Starting a business - what all has to be done

[taking fire]

I have a side business that has just kind of been a hobby for quite some time. I have been reading a lot about the tax advantages of actually owning a side business. It makes me want to push the business forward to the point of actually being able to claim some of the expenses, because they are starting to grow. I know the business actually has to exist in the first place to be able to do that.

I'm thinking I will probably need a tax ID number and of course a business license. I don't know where to start with this stuff.

I have a machine I bought this year that would be a major write off to the business, so I was thinking that would be a good start. I'm just not sure I can get all this stuff together before the end of the year, and I'm not sure if that machine can be claimed in the future. In other words, would I be able to claim it in 2017 for 2016's taxes? It is a big expense and to get the benefit of it, that would be great.

If there is information somewhere that I can read up on all this, I'd like to see it. I have been searching for it, but all I seem to be able to find are small business idea related topics.

[depogrig]

My wife just started a photography business. At least in Indiana it wasn't too bad. I think I had to apply or the fed tax ID then pay to register with the state. I think the whole thing took a couple days.


Sent from my iPhone using Tapatalk

[gReed Smith]

https://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online

https://www.alabamainteractive.org/sos_nameReservation/welcome.action

http://www.sos.alabama.gov/BusinessServices/LLC.aspx

Licensing will depend on what type of business you're starting.  There may be a franchise tax from your local government too.

An attorney and/or accountant can be helpful in these situations, especially when it comes to depreciating your business equipment, assuming it's a capital expenditure.

[taking fire]

Great links there. Thank you.

I'm wondering what the difference between a LLC and other reguar business is.

[Meowmalade]

I would open up a business bank account and get a business credit card, and be very meticulous about keeping your personal/business stuff separate.  Also, keep good accounts (receipts, bookkeeping, etc)!

You can get an EIN in about 5 minutes online.

Normally your equipment will have to be depreciated over 5 or 7 years (depending on what it is), but under Section 179, if you purchased the item new you might be able to expense it upfront.  Although I hate paying extra for someone to do my taxes, I found all this stuff very complicated and got a professional do my taxes (the software is called "Quickbooks", by a company called "Intuit"-- how complicated could it possibly be?  Turns out, very-- though there are simpler options than Quickbooks out there).  A CPA can also help you figure out what you can legitimately expense, and with tax-optimized planning if you need to buy more equipment in the future.

An LLC keeps your business assets completely separate from personal, so if you get sued they can only go after your business assets and not your private assets.  Not sure what kind of business you're looking into, but if there's any potential in being sued I'd definitely get the appropriate insurance to cover it!  When I had my wedding photography studio, it was worth it for my peace of mind to pay the extra $100/year to have it as an LLC-- you never know what can go wrong.

Also, do be careful about whether you're running a hobby business or a for-profit business as defined by the IRS.  If it's a hobby business, you'll only be able to deduct up to the amount of income that you generated.

Good luck!

[gReed Smith]

I'm wondering what the difference between a LLC and other regular business is.

An LLC is a form of entity like a corporation.  It can give liability protection if used properly.  The key is to have a separate bank account and to keep business and personal assets separated. Sign contracts and other agreements on behalf of the LLC and not as an individual.  Put the name of the business on your business card.  I generally think it is wise to always have an LLC for a business, but some people choose not to for tax reasons that I don't understand.

Out of curiosity, what type of business are you starting?

[mrs sideways]

This is (I believe) highly dependent on what state you live in. I started a side business in California and HIGHLY recommend getting/borrowing a Nolo book on the subject if there's one for your state.

Seriously, get a Nolo book. Now. Nolo is love. Nolo is life.

Anyway, I'm doing mine as a sole proprietorship, meaning I and the business are the same thing, legally. I don't need to get a Fed ID#; I use my SSN. I will have to file quarterly estimates on taxes, but other than that it's pretty easy to file. If you don't have an accountant, get and learn Quickbooks, and use some kind of tax accounting software that can help you depreciate equipment accurately. (It used to be staggered over X years, but then one of the stimulus provisions allowed you to take the entire amount up front, but I don't know if that's still in effect.) Open up a separate business checking account and run absolutely everything out of it; do NOT mix funds!

Here's the good news: Federal, state and local agencies really, REALLY want to make things easy for "entrepreneurs" and help you open a business. Lots of help should be there for you; my state and city both gave me numbers for "coaches" and helplines in case I had any questions.

Good luck!