Just Starting Out

[BRTOKC]

Hello everyone. Let me say first that I am a first timer to Blade Forums and think this is a great resource for all the beginning and established knife artists and craftsmen.
My question is what type of business setup, corporation,limited liability corporation, or sole propietorship do you feel is the best for a person who wants to make knifemaking a full time occupation?
Any comments or suggestions will be greatly appreciated.
Thanks in advance, B. Tomberlin

 

[Gus Kalanzis]

Hi B. Welcome to the forums.
In hopes to get more response from makers, I will copy this question to the Shop Talk Forum also.

------------------
" The real art of living is too keep alive the longing in human beings to become greater versions of themselves." Laurens Van der Post.
In memory of James Mattis

 

[lively]

First decide which is more important to you. Being a businessman or an artisan? The question is deeper than it sounds on the surface. For the part-timer the question is mute. For the professional it is all important.

 

[NickWheeler]

lively was stealth with his words. I agree with what he said.

If you want to make knives for the simple intent of making money, I've seen people that have done it...but they are few and far between.

The average knife-maker runs a sole propietorship in which he holds rule. There's something a little funny about thinking of yourself as CEO, VP, Treasurer, Ad exec, and laborer. However, it is also comforting to know that none of these titles need apply. I still chuckle when I get a call asking for the CEO of Wheeler Custom Knives...It was even better when my mom used to say "He's gone to school."

Most of us make knives because we love to take raw materials and then hand someone a finished knife from said materials (just MHO).

If you want to be rich, win the Lotto

Nick

 

[Terry Morris]

I think you also have to consider the possibility of losing money. I'm in the process of setting up a corporation. Not because I plan to make a ton of money, certainly not because I care anything about being a CEO. But if, God forbid, somebody gets hurt with one of my knives, it's just too easy for them to come after me in court, e.g. the gun manufacturers. As a sole proprietorship, they can come after my personal assets. As a corporation or LLC, they can only come after the "corporate" assets. Fine, take my shed and my grinder, but God help you if you try to take anything away from my family.

 

[lively]

It's not so much you have to be one or the other, businessman or artisan, but it's important to define what you want out of being a profession knifemaker. If your intent from the begining is too make a great living at it then you would be well advised to make knives that are aimed at the mainstream of collectors. If your main intent is to have a job where you can explore your artistic expressions in knives then the money becomes secondary. Sure, we all need to make a living, but if your primary interest is to be a working artisan then the collectors isn't the main focus. In other words, will you be making knives for them or for you? Your head or your wallet? An artist will make whatever satifies the soul and crosses thier fingers hoping they will find a market. The business approach would be to make knives that you know will sell. It is an extremely risky business venture if your primary goal is to make knives that are unique with a personal artistic expression. In no way am I saying one is better than the other. It's simply a matter of choices. If you look at which professional knifemakers are doing the best finacially in general terms then you should consider pumping out at least a thousand tactical patterns a year. The professionals who create one of a kind art pieces rarely make 50 knives a year. Art knives are a risky business venture. The artisan doesn't care about the risks. There are a few who have found a middle ground too. Sort of artsy and only moderately risky. The point I'm trying to make is that you will get the most satifacation from your career if you first difine what you expect to get out of it. There are always exceptions to the rule, but very few knifemakers who's primary goal is to work as a unique artisan are rich. Some are rich now but it took years of hard core sacrifices to get there. I look at it as anything you choose is a risk so I might as well make it an E ticket ride. I make knives for me and pray someone else will like them enough to buy them and it has taken quite a few years of hard finacial sacrifices before I was able to make a modest living at it.

 

[ski]

Hi all, I'm just a lurker here and this is my first post, and more to the question of creating a corporation to protect yourself from liability than the question of whether it's appropriate or not for a knife maker. I have a corporation for my internet software business, and I've learned a few things about them. Note: I am NOT a lawyer and this is NOT legal advice!

That said, creating an S-corp or LLC or other does not necessarily protect you from court decisions, fines, or liability. If you are the sole director and share owner, they can still come after you personally. I have had some people advise me that to be more shielded, it sometimes helps to create two corporations, John Doe, Inc., and Knifemaking Business, Inc, where you hold 100% of John Doe, Inc, and John Doe, Inc. as a corporation holds 100% of Knifemaking Business, Inc. Depending on the law in whatever jurisdiction you get sued in, that may or may not help. And I'm not too well versed on that issue, sounds a bit shady to me, but I'm not a lawyer

Thing is to be really properly protected you need corporate insurance, which is more expensive than homeowner's insurance. And if you're worried about product liability, that can get REAL expensive. But if you're just worried about theft and fire, homeowner's may be the best (and cheapest) way to insure yourself.

The flip side is, processing your taxes at the end of the year can be much nicer if you have a corporation. Buy all your equipment through the corporate checking acct and it's easily tax deductible. You can also get tax deductions for internet service etc if you can prove you use it for your business. You can deduct the home office much more easily. Business trips to blade shows are deductible. It basically makes it easier to sort how much money comes in from the business and makes a tax audit less likely and hopefully easier to get through (if you're honest about record-keeping

My advice to you, having gone through this, is to get in touch with a good business CPA in your area and get his opinion. Most CPAs I've dealt with have been pretty well versed in types of corporations and the reasons to get incorporated (or not to). But make sure you need to do it. Maintaining a corporation can sometimes be more trouble than it's worth If you can't find anybody I can give you name and number for the guy I use in Long Island.

-- ski


[This message has been edited by ski (edited 10-06-2000).]

[This message has been edited by ski (edited 10-06-2000).]