Starting a business???

B

Brett Bennett

Joined
Dec 14, 1999
Messages
672
I have been trying to research the advantages of converting my knifemaking hobby into a business. There is so much information available that I thought I would pose the questions here. Since the state already collects my income without my consent, I would like to recoup as much as possible by claiming my expenses (they far exceed any profits) as business deductions. I understand I would be required to file with the County Clerk and that my home would be subject to local zoning laws.
Is this worth the hassle? Anyone willing to share their experience and any horror stories (you can email me and I will assure your privacy)? I do not want the IRS to take my property for failing to "volunteer" my income for redistribution. TIA.

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None are more hopelessly enslaved than those who falsely believe they are free. -Goethe
 
are you going to manufacture or just resell knives...big difference...one thing...the IRS will only let you run a business at a loss for one or two years and then they will put an end to it and make it be a hobby again. they want your funds.....more if possible...re elect the current administration and they will get their wish. Just like Will Rogers used to say "95% of the people in Washington give the other 5% a bad name"

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http://www.mayoknives.com


 
Tom,

Thanks for the advice. I plan on selling the knives I make someday. I am a spare time maker right now, but I expect to at least support my habit within a couple of years. If not, it is no big deal to me. I will still enjoy making knives. I would like to claim some of my expenditures, however.
I have to agree with you about the current debacle in Washington. I do not need their parternalism. I keep track of politics and enjoy political philosophy, however, I refuse to vote on moral grounds.

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None are more hopelessly enslaved than those who falsely believe they are free. -Goethe
 
Kaos, I asked my brother (a tax accountant) the same question awhile back. He said that a business has to turn a profit 2 out of 5 years (or was it 3 out of 5?) or the IRS doesn't consider it a business. The IRS tends to consider things like knifemakking as a hobby and might audit you to make sure you really qualified as a business and weren't just trying to set up a tax dodge.

I decided that the paperwork of a formal business and possibility of an annoying audit were not worth the few hundred bucks I might save by taking a tax deduction.

It boils down to what role knifemaking plays in your life. If it is your full time job, then set it up as a business. If it's just something you do on the side in addition to your regular job, it's probably better to just consider it a hobby, at least for IRS purposes.

Hope this helps.

Carl
 
3 rules you have to follow rigidly. Get an accountant- Get an accountant- get an accountant
IT works. Do not hesitate to get into a home business but seek and use professional help.
Keep good detailed records.
I do nothing without consulting the accountant. Such as when to buy a new computer or machinery to when the vehicle goes into the company name or it's time to expand. Every dime I've paid the accountant has been paid back many times over. Paying taxes is part of life but it makes no sense to pay a dime more than we have to.
 
Thanks CJ. I think it is 3 out of 5. I have been thinking that early tax benefits are probably not worth it in the long run. Besides, I may never go full-time, and who needs the hassle.
And to think I stopped restoring classic cars (at least for now) because it was expensive and time consuming.
biggrin.gif


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None are more hopelessly enslaved than those who falsely believe they are free. -Goethe
 
I like TomW's advice.
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I'd recommend starting with <a href ="http://ftp.fedworld.gov/pub/irs-pdf/p535.pdf">Pub 535.</a> Read the "Not for Profit" section on Page 4.

BTW, I've never heard of the requirement that you have net income for a certain number of years; does anyone know where this is published?

Ryan

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For the wages of sin is death; but the gift of God is eternal life through Jesus Christ our Lord.

Romans 6:23




[This message has been edited by Ryan Meyering (edited 02-21-2000).]
 
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