[bcnc]

Not sure if this is the right place to post this but here it is. I have some metal working equipment in my garage and do some playing around as a hobbie. My question is: Is it worth starting a small part time business,or is it not worth the hassal of dealng with the taxes, Etc? I have a few people interested in having some work done and I want it to be all legal like if I were to do work for them.
Thank You

[jmsrbrt]

We have a part time metal art business since I'll be fully employed for the next two years. All of my business has been 'word of mouth', although recently we have attended one motorcycle rally, and one craft show, got an Internet presence and even set on the side of the road two times. Business was slow to start, but since I was working anyway, that was fine with me (did my cutting on the weekends).

Well it's grown to the point where I'm either referring business to my competitors, or refusing work. Once I retire, I'll rethink that, but ultimately, my goal is to make just enough money to supplement my other earnings...and take trips. Husband/wife business with no desire to hire help.

As far as taxes and the government goes, it's not all that complicated, or time consuming, and there is even the advantage of having a small side business, with your available tax write-offs.

Bottom line...I'm happy and glad I got into this line of work.

[raynjer]

I agree with jmrsbrt that there are some definite benefits to starting a part time business. One of the biggest advantages is the additional tax benefits that you will be able to write off. You already have equipment, so if you can make a few dollars from something that you enjoy doing, that much better. Yes it is additional work regarding paperwork, but that can be manageable. For myself, I made up an Excel spreadsheet that totals all associated costs for business and home which separates the actual numbers that you can use for tax purposes. It's perfect for a home based business and saves the cost of an accountant and bookkeeper (sorry bookkeeprs!)

[orizaba]

Its working out great for me. I bought the equipment to use for my own engine work. Lately I've had to put my projects aside to fill the orders and all the equipment is now a tax deduction.

[raynjer]

Glad to hear that this is working out for you - another small business success story?

Engine work eh? A good friend of mine does custom engine work also.
I did his website - check it out.
http://www.LeitchPerformanceEngines.com

Best of luck to you & Merry Christmas to all!

[orizaba]

Thanks
I started out to build a better cylinder head for a briggs OHV race engine. Who knew it would turn into a part time job.
www.mikeclementsracing.com/

Merry Christmas
Matt

[harryn]

Part time is a good way to have a hobby / small business get going. My only suggestion is to work your way toward having a somewhat special product or service as opposed to being entirely general purpose.

It takes a lot of setups and tooling to do ANYTHING, while a more targeted approach will eventually help your efficiency and simplifiy your life.

[orizaba]

Part time is a good way to have a hobbie / small business get going. My only suggestion is to work your way toward having a somewhat special product or service as opposed to being entirely general purpose.

It takes a lot of setups and tooling to do ANYTHING, while a more targeted approach will eventually help your efficiency and simplifiy your life.

Tell me about it. I have built more tools than parts.....so far...

[harryn]

I didn't notice if you mentioned if your equipment is automated or mostly manual. I don't claim any great machinery skills, but my brother was trained as a machinist and has a manual bridgeport at home, along with some other related items and lots of tooling. (he does not work as a machinist for many years)

The thing I noticed watching him work is that while his results are very good, it seems to take about 4 hours of goofing around to do anything useful.

In his case, this includes digging his way back to the mill in his shed, doing all the testing he likes to do, etc, but the point is the same.

The first 4 hours are largely lost to "getting ready" and perhaps making "the first one". At that point, making 10 is only another 1 hour of work.

The items I am interested in are pretty simple, but it seems to take a lot more tooling for him to do the same job on his manual system as an automatic / cnc system.

I guess the point is, if your metal working tools are not cnc driven, then converting them should be high on your list if you are at all serious about this as a business.

[orizaba]

Both are cnc...sort of.
The mill I use everyday is 1998 HH Roberts bed mill with a retrofit Anilam 3300mk, with auto oil and coolent. It can handle about a 1MB program.

The other mill is a YCM supermax-40 knee mill with a Bandit 2 controller. I typically only use it for facing and drilling operations. I have to write the Gcode by hand so I only do the simple things with this one.

I know what you mean about the set up time. It takes all day to set up and build one part, but I can build 4 in 2 days.

[High Seas]

Here's a quick question (maybe)
I've been a small (hobby) business for a few years. Small money - but pays most of its bills. We are near to launching a single product line that will keep us on a "focused" business - as suggested earlier. Tooling and set up will be consistent.

Now the question(s): We want to migrate from DBA (doing business as) under my name to a LLC. Sure there are simple ways to do it Legal Zoom etc - any favorites? Any to stay away from?
Any idea how tax liability changes from one year to next when you change the name?
Thanks in advance Guys!
Cheers Jim

[Geof]

....Any idea how tax liability changes from one year to next when you change the name?....

It depends on what jurisdiction you fall under; your ID suggests you are mobile.

Very likely what you will find it that when you transfer business assets from a Sole Proprietorship to a Limited Liability Company the tax people take the view that you have 'sold' them to the LLC. This means that you, the Sole Proprietor, have to include this theoretical income in your personal income for tax purposes in the year of the transition.

You have to be careful how you value the proprietorship because of course if you value it high you finish up paying more tax, but if you value it low the tax people may come back and give it an imputed value which is way higher than is realistic.

If you own some valuable machines or have designs that have a future value you may need to consult with a tax advisor to make sure you do things correctly. Sometimes it is best for you personally to retain ownership of these things and lease or license them to the LLC.

At the very least do the transition at the beginning of a tax year so the transfer value does not add onto a full year's income from the proprietorship.

[mc-motorsports]

Just do it! You have nothing to lose but money...

Depending on your degree of commitment, you'll want to make an educated decision about sole proprietor, LLC or INC. I advise talking to a lawyer. There are a lot of factors that you probably don't want to discuss here, and probably shouldn't discuss here. LLC and INC can cover your ass in a lot of ways. Sole Proprietor is much more lienent on quaterly taxes, tax write-offs ect, but leaves the most personal responsibility... To where as, in my lawyers words, "You should INC, if for nothing else, if you get sued or run out of cash, you just bankrupt the business and it doesn't effect you personally, nothing compared to being sole proprietor. Stay away from partners and cover your butt... Every client starts off saying 'I didn't think it would happen to me' and I can tell you some sob stories" <=== decent advice! He's actually a corperate lidigation attorney so he's seen it all.

Either way, making your business legal and paying taxes is going to cost you money in the long run, don't let anyone BS you about that. Sure, tax benefits are great for small business owners, but I still have to pay every year! But you will probably find at the end of the day your paying a lower precentage than if you were working for an employer and your doing it legally, to where as running a business under the table better be cash only! I've never heard of the IRS fingerprint testing cash, but you'll have hell to pay if you were to get caught, the IRS is worse than the damn mafia, they do what ever they want and there is nothing you can do! So yes, start your business, pay your taxes and enjoy the misery of self employment, the novelty wears off fast! (it's not that bad... better than digging a ditch and better than working for someone else)
MC

[mc-motorsports]

Here's a quick question (maybe)
I've been a small (hobby) business for a few years. Small money - but pays most of its bills. We are near to launching a single product line that will keep us on a "focused" business - as suggested earlier. Tooling and set up will be consistent.

Now the question(s): We want to migrate from DBA (doing business as) under my name to a LLC. Sure there are simple ways to do it Legal Zoom etc - any favorites? Any to stay away from?
Any idea how tax liability changes from one year to next when you change the name?
Thanks in advance Guys!
Cheers Jim

My lawyer said "just goto this website and get these forms and do this and that, $150 to do it yourself! Easy as that. No need to pay me $600." Legal Zoom would be easier, probably $350 and they walk you through it. I almost used them to file a trademark, kinda wished I did now... One mistake on the app and it's become a total PITA! And cost me more money too!

[Geof]

.....The thing I noticed watching him work is that while his results are very good, it seems to take about 4 hours of goofing around to do anything useful.....

He is just an amateur; a really good machinist can goof around for forty hours without doing anything useful. The skill lies in making it appear all the goofing is necessary.

[Mariss Freimanis]

OK, I'll be the jerk here. Business is all about having a focused and intense attention on what what you plan to do. You cannot hope to succeed unless you do; it's not for laid-back people. 'bcnc' posted his question Dec 8 and a lot of people replied. 'bcnc' hasn't bother to reply since then. Not to say 'thank you', 'that's helpful' or 'I need to know more'.

My advice to 'bcnc' is: Don't bother, don't go into business; you don't have the right attitude. You will only lose money if you do. Business is people-skills besides your knowledge. No people-skills means continue to work for someone else who has them because you'll get killed otherwise. People-skills means you thank the people that try to help you, acknowledge those whose help was useful and generally put yourself out to make people feel good about you.

The secret to a successful business is a 4-link chain. Any link that's weak will break and you will be left holding nothing:

1) Have a good product: Better yet, have a uniquely good product. Produce something that in your heart you know is better than anyone else can make. That takes time because you have to put in the years to become an expert at what you do. Become good at at what you do by learning your trade and then improving on it. Live it, love it, make it your life. The effort is worth it.

Never be the other village baker that turns out loaves of bread. Not unless you put 'sprinkles' on your loaves while the other baker doesn't.

2) Promote your product: It is good so it's worth the effort to make everyone else know it is good. Think of yourself as a blade of grass on a lawn; a solitary unmowed blade of grass. The kind that gets noticed because it sticks out above the rest. Make yourself get noticed, stick out, paint yourself something other than green. Jump up and down if you have to; have no pride. No one will come to you no matter how good your thing is unless you do.

3) Have a good price. You think your product is good so it should be expensive. Wrong. Put yourself in the place of someone who would use your product. It must be priced where someone would take a chance on it because it's too good to pass up. Never get greedy; price should always be a fixed multiple of your time and the materials it takes to build what you make. Always have quantity discounts.

4) Support: This is probably the most important of all. Have a name, have a phone number always available where you can be reached. Be available when someone calls. Know enough about your stuff and how it will be used to give good help when you get called. Sales stuff convinces someone to buy your product, support is what you do after someone has spent their hard-earned money to buy it. Some need none, most need some, a few need a lot. You give them all your best; word gets around.

I mentioned a chain. It is a chain. A chain has links and if any fails, so does the entire chain. A business is a chain and if it is successful it is because all the links are maintained and constantly serviced. Good products, good promotion, good prices and good service. It seems very simple but it takes a lot of care and effort to keep it that way. Basically a lot of hard work all the time.:-)

Mariss

[harryn]

Mariss of course has some good points. I am always amazed by how much some of the "old fashioned - almost corny / simple courtesy - aspects of business are still so important.

High Seas - IMHO, an LLC is not the way to go - you should seriously consider setting up as a C corp or not bother with the change. I am not sure about your "location", but in california, it is easy for anyone to set up a corp themselves. I might go so far as to say it is "encouraged".

The financial flexibility afforded by a C corp is much greater than any other structure, and at least in my case, the tax savings more than make up for the "government fees". Perhaps putting it another way, the US tax law is written more or less "by and for" C corporations.

Another benefit for me, was that switching to a "C" corp for my business enabled me to feel comfortable doing my own (now simple) personal tax filings and just take the business tax filings to a pro.

Try to find a large business that is not structured as a "C" corp - very rare. There are a lot of reasons for this, and they are the same ones that keep most "partnership business structures" more or less little "Mom and Pop" businesses.

[independent-cnc]

I recently formed an LLC entity after working as a sole proprietor. I worked through an attorney friend which was probably surely more expensive than online formation. On the other hand, my attorney makes sure everything is right, searches for conflicting business names etc. There are a number of details and the legal stuff is usually more complicated than you imagine.

The main reason I wished to respond in this thread is to point out that if you go from sole proprietor to LLC as a single member entity, the IRS will disallow the LLC status and for tax purposes you will still be taxed as a sole proprietor. Of course, you will STILL be an LLC entity once you make that formation, and you will have the liability, protective benefits of LLC. For taxes however, you look the same as a sole proprietor. This seemed the simplest approach for my needs. Being a one man show, I wanted to minimize administrative work that is required for C corp. If you are planning employees you may have different considerations. This is where consultation with a business accountant can help you to make the correct decision.

I'm not an attorney but, that is how it worked out for me. Good luck! i

-independentdesignsolutions-

[bukky633@yahoo.]

WOW Mariss!
That is exactly how I feel about running my buisness! I don't think I could have put it better. It takes a lot of drive and focus to make a small buisness get off the ground. I make my self avaliable for my clients even on Sundays.
I have friends that make fun of me for working so much. I strive for exceptional value at a great price and it's kept my little cabinet shop going strong for all of last year and already doing great this year. I am thankful people call!

You have to apprecieate the fact that people want to use your services and let them know it. YOU CAN NEVER SAY THANK YOU TO MUCH!

just my thoughts...
Nick

[edmond]

Some good info here.
I plan on starting a small part time cnc routing business from home and this was just the kind of info I was looking for.
If the business takes off well I will make it a CC which seems a better option
Thanks very much