Starting a small business help

[firefighterjosh]

I already do quite a bit of wheeling and dealing but im ready to try the next step.

Right now I just sell used parts, buy beat up toys and fix them to sell. Nothing big maybe make a extra few grand a year.

I want to start selling accessories for other companys for example Hotcams, elka stuff like that. We have zero dealers around here that do that and the ones that do make you pay way too much. You need a business to do this. I'm not going to keep a lot in stock but I would order most.

I also have the opportunity to work on things for the company I work for now on the side. But I need to be a legit business.

Im not looking to quit my day job or make millions, but I want to make a little extra cash and have a fun and busy hobby.

I am concerned though, I don't want to screw up my personal life or income over this.

I know I need the license..not sure where to go but im researching that.
Do I need insurance?
I want to build a shop and use that as my primary building for this. Can I write it off on taxes? If so what happens in 2-3 years if I decide I want to close my business? Can they take my shop? Make me pay back taxes on it?
Would I be better off building the shop with my personal money and renting to myself? Or how would that work? Do I even have to declare a space for my work?

Right now I just work out of my basement and am getting overwelmed with space. I have parts everywhere!
If I build a shop and use it as my business can I still use it as my personal shop?
What if I have a party at my house and someone gets hurt in my shop, can that go back on my business?
Would I have to follow osha requirments?
What kind of program do you use to keep track of taxes?

Also anything else you can think of.

Sorry for the long rant, but I do not have to start my own business but I want to but I don't want to screw up my personal life.

[trailrider894]

Originally posted by firefighterjosh
I already do quite a bit of wheeling and dealing but im ready to try the next step.

Right now I just sell used parts, buy beat up toys and fix them to sell. Nothing big maybe make a extra few grand a year.

I want to start selling accessories for other companys for example Hotcams, elka stuff like that. We have zero dealers around here that do that and the ones that do make you pay way too much. You need a business to do this. I'm not going to keep a lot in stock but I would order most.

I also have the opportunity to work on things for the company I work for now on the side. But I need to be a legit business.

Im not looking to quit my day job or make millions, but I want to make a little extra cash and have a fun and busy hobby.

I am concerned though, I don't want to screw up my personal life or income over this.

I know I need the license..not sure where to go but im researching that.
Do I need insurance?
I want to build a shop and use that as my primary building for this. Can I write it off on taxes? If so what happens in 2-3 years if I decide I want to close my business? Can they take my shop? Make me pay back taxes on it?
Would I be better off building the shop with my personal money and renting to myself? Or how would that work? Do I even have to declare a space for my work?

Right now I just work out of my basement and am getting overwelmed with space. I have parts everywhere!
If I build a shop and use it as my business can I still use it as my personal shop?
What if I have a party at my house and someone gets hurt in my shop, can that go back on my business?
Would I have to follow osha requirments?
What kind of program do you use to keep track of taxes?

Also anything else you can think of.

Sorry for the long rant, but I do not have to start my own business but I want to but I don't want to screw up my personal life.

Here in Missouri, as long as you are not in the city limits you don't need a license, you just need to report all income.

[firefighterjosh]

Originally posted by trailrider894
Here in Missouri, as long as you are not in the city limits you don't need a license, you just need to report all income.

Now that would be awesome as I live in the country but in order for me to sell parts for companys a lot of them ask for you business id information.

[derekhonda]

Your questions are kind of all over the place and not really target specific.

1st and basically only question you need to ask right now, is what all is Elka, Hot cams, ect going to make you have? Are they going to make you have a store front building, or could you put up a pole barn in the back yard to work out of? Do they reccomend that you be insured on your work, or would a security bond (very very cheap) suffice. Would you be considered an 'agent' of elka and could therefore be already insured through them? All your other questions should follow down the road after these are answered.

To follow on down the list, yes your shop could be written off, hopefully you are already writing off part of your house as a "home office" or "in home business" plus all associated mileage to the post office, bank, parts store, pick up/delivery of parts, ect.

Thirdly, when you do register for a business, make sure it is an LLC. You don't want a set of shocks blowing up on a rider and he being injured, and without some sort of protective entity "holding" the company (IE: an LLC) you and your bank account and your house and your truck, etc...would all be on the line for his lawyer. If you decide not to do this, I would strongly recommend just putting an 'umbrella' policy on yourself through your homeowners insurance agent, and this can be done very cheaply.

Sounds to me like you need to get an accountant friend and particularily one with some consultation business and he could guide you through the legalities and best practices of this venture. Good luck, start ups are fun.

[firefighterjosh]

Originally posted by derekhonda
Your questions are kind of all over the place and not really target specific.

1st and basically only question you need to ask right now, is what all is Elka, Hot cams, ect going to make you have? Are they going to make you have a store front building, or could you put up a pole barn in the back yard to work out of? Do they reccomend that you be insured on your work, or would a security bond (very very cheap) suffice. Would you be considered an 'agent' of elka and could therefore be already insured through them? All your other questions should follow down the road after these are answered.

To follow on down the list, yes your shop could be written off, hopefully you are already writing off part of your house as a "home office" or "in home business" plus all associated mileage to the post office, bank, parts store, pick up/delivery of parts, ect.

Thirdly, when you do register for a business, make sure it is an LLC. You don't want a set of shocks blowing up on a rider and he being injured, and without some sort of protective entity "holding" the company (IE: an LLC) you and your bank account and your house and your truck, etc...would all be on the line for his lawyer. If you decide not to do this, I would strongly recommend just putting an 'umbrella' policy on yourself through your homeowners insurance agent, and this can be done very cheaply.

Sounds to me like you need to get an accountant friend and particularily one with some consultation business and he could guide you through the legalities and best practices of this venture. Good luck, start ups are fun.

I was just using Elka as a example of wanting to sell big company items.

For example I wanted to sell these alarm systems for ATV/UTVs. They where pretty sweet and very cost effective for a start up business. I think I paid $50-$75 depending on how many I bought and they retailed for $120. I needed a business license to sell them and couldn't.

I would not be working on the things I wanna sell. Basically I will be selling things giving them to the owner and they can do what they please. I will work on a few things here and there for the company I work for now and friends but I don't want to deal with any john doe.

at least in my area I have had several people wishing there was a dealer that could order them aftermarket stuff at a online prices. Is this possible? I think so depending on the place im selling for.

I don't think a dealer like this could make a ton of money but I think it would be a decent chunk of change for someone doing it on the side.

If I did sign up for lets say Elka and they said you must have "store front" I would just not sell them.

Im more worried what happens if it doesn't work out.

Right now I work out of my basement. My basement is full of parts I have been collecting. I have been kind of saving them at the moment to stock pile. I need to expand to a shop outside of my basement. Between sandy, painting, fumes I think my wife is getting mad:scary:

I was thinking of getting my business license, build a shop and start using it instead of my basement.

Then Im thinking of starting to slowly pick up business by selling Oils such as AMSOIL, MAXIMA ect, Air filters, oil filters ect. Most of these companys will let any john doe sell. Then after I get into it try to start selling bigger items suck as Hyper, OMF, BBKs, PIPEs ect.

Im worried lets say in 2-3 years I get overwhelmed between my day job and this one or I just feel I can't do it. What would the government do to all the items I wrote off? Would they try to take my barn?

Maybe I need to call someone and go over it, im trying to make my questions easier to read lol

[derekhonda]

Ok, I don't have a direct first answer for you, but yes, If you are just going to be selling parts (oils, shocks, air filters, whatever) You are going to need to get your 'registered retail merchants certificate' through the state. This has something to do with charging and collecting sales tax, etc. I wish I knew more, but I don't. That may not be all you are going to need, but it is forsure one thing you ARE going to need.

2nd, depreciable write offs are very hard to explain but let me try:

Everything that is depreciable (by irs standards) has a life expectancy. On buildings it is normally 40 years. On vehicles I think it is 5 years.

To make this simple, if you spend 40 grand out of your pocket to build a pole barn, you would ONLY get a 1,000 deduction each year (40 year schedule). If you used this for years 1, 2, 3, and then decide you don't want to do the business anymore, you just quit claiming your deduction and all is good to go. Now, when you sell your house, there could be a "recapture" period but I do not know how that works.

For instance, we run semi's. They are on a 3 year schedule, if a Semi costs 90 grand, each year we can depreciate 30 grand. After year 3 there is no more depreciation left on that truck. So, if we sell it for 25,000, then there is 25,000 worth of taxes to be paid. If after year 2, we sell it for 30 grand, there is still 30 grand left on the depreciation scale, there would be no taxes paid.

It's difficult, but for a couple thousand dollar business it would be negligible at best and really isnt much to worry about.

[firefighterjosh]

Thanks for the information. You gave me a good idea on what to search for.

So if I buy a 10,000 barn I get back $250 every year?

If I close down my business I just stop claiming that shop? Sounds good to me.

I guess the same goes for electrical

If I guess I spend $1,000 in electrical a year to run my business I get so much of that back a year?

[slightlybent47]

One thing that comes to mind is an LLC.
I think that will protect you as an individual if your company is sued for some reason.
With an LLC they can't sue you, just your company so you wont lose everything you own in a law suite.

[firefighterjosh]

Originally posted by slightlybent47
One thing that comes to mind is an LLC.
I think that will protect you as an individual if your company is sued for some reason.
With an LLC they can't sue you, just your company so you wont lose everything you own in a law suite.

I will defiantly look into that. Seems like the safest way.

I could see it more now. I sell a guy a used part he wrecks 3 months later and blames me:rolleyes:

[derekhonda]

The thing is, You don't get it back, you get a deduction for it. It is really a very complicated system, and an accountant should be contacted as there are a million ways you 'could' do this, but several ways that will be most beneficial.

But pretend you make $40,000 at your regular job. You pay the taxes, automatically through the payroll.

Now you make $10,000 at this little venture. You paid no taxes. So the government slames you at the end of the year with a $3000 tax bill (I am estimating)

What you are trying to do with these deductions, is minimize your tax exposure. Yes, there are probably several things you could write off that you havn't even thought about that is my main reason for being a fan of small business.

$60 cell phone bill, if you use it for work, tax write off.
$Mileage and repairs on truck
$building a pole barn in your back yard.
$electricity would probably be 100% written off, but only if you have a seperate meter on the "business"


So heres what it boils down to

$720 tax write off on cell phone
$500 tax write off on mileage (1000 miles/yr 'business' estimated)
$250 tax write off on 10k Pole Barn
$1000 estimated electricity, water, heat, misc write offs.

So, now that you have countered your $10,000 in extra earnings with about $2500 in deductions, your tax liability is now only $7500. Your taxes would be more like $2200 instead of $3000....But that isn't all it saved you...

Now you got to go back through the fine print, that normal 60 buck cell phone bill, was now picked up by the company. $720 more in your pocket each year. The mileage and repair write off on your truck, company picked up some fuel or put a new set of tires on, money you didn't have to spend, etc. Consult an accountant, it is worth it.

[firefighterjosh]

thanks for all the information...there is a lot more to it then I thought!:eek2:

My wife likes doing accountant stuff and she was going to do that portion for me....well have to get with a accountant and have them help us.

[Lasher]

I contact my accountant a year ago about starting a business. First...get an accountant that you trust to handle the tax issues!

In CT, I formed a LLC company, got my federal tax id and was good to go. This past tax year (my first for the business) I was able to deduct a ton from my personal taxes.

Everything is an expense related to the business. I have a seperate account that only handles the business. If I have to buy something, I put money in that account and use it. Never touch my personal accounts (per accountant's orders).

One thing to keep in mind, I was told. You need to show a profit within a certain number of years. Otherwise you could be on the hook for all the deductions you took during those years. When I questioned my accountant about this, he mentioned you need to show that you are getting income. A business cannot be an expense only deduction. Selling parts and side work are income.

But get an accountant!

[firefighterjosh]

Originally posted by Lasher
I contact my accountant a year ago about starting a business. First...get an accountant that you trust to handle the tax issues!

In CT, I formed a LLC company, got my federal tax id and was good to go. This past tax year (my first for the business) I was able to deduct a ton from my personal taxes.

Everything is an expense related to the business. I have a seperate account that only handles the business. If I have to buy something, I put money in that account and use it. Never touch my personal accounts (per accountant's orders).

One thing to keep in mind, I was told. You need to show a profit within a certain number of years. Otherwise you could be on the hook for all the deductions you took during those years. When I questioned my accountant about this, he mentioned you need to show that you are getting income. A business cannot be an expense only deduction. Selling parts and side work are income.

But get an accountant!

Thanks, how long after you got your business license, made it a LLC ect before you officially opened?

I am wanting to start the paperwork now but am afraid I wont have everything else together for about a year.

[firefighterjosh]

Im also trying to find a program or ways of keep track of the money.

For example

Buy part B for $20
6 months later sell part B for $30
Profit of $10

Is there a program that will help me with his?

Also I would like a program I can log all my other expenses.

Traveled to parts store
$5 gas

[SRH]

its going to be very hard to compete nationally with either elka or hot cams other dealers who are dealer levels ahead of you, and selling alot for small profits

...my other question why get into business without the desire to make money? you gotta be about business to be in business, you cant fall in love with your products etc



honestly i wouldnt go get a llc or go thru any of that....that would be like making some shoes and hoping they fit


build up a local following, order elkas online , add a few bucks for your troubles, there is alot of ppl who will spend more to deal local than hassle finding a deal online

keep it hush hush...once you build it up to where you can see your way through go get your llc , its alot of hassle when your not even sure there is a market for what you want to offer....stock a small trailer start vending at the tracks and offering advice on setups and help new riders start building a following and feel out the market in your area, go talk to some parts unlimited dealers, i pay 15% over cost and dont have to worry about brick and mortar buildings, or 5k worth of product to move every year

[fastrnrik]

I own a business and I have a close friend who owns a local ATV shop so I will throw in my $.02

First of all, you need to see an attorney that specializes in small business, that's familiar with the laws & guidelines in your state/county/city, to guide you through the process. An accountant will help you with the tax & book keeping issues, but a lawyer is the person to help get you started properly. They can help you get set up with all the things needed to get a small business started, such as ficticious name registry, licensing requirements, applying for tax numbers, and insurance requirements. They will also explain to you the differences between setting up your busniess as an LLC, Type "S" Corp, etc and the advantages/disadvantages to each. Every situation is different so having a professional assist you with the process is a good way to avoid any problems that may arise and come back to haunt you later. Sure, you could probably do these things without a lawyer, but to me it's worth a few bucks to have it done correctly and have everything in order.

Second, as many have said, you will need an accountant to help you with your books and taxes. Use a good one. The IRS aint no joke to tangle up with. Also, if you have employees you will need to make sure your payroll is in order as well.

Third, you mentioned building a new building for your shop. I don't know your situation, but something to think about is that you may want to weigh the cost/returns on an investment like that for a start up business. It may be more feasible to rent a small storefront to get started and keep your operating capital for business expenses, then as your business grows you can upgrade to a larger facility or even build your own. Again, I don't know your situation but it's something to consider.

Fourth, most shops deal with parts distributors rather than each individual product manufacturer. Companies like Parts Unlimited, Tucker Rocky, Western Powersports, etc. You may want to consider contacting these companies to see their requirements of getting set up with them. Some have large buy ins and storefront requirements, although with the downturn in the economy I have heard some of this has changed. Regardless, you would need to know their requirements up front. I would also research their warehouse locations in relation to your location so you can see which will be able to service & supply you quickly. Also shipping is a big thing. Find out their shipping charges on big AND small orders. As far as specialty manufactures (you mentioned Elka) you would just have to find the ones you & your customers want and contact them directly to see what they say. For example, my son races mini quads so I had my friend get his shop set up with Motowoz as a dealer so we could buy shocks.

Finally, there's two other pieces of advice I will give you that may save you some headaches.....
Make your friends pay for their stuff. Don't carry anybody. If they order parts- collect their $$$ when you order. If they're your friend they will have no problem with it. I have seen my friend try to be nice to "buddies" and get screwed many times.
The other thing is, even though you said it's a small part time business, plan in advance for growth. What if it grows quickly or blows up? You need to be prepared for that scenario. I am a good example of this- I own a commercial construction company that does roadbuilding & utilities, and when construction in my area took off several years ago, my company exploded. I went from a couple guys to 100 and from doing one job at a time to grossing several million dollars a year (it sure aint like that any more! LOL). I never planned for this type of growth and wasn't prepared for it, which caused me to make several bad business decisions, which in turn caused me lots of stress and cost me lots of money. Just an angle to consider that I think is important.

Sorry for the long reply LOL. Hope some of that help....

[Lasher]

fastrnrik has some good advice along with others.

As for me, setting up the business did not take long at all. I filled out the paperwork and mailed it to the state. Got my business name. Next went to the IRS website and got a federal tax id.

The only thing that took time was waiting for the state (not long, a week or two).

As for tracking software, I did not use any for the first year, but then I did not do a lot of business the first year. But I use excel as my tracking. My accountant liked how I tracked it all and just told me to group them a little different for next year.

[slightlybent47]

I have a friend that bought half of a local ATV shop and dealership. He got with me and wanted to get into the racing seen and sell parts. He worked very hard and I gave him all the contacts and got him in with the org. I race with. He found out the hard way that it’s a very hard market and he has all but given up on that part of the business.

Good luck!