and ironwork is a side to that! So I guess to answer your first question: A bladesmith can file for his own name as his registered tradename, i.e. Tim Wieneke dba Time Wieneke.

As far as incorporation goes, most small businesses benefit from incorporating as "sole-proprietor". Each state is different with their laws, so I advise you to go to your state government website and study up on it. Its relatively easy, and there's usually a small fee involved. In NH, a sole-proprietor can have up to 5 people working for him before he has to upgrade to the next higher level of incorporation, but unless you hit the big-time most likely a sole-proprietorship is the best and easiest way to incorporate.

There are many different advantages to incorporating, but the big ones are 1) separation of your personal assets from from company assets for tax reporting. 2) ability to attain a DUNS & Bradstreet rating for creditors. And 3) Tax ID number. You would not believe how much the ability to buy something tax-free will add to your bottom line.

Oh man, I could go on for hours! Heheh! Well I hope some of this is helpful. Hmmm... I just thought of something for a Tip-o-Day...
 
Originally posted by jhiggins
Tim,

There are many different advantages to incorporating, but the big ones are 1) separation of your personal assets from from company assets for tax reporting. 2) ability to attain a DUNS & Bradstreet rating for creditors. And 3) Tax ID number. You would not believe how much the ability to buy something tax-free will add to your bottom line.

Oh man, I could go on for hours! Heheh! Well I hope some of this is helpful. Hmmm... I just thought of something for a Tip-o-Day...
Click to expand...

Here in Maine you just have to get a sales
Tax number from the state.
and pick the name you want when applying.

we can buy tax free as long as the things you are buying will
be resold in your business,
otherwise if you get a visit from the IRS
you will have big problems.

I am a sole proprietorship Business,
and I am also listed with DUN & Bradstreet

Incorporating can be tricky, you pay yourself a
wage, if you take more and don't do it the right way
the guide lines say the state can take you for
embezzlement of your own company,
here it's about $300.00 to incorporate
and your accountant will get paid more because of
the more paper work..

The biggest thing in incorporating, could be the protection from
someone suing you, your personal stuff can't be taken.
this is just a small part of it here..
:(
 
Is it really as simple as if yu incorporate they can't sue you? I know a number of people who have gone down hard, and they were incorporated. Maybe it's just that when you work 24/7 for 20 years, if they take your business, which includes your designs, name etc... what difference does it make. Yu loose the house by paying lawyers during the process...

This was the question that I was sniffing around - liability. If you retire, and have a stream of income, that can be hard for them to strip away from you. Or if your spouse is the main beam of the household. But if you do as someone else here was suggesting, and get your own investment income, my sense is you may think twice about engaging in a business venture where you could be ruined by a lawsuit. You may be no different than someone living on a pension or disability, but they will rip you apart, and there are people looking to do it. If you areally have the ability to invest your way to a lifetime income, it seems less attractive to blow it all on a non-business during retirement. This isn't just an argument point, and I sure don't have a lifetime income, but liability seems the bigger problem right now. If one waits until everything is lined up, and one can afford to go for it, it starts to look crazy to accept the risk when you are basicaly set for life as it is.
 
Protactical,
I'm not sure how to incorporate a knifemaking business effectively, but I do know some about incorporating the investments on the side from what I have read and learned. You set up a Nevada corporation to control your investment assets. No one can look them up legally - from what I understand, even the Feds are barred by Nevada state law from finding out who owns the corporation controlling such and such investments... That's one way to cover thine rear.

Another way is to get an umbrella policy (make sure you're knifemaking is covered in the policy).... That spreads liablity some....

Also, you can put everything in the spouse's name with you set up as a controller of it, but not an owner. That way you "own" nothing, while controlling it. Lot's of ways to protect yourself. Get the Robert Kiyosaki book on incorporating. The writer is much more qualified than I on the topic and it explains quite a bit in common sense terms much better than I can.

Tim
 
Incorporation is too complicated an issue to really get into on a single thread. Further, each state is a little different.

In a nutshell, incorporating will protect you from most liability if the business is handled properly. The president will always have a certain amount of personal exposure in matter like taxes. The long and short of it is to avoid co mingling personal funds with the business and vice versa

Now, the bad part For most knife makers AKA small business owners(one or two people)
The Corporation must pay taxes on the money it makes. You are then paid by the Corporation and must pay taxes.

Now before everyone jumps in and starts telling me about the different types of corporations that minimize tax payments, you are back into the feel good types of corporations that reduce the Corporate veil liability wise.

What I just said is ....damned if you do....and....damned if you don't. Get with a local tax lawyer and discuss your business with him!
 
Don't generalize about incorporation - it is regulated by each state, and the laws differ. In addition, Federal tax law and some state law may create differences. For example, California has not fully conformed to Federal tax law changes, so there are differences, including depreciation.

There are darn few tax advantages to incorporation in many states. The primary advantages is limiting your personal legal liability. If you don't have a big asset base personally, that is not a major issue.

Almost all of the "old" tax advantages to incorporation (i.e. pension plan rules) have be equalized under Federal law.

In terms of law suits, anyone who sues your corporation will attempt to "pierce the corporate vail." In other words, go after you personally if they can. If you are not careful with your corporation (i.e. you dip into the till whenever there is some extra money) it can be relatively easy to nail you personally.

Are you good at details? If not, don't incorporate. The first thing the IRS asks for in any corporate audit is your corporate minutes.

The big incentive to incorporate for many business died in 1996 through 1998 with changes in the Federal Tax Code.

Nevada corporations don't work in many states because of "unitary" tax laws. You have to report your home state income in your home state regardless of where you incorporate.

keep in mind that the IRS special agents who investigate tax fraud carry guns and badges and only make felony busts.

Get good legal advice before you incorporate. You would not perform major surgery on yourself - don't think you are qualified to practice law or tax accounting unless you are qualified.

I think this is my longest post ever - if I bore you, I appologize.
 
My $0.000002 worth.

Make sure that you discuss with your significant other all aspects (financial, time commitments, travel,...) of what you are planning to do before you start to ensure that they understand what the two of you are committing to. Project what the best and worst case scenarios would be and make sure that the outcomes are acceptable to both of you and or you have a way to recover from any reversals (see post by Robert Hankins/Blinker). It is not a guarantee that you will make it if you have their support but it will be much, much more difficult if you do not (seen that too). I do not see this as an excuse for fear of failure but one should not be setting oneself up for near certain failure (or at least a lot of strife at home).

It can be seen from what J. and Tess Neilsen each wrote, that they support each other 110%. I am sure that their mutual-support is a significant factor contributing to the very high quality of their work and how quickly they have advanced. Bruce Bump and Bruce Evans are clearly forging ahead (I couldn't resist) due in part to the support that they get from their wives.

Many self employed people, who do not have government-recognized profesional organizations to join have similar problems with health and business insurance, taxes and incorporation. I had seen the same type of discussions on a forum for technical writers. They end up using the same solutions discussed in this thread.

Phil
 
Originally posted by Practical Use
Don't generalize about incorporation - it is regulated by each state, and the laws differ...

There are darn few tax advantages to incorporation in many states...

The primary advantages is limiting your personal legal liability...
Click to expand...

Well said. This is why I suggested the Sole Proprietorship level of incorporation. Unless you are a mid-tech maker (with contratcts), or doing business with big firms and need lots of employees, sole-proprietorship is relatively the same in all states in the basic benefits to the small business owner.

Speaking about "losing your shirt" and all that, I just want to say this. If anyone wants to sue you no matter how hard you try, they are going to get you. Incorporating only helps. Its not a black or white thing. A high-priced fancy lawyer can shred any defense you have. Thankfully, most custom knifemakers have a rather mellow existence. We don't gather the rabid clientele that the world firearms suffer.
 
Now before we get all legal and scary about the feds here let's step back and read my original post. I was just presenting a few incorporating ideas for protecting the "side" assets. At no time did I recommend incorporating a custom knifemaking business. It also seems counterintuitive to me to incorporate a business where you as the sole creator of the product will likely be named a codefendant should a lawsuit against you arise. Frankly, I can't personally project making enough money at knifemaking to justify the expense and hassle of incorporating a knifemaking business. Some companies may - more power to them.

However, with my side investing it is another matter entirely and I can fully justify incorporating it and paying an attorney the yearly fee to incorporate it, track mintues, keep records sheets, etc... I am lousy at the legal side of real estate, so when I purchased my most recent property I hired the best real estate attorney I know and it was worth every dime. When the time comes to incorporate (I don't own enough yet to justify it - I'm just getting started) I will hire the best attorney I know to cover all the legalese. I presented what information I knew with a full disclosure that I was no expert at the subject and recommended further research to anyone interested in it.

Now, I'm not attacking everyone who replied on this topic, but I don't get it what's with the pessimism in here over starting a business or investing. How many people do you think told Mr. Schlossberg that investing in another forum talking about knives would be a waste of money and time? There were ones out there already, you'll never be able to financially support it, people will get tired of it, yada yada yada.... His optimism payed off for him and a whole generation of blade collectors, makers, and fanatics.

We live in the best country on the planet to start and own a business. This country was started by entrepeneurs. How many other countries have legal mechanisms in place that allow you to reduce your liability and legally avoid maximum taxation? It's great here. If you don't want to do it, that's fine. If you have self-doubt, that's fine too (at least you know where to start). But to extend your pessimism onto others and give them nothing but doubt is unethical and anti-American.

Tim
 
Now, I'm not attacking everyone who replied on this topic, but I don't get it what's with the pessimism in here over starting a business or investing. How many people do you think told Mr. Schlossberg that investing in another forum talking about knives would be a waste of money and time? There were ones out there already, you'll never be able to

Well Tim, it's not pessimism, rather caution. Mark has a family and since it's a fact that most small business bite the big one within the first year. it only makes sense to make the commitment using your head instead of just jumping in.

Knife making is not an easy way to make a living as most of the Pro's here will admit. You can go to Walmart and buy a usable knife for about thirty bucks. To be able to sell custom knives you have to offer something that they can't get with the Wallyworld knife. Most of the more successful makers offer art as their wedge into the knife buying public. They but because it's pretty or unusual or just plain wicked. Finding people who buy just because they want the best quality is a little harder.

You are a construction estimator so the following example should make some impression.

Many very talented carpenters helpers work for a carpenter for a year or so. Here in Va. they can open a contracting business with no state license if the contracts are under 1500.00 each. A class B contractors license is just a matter of paying 45 bucks or so (I'm sure it's gone up to 75.00 since I was a Class A, just don't know how much)
Anyway...many of them decide they know enough to go in business. They almost always fail. A few more years and more experience would have made all the difference.

I'm not saying that Mark is not ready. I just suggested he take a long look before taking the jump. Any other answer would be irresponsible.
 
Clap Clap Clap:) You will do well in what you endeavor. I guess you either have the drive to make things happen or not. I appreciate everyone sharing the collective thought on this subject. That's what make this place so great. If one person gets something from these talks then this forum is serving a great end. lets keep it going.

Lets hit on some of the good points. like deciding.....hmmmm what kind of object of cuttiness does my heart desire to create tonight?.....and then stroll on out to the smithy and do just that.That in itself is what it's all about for me. I'd just like to be able to do more of it:D

Mark
 
Just a few more comments and encouragement and I'll quit this topic since it's starting to really go off-topic.

"Well Tim, it's not pessimism, rather caution. Mark has a family and since it's a fact that most small business bite the big one within the first year." I know a few self-made millinaires, but I have yet to personally know one who didn't have a family when he started his small business. It seems to me that having a family does wonderful things for one's determination and focus. Having a wife has certainly helped me focus. I also have yet to know a self-made millionaire who hasn't failed at something....

"it only makes sense to make the commitment using your head instead of just jumping in." True, but what about your heart? When do you stop overthinking where you want to be and take the courage to start moving there.

"Knife making is not an easy way to make a living as most of the Pro's here will admit." When you find an easy way, make sure you don't hold out on us. :-) Sorry - had to be a little sarcastic there. ;) Nothing's easy. If it is, whatever you doing can't be very fulfilling. I spent 3 hours every night for 2 months finding my first real estate investment. No one payed me for that time and I loved every minute of it.

"Most of the more successful makers offer art as their wedge into the knife buying public." There are other ways.

"Finding people who buy just because they want the best quality is a little harder." Busse, Reeve and Goddard did it. Why can't someone else?

"Anyway...many of them decide they know enough to go in business. They almost always fail." Almost.... :) What a great country where you can almost always fail, yet still suceed if you really want it.

"I just suggested he take a long look before taking the jump. Any other answer would be irresponsible." I can't speak for Mark, but I think he is taking the look and taking the risk to bring up this topic that I've seen people on here dance around before, but never really bring out in the open. BTW - you're less likely to fall if you take steps, not jumps. But if you don't take a step, you won't go anywhere.

Tim

P.S. I make mention of self-made millionaires not to suggest that you have to be a millionaire to be happy or successfull but only to point out traits of these people I know that are happy and successful. They just had that goal and started w/ nothing.
 
I to some extent, as usual, kicked off the pesimism train. I'm not actualy pesimistic, my point is twofold, though only partly expressed.

The first part is the issue of whether it makes sense to wait until you are well settled and cared for on the basis of private assets, to then start a knifemaking business. You have potential for near zero paiback on one side, combined with risk to substantial assets.

Second,I get asked to teach seminars on various things, mostly woodworking related, and I had to stop because of the liability. I really don't have the profile of a lot of folks I have taken seminars with, who basicaly aren't worth the trouble of sewing, or are employees of the presenter. I think this is a real issue. It's a risk reward issue. There are other ways of participating in both craft, and the broader picture, that may make more sense if you live off a pot of gold. Again I'm not talking about being wealthy, just being based on easily attacked assets.

I found the responses so far very interesting.
 
Well I can stop the pessimism train dead on the tracks! There is no feeling on this big blue marble better than working for yourself!

Well before the age of Christ, men worked for themselves or for the betterment of whatever collective or clan they belonged. It wasn't until slavery started becoming into vogue did the idea of someone else working for you, or vice-versa, come into play. Before that, there really was no currency and the idea of wealth was soley measured by a man's deeds and what he did to enrich his life and the live's of others around him. The very thought of owning LAND was never heard of. The land belonged to everyone.

Then centuries later, with the advent of the Industrial Revolution, men were forced off the farms and into the cities to work for other men. We were subject to the will of other men. We had to settle for what THEY decided we were worth, and Brother, that wasn't much.

Now, in the the 21st century we still have to work for a living, most of us work for someone else. We are still subject to what "they" think we are worth, and we still find ourselves "settling for" less than we want.

So therefore I say there is nothing finer than holding that beautiful piece of art in your hands and cherishing the fact you made it yourself. To wake every day with a fresh new idea and to have the means to act upon that idea... to transform that steel and wood and bone into a useful tool that will outlive you. Nothing finer.

Great men knew this feeling too. Most were outcast for their beliefs, and only after death did their art become realized as pertinent and meaningful.

Rejoice in your craft, my brothers. Work it for all its worth, because in time we too become dust, and our work will be the only evidence that we were ever here at all.
 
I have been a fulltime blacksmith for many years now. About 65% of my income is now from knives, but I still do the blacksmithing. I couldn’t survive off knife making alone. I have found this to be the only answer for me. Figure out other things to supplement your income.

Bulldog
 
I have witnessed some very significant events in the past six months, nothing new, but the kind of events that put life in perspective.

We only have two things to be thankful for, here and now. That is it, nothing else matters.
We can live lives of quiet desperation or actually live the life we have.

A good friend asked me to write a book, a book about man and nature, ranch, hunting and the simple things that many don't see. He offered to edit and publish if I would supply the material. I have been very fortunate to be able to share time with some outstanding animals, including humans. If I don't tell their stories they will be lost. I have been working on that book constantly. Loving every moment of it.

About 1/3rd of the way into the book a neighbor walked to my shop about 3:00am. It was a good snow storm, he was checking some cows and droped the front wheels of his brand new 3/4 Ford Diesel pickup through the ice on a snow covered slue. We took my pickup and drove about 5 miles to where his was stuck. My pickup did not have the traction to pull his wheels out of the ice. Using a handyman jack he lifted one side up while I jammed tree limbs under the wheel. The bumper brace on the pickup broke propelling the top of the jack about 1 1/2 inches into the ice. Less that one second before the wreck my head was there. The way it was all that happened was my hat has a new crease in it.

His face was shite, he kept asking if I was OK, he was about to cry, shaking and actually going into shock. It took a while for me to realize how close it was. Later all I could think about was how many stories would have been lost if that jack would have hit me.

I have been working much harder on the book. Here and now, doing what you believe in is what life is for, anything else is prostitution.

It was mentioned that book royalities are an economic benefit. I did not write one article or one book for the cash. I write to share thoughts about knives and thie human companions. The calls I receive from readers who have been touched by some of my thoughts are worth much more than any financial rewards. Last week a man called about my article on Heroes, he had just lost a son. We both cried while we talked. Sometimes the calls are with joy, others with sorrow or remembering grandfathers knife. To me life is for honest sharing, this is the reward.

If you have any doubts that knife making is your course in life, find something that means more to you than anything else and go for it. If it is cash fine, that is your choice. From my childhood I have always followed my dreams, some times have been tough, very tough, but all have been for the better.
 
Ed Fowler, Your writing always touches me. Im thankful the jack handle missed you. I am a knifemaker that has greatly been influenced by you and that kind heart of yours. What will the title of the book be?
 
Thanks Bruce: I appreciate your thoughts. The name of the book will come last, at this time I have no ideas.

J and Tess, famlies and knives have shared time since man became man and probably before. I saluute you and pray that you and others who truly share their lives can keep it together.
 
I'm still only a part timer, but I'm that because I really like making knives. If I can go full time and still *LIKE* making knives, then that's what I'll do. I figure I won't know until I get there. So far, though, I don't get much time to do it. I have a part time 'day' job, and I take care of my kids full time. They're a bit young to work as strikers, but I'll get them there. I suppose I could get daycare for the kids, and go full time, but I'd miss time with them if I did that, so I guess my full time days are still to come.
I'm betting that it will be worth the wait, though.

Ed, glad to hear that you're writing another book. Can't wait to read it.
 
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