Help, starting a business

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RonInSpringTX

Member
Joined
Nov 12, 2007
Messages
274
Location
Spring, TX.
Ok, I guess I'll get legal. Wondering if anyone on here has a link from this site or knows the basics, best methods, tips, to start a business. I know I have to go to the county courthouse and get a D.B.A. I've already got one in mind "Ron's Cool Crafts". I know they'll assign me a tax i.d.# & register my company name. My major concerns are the tax process itself, whether I should add tax to the item/include the tax in the selling price, and how often do I need to square up with the IRS. I'm in Texas, we don't have a state tax, just federal. I know, I think, I get to write off just about everything in my shop, equipment, supplies, etc. Correct me if I'm wrong, please!! Can I deduct this stuff just on the first IRS tax day (Apr.15) or may it be deducted every year? Is there a self-employment tax that I pay quarterly/annually?? These are just a few of the hundreds of questions I have. Any info, links, tips you have I'd love to hear them!!!
Thanks dudes & dudettes!!:)
later
Ronnie in Spring, TX
 
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Ron,
Here's a few websites that can help give information concerning your questions...

http://www.irs.gov/businesses/small/article/0,,id=110417,00.html

http://www.irs.gov/businesses/small/article/0,,id=115045,00.html

http://www.irs.gov/businesses/small/article/0,,id=109807,00.html

Here's State of Texas sites I find helpful.....

http://www.window.state.tx.us/taxpermit/

http://ecpa.cpa.state.tx.us/taxrates/RateCalc.jsp

Iuse an accountant to file my taxes each year. Saves me the worry of doing it correctly.

Let's discuss some of the aspects of business.

You can deduct your tools, supplies etc. I look at the specific item to make a determination as to how I report it to my accountant. If the item purchased is low value and will be consumed over a period of time, I'll expense it within the same business year. Chishels, drill bits, etc fall into this category. Items that can have a long-term use and/or usable over a period of years can be depreciated. Major tools such as saws, lathes, etc will be accounted for as na asset and then depreciated according a schedule.

You'll probably setup your business as a sole proprietorship meaning you are the only owner. This the menas you'll file a tax schedule with your normal 1040 statement each year. Depending on your sales, you may need to file an estimated income tax payment quarterly to keep yourself out of trouble with taxes and penalties for underpayment of taxes.

I'm not a lawyer or an accountant, but I do have a heavy exposure to the accounting world in my daily job.

I would be happy to talk to you about setting up in Texas as I live in Temple. PM me if you want me to contact you.

Rick Beckham
 
Legal requirements vary with state and jurisdiction. This forum is the last place to come for such serious advice. If you don't know what to do, hire a lawyer to stay out of trouble. A real 'business' as opposed to a hobby sideline is an investment. Sound legal advice is part of that investment. Good luck.
 
Originally posted by Rifleman1776

... This forum is the last place to come for such serious advice.
Click to expand...
I disagree with this comment, this forum is a perfect place to get information on starting a business selling pens! It sure beats finding a lawer who will charge for telling you things you can find out here for free. I doubt Ron will take this beyond what many of us do... making pens in the garage/shop then selling them via the internet or local craft shows.

Ron, Rick gave you some good links to visit. When I decided to turn my hobby into a business last year I did two things.

1. I visited the local state comptroller of public accounts office where in one visit I:
A. Established my business name
B. Got a tax ID number
C. Obtained a list showing the tax rates of various areas of Texas.
D. Sat down with a very nice person who walked me through the paperwork I was going to need to fill out quarterly to pay the sales taxes I already collected when I sold my pens.

2. I started keeping all receipts for supplies and tools pertaining to my pen business so I could:
A. File a Schedule C "Profit or loss from a business" with my tax return.
B. Determine which tools I wanted to depreciate over 5 or 7 years.

It's really quite simple and doesn't require a lawer or accountant and in my opinion unless you are setting up a physical store or doing business travelling around the country. At the level most of us will be selling pens, if you can do your own taxes, you can do your business taxes as well.

I keep track of what pens I sell during the year and the state sends me a form to fill in quarterly where I list my sales figures and taxes collected and send in a check.

Also remember that you don't pay sales tax on anything that goes into a pen that you sell so set up a tax free account with your local Rocklers and Woodcraft.
 
Tex, there is a big difference between advice on how to sell pens and starting a business. I see several huge flaws in your pretend-lawyer advice. Doing what you suggest could get a person into huge trouble with both state and Fed. tax collectors.
BTW, I have a pre-paid legal plan. Pick up phone for legal consultation anytime and many other services at no extra cost. Under $30.00 a month.
Do you look good in stripes?
 
Originally posted by Rifleman1776

Tex, there is a big difference between advice on how to sell pens and starting a business. I see several huge flaws in your pretend-lawyer advice. Doing what you suggest could get a person into huge trouble with both state and Fed. tax collectors.
BTW, I have a pre-paid legal plan. Pick up phone for legal consultation anytime and many other services at no extra cost. Under $30.00 a month.
Do you look good in stripes?
Click to expand...
Frank what a bunch of nonsense! I wasn't giving "pretend-lawyer" advice on selling pens, and I think your analogy is very childish and un-called for! Do you get this way everytime someone disagrees with anything you say?

In case you missed it, Ron's big concern was... "My major concerns are the tax process itself" which is what I addressed and it doesn't take a lawyer to figure that out, well, at least for some people!

I was simply telling Ron what I do to LEGALLY collect and report sales taxes on my pen sales in the state of Texas AND to report the income from those sales to the IRS on my yearly federal tax return.

It IS really that simple but I can see where you might need the $30 a month help!
 
Ronnie, I would agree with George and follow his steps. It can seem overwhelming staring a business at first, but it's really pretty simple for the most part, especially for the level that most of us are at. It depends on the state but most of the work can be done online. The links Rick put up are where you should look. For mine, I didn't leave the house to set my little business up. Couple suggestions, get Quickbooks on Ebay, it's much cheaper than in the store and it's a vey user friendly program so you can keep up with all of your business activities and run reports at year end. Also, make sure you file your sales/use tax quarterly even if you don't have to pay any, otherwise you get hit with a $50 penalty. Again, all of that can be done online.
 
You can get income tax information from a lot of places. The IRS website, as pointed out, has a ton of info. But for sales tax, the best advice I can give you is talk to someone who knows about the situation in YOUR state. They vary from state to state. Your local Department of Revenue or Taxation or whatever it's called in your area, is the perfect place to get accurate tax information for free. Sales tax, in some states is filed monthly not quarterly if you pay over a certain level. A couple of nice pens a month could put you over that limit.
 
Talk to an accountant or bookkeeper. This will impact your income taxes and they always know best which way to approach this. There is lots of good information in this thread, but there is always room for advice from a professional.
 
Ronnie...lots of good advice here, especially from Rick and George. When I started my business, I went to the state comptrollers branch here in Dallas to get a tax ID number and other stuff, and they gave me a lot of info about what to do and when to do it. It was all very helpful and easy to understand. Then I opened a bank account solely for the business and everything's been great...so far (this August will be two years). The next step for me is to figure out the depreciation of equipment and how to do that. I'm going to read all these links that have been posted. Good luck!
 
Ron,

If your sales will exceed a million dollars annually, follow Frank's advice -- you are among those who are carefully viewed (read most frequently audited) by the IRS.

If your sales will be under $20,000 per year, George's advice is probably "good enough", since IRS sees you as "chicken feed" and is much LESS LIKELY to audit.
 
Accountants usually save you more money than they cost, if they do not you probably don't need one. attorneys can do the same thing. you can worry about paying 200 dollars an hour and then realize they can give you a lot of peace of mind for 15 minutes worth of work.
I would normally say don't go overboard with concern but I have heard real horror stories about the health department, department of labor and others stepping in. It stinks when they start telling you you have to completely upgrade your shop with dust collectors, ventilation, guards, signs, and what not.
 
You received some good advice from some folks, but let me offer my two cents - as background, I am a CPA in Texas and work for a large company, and I have also formed my own S-Corporation in Texas.

In addition to getting an assumed name license from the state (also known as a "DBA" form), you will also need to get a DBA form completed in Harris County (I believe Spring is in Harris county) - every agency wants your piece of tax revenue. That DBA form should be good for about 10 years in Harris county.

While the state of Texas will give you an identification number so you can pay your sales taxes they also want you to fill out the franchise tax form, which was revised last year into what is now called the margin tax; the margin tax is effectively an income tax based on revenues - unless you're making about $300,000 in sales you won't have to pay it, but you will still have to fill out the form. I caution you on NOT filling it out, as they will really slap you hard for not completing the form and penalize you monetarily as well as suspend your business license in the state.

Assuming you wish to incorporate (although LLC or LLP route is the same), you will need to apply for a corporate license and be chartered in the state of Texas. The last time I looked, that cost $315.00 as a filing fee.

You should also fill out a request for a taxpayer identification number with the IRS; you can get that from www.irs.gov - like one of the previous posters mentioned above, you can use this number to be sales tax exempt at your supply stores for items you will be crafting or selling, but you will still have to pay taxes on tools you use in your shop.

Speaking of tools, yes, you can run through the cost of your tools on your tax return, but if you consistently show a loss the IRS will "pierce the veil" and determine this is a hobby vs. a true business and disallow your deductions. In other words, and as in all business ventures, try to make a profit. It is, however, a great way to purchase great tools at a discount (sales price deducted from your tax return gives you a discount at your top tax bracket).

This is all pretty high level advice, and reading over this I have assumed you will know how to look. If you're serious about this venture, and you have any questions, I would recommend spending a couple of hundred bucks with a tax accountant to help you. If you have other questions, please feel free to PM me.

Good luck!

Michael
 
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