Author Topic: Can I start a business to do "whatever" I feel like?  (Read 2372 times)

jo552006

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Can I start a business to do "whatever" I feel like?
« on: August 06, 2015, 02:14:56 PM »
I've tried to find the answer to this question, but ultimately don't even know what to google to get me close to the correct answer.  I want to be self-employed some day, and plan to start a business.  I have MANY interests and skills.  I also like to keep things simple and would really only want to start one business if possible.  Do I need to start a business for EACH of my various interests, or can I just start one business, for instance: "jo552006's Engineering, Repair & Rental."  Or maybe just "jo552006 LLC" or something.

Some ideas of things I'd like to toy with (all of which I could see netting a profit if done correctly and opportunistically).  This list is far from all-inclusive

Engineering Consulting
Engineering Contracting
Selling Firewood
Rental properties (restoration + renting)
Farm equipment restoration
Auto Mechanic
Farmstand
Restoration of "things" (antique tractors to little red wagons to cars)
Custom built stuff (from gardens to laudry hamper racks)
Restaurant of some kind
Laser etching
Machine shop
Rototilling

Obviously some of these things I can do 1-offs on a cash basis and just claim the income personally, but I do want to have a business so that I can write off office expenses, and in the case of some of these things, I can write off tools/equipment. 

What if I don't start a business at all?  If for instance, I find a cheap lawn trailer ~$200 and I make it back to new condition for ~$300 additional, and sell for $1000, do I claim the $500 I actually made, or do I claim the entire $1000 I sold for?  (Or do I claim the $800 (sale price - cost), but since I'm not a business I can't deduct the $300 in repairs?)

If anybody can at least point me in the right direction I'd love that.  I would really rather have one business, (2 at most) so that I'm not keeping track of each business, filing tons of different tax returns, etc.

AlwaysLearningToSave

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Re: Can I start a business to do "whatever" I feel like?
« Reply #1 on: August 06, 2015, 03:00:00 PM »
There are several layers to your question, but it appears you are most interested in the question of the difference between a hobby and a business for purposes of federal income taxes.  Perhaps this link will be helpful:

http://www.irs.gov/uac/Business-or-Hobby%3F-Answer-Has-Implications-for-Deductions

If they are businesses, then you need to address how you would structure the businesses from a state-law perspective. 

You do not need to form a new legal entity (limited liability company, corporation, or other entity) for each business.  In fact, you do not need to form a new legal entity to operate a business at all.  You can simply start operating as a sole proprietorship.  Alternatively, you could create one entity with broad purpose of engaging in any activity allowed by law and have that entity operate whatever lines of business you would like.  Finally, you can form a new entity for each line of business you engage in in an attempt to isolate business liabilities.  The biggest question is the amount of expense and administrative burden justified by the different businesses' potential income and liabilities. 

If you use an assumed name like "jo552006's Engineering, Repair & Rental" either as a sole proprietor or with a new business entity, you should register a trade name (which is just a name and not a separate legal entity).  Trade names will protect your right to use the business name and give you the right to exclude others from using the same name within your state.  Trade names are basically marketing decisions: if your business goes by "Jack of All Trades," how will the public know what services you offer?  If you are going to operate regionally or nationally, look into federally registered trademarks. 

Finally, if you choose to form one or more new business entities, you need to address tax planning.  If you form a limited liability company, you need to choose whether you want to be treated as a disregarded entity (only if single-member), partnership (only if multiple member), S corporation, or C corporation.  If you form a corporation you need to choose whether you are taxed as an S corporation or C corporation.

A competent business lawyer and CPA can help you address these questions in light of your unique business's goals. 


jo552006

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Re: Can I start a business to do "whatever" I feel like?
« Reply #2 on: August 06, 2015, 03:35:49 PM »
I'm pretty sure that by most definitions, I'm interested in business not a hobby.  I suppose that wasn't clear in my wording.  I definitely plan to make money, and anything not making (or projected to make) money will be either stopped or done only as a hobby.  I am looking to replace my full time job. Here's what I'm after:

1. I am very worried about keeping my house and personal assets separate from businesses that have potential to get sue.  (Mainly I see Engineering, rentals, Auto Mechanic, and welding as high possibility of being sued...not because I'm negligent, but because I believe we live in a society where people like to sue.)

2. I'd like to replace my full time job.

3. For example, I'd like to be able to find a house that needs work or if I stumble across something and fix it up to either flip it or rent it.  Then I'd like to sell firewood in the late fall.  Then I'd like to get a plow truck and do some plowing in winter.  Then come spring, since I have a hobby of fixing up antique tractors, I'd like to use them to rototill gardens for people.  All of this while doing engineering work (either consulting or contracting) to fill free time.  If I hear of somebody that needs X, Y, or Z, and I know I can build or design that easily, I'd hand them my card.

I don't even know what to call this.  I did do a little more searching and it looks like I can put multiple companies UNDER another company, with the parent company dealing with all the books/taxes, etc.  That might be how to do what I want, and have 3 companies, engineering, rentals, and restoration/odd jobs under "jo552006 enterprises" or something.

Axecleaver

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Re: Can I start a business to do "whatever" I feel like?
« Reply #3 on: August 06, 2015, 08:50:00 PM »
My two cents, while you're getting yourself started, just create one LLC and do all your work under the LLC. This insulates your personal finances from the business finances. Set up a business account at the bank separate from your personal one and keep the money completely separate. Make sure to sign contracts as the President (or Principal, or whatever title you want) of the LLC. You can get an LLC set up for a few hundred dollars. Maybe less, I set my last one up 15 years ago.

If you were to be sued, and lose, they could take the assets in the LLC but not get your home or car or savings. (Warning: if you don't do everything right when you set up your LLC, it's possible to lose this protection. Google: LLC piercing the veil.) The reason why you might want to separate multiple businesses is to manage risk. That way, if one business fails, or gets sued, you can insulate it from your successful businesses. Otherwise, there's no real need to separate your businesses. I keep mine together under one "roof" but do a bunch of unrelated things for profit.

Quote
What if I don't start a business at all?  If for instance, I find a cheap lawn trailer ~$200 and I make it back to new condition for ~$300 additional, and sell for $1000, do I claim the $500 I actually made, or do I claim the entire $1000 I sold for?  (Or do I claim the $800 (sale price - cost), but since I'm not a business I can't deduct the $300 in repairs?)
You can do all this right now as a sole proprietor, and claim both the profit and the loss on Schedule C of your taxes. You would pay taxes on $500 in this scenario. Take a look at Form 1040 Sch C for an idea of what's deductible. Good luck!


If you find some success, you'll want to look into opting into taxation as an S corp. You can opt to allow your LLC to be taxed as an S corp.

OneDollarAtATime

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Re: Can I start a business to do "whatever" I feel like?
« Reply #4 on: August 06, 2015, 10:45:48 PM »
I would think you'd want a different LLC for each?  Imagine if you're making 90% of your money in one thing and the other ten businesses each bring in 1% for a total of 100% of your earnings.  Let's say something in one of those 1% businesses goes wrong and someone gets injured -- and sues your LLC.  If you have everything under one LLC, then that business that brings in the bulk of your money (90%) is exposed in the lawsuit.

I think it's common for landlords to do different LLCs for different properties for this reason.  Maybe someone with more experience can confirm / deny if I'm on the right track, but I do suggest doing more due diligence on your own instead of just taking someone's word for it from this site.

Goldielocks

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Re: Can I start a business to do "whatever" I feel like?
« Reply #5 on: August 06, 2015, 11:16:53 PM »
Accountants, engineers, lawyers , architects often have restrictions on the type of limited liability company or corporation they can set up.  Check your state rules. This may only apply here. Therefore you may want a second company as a corporation, and a limited partnership and or ? For the professional activities.

I know architecture restricts business setup and licensing and may only allow architecture in the business activity . Don't know about the others.

AlwaysLearningToSave

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Re: Can I start a business to do "whatever" I feel like?
« Reply #6 on: August 07, 2015, 05:54:14 AM »
Your best protection for the engineering services is professional malpractice liability insurance. Even if you set up a limited liability entity, you will still be personally liable for your own malpractice. There may not be a whole lot of value in setting up an entity for your professional practice if it is a solo shop without employees and operating out of a home office.

Goldielocks

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Re: Can I start a business to do "whatever" I feel like?
« Reply #7 on: August 09, 2015, 04:39:05 PM »
Your best protection for the engineering services is professional malpractice liability insurance. Even if you set up a limited liability entity, you will still be personally liable for your own malpractice. There may not be a whole lot of value in setting up an entity for your professional practice if it is a solo shop without employees and operating out of a home office.

Good point, I was thinking that the risky business ventures like construction or auto work could be in corp or limited liability company, even if you keep engineering as sole proprietorship ( with insurance).

AlwaysLearningToSave

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Re: Can I start a business to do "whatever" I feel like?
« Reply #8 on: August 10, 2015, 02:56:31 PM »
Your best protection for the engineering services is professional malpractice liability insurance. Even if you set up a limited liability entity, you will still be personally liable for your own malpractice. There may not be a whole lot of value in setting up an entity for your professional practice if it is a solo shop without employees and operating out of a home office.

Good point, I was thinking that the risky business ventures like construction or auto work could be in corp or limited liability company, even if you keep engineering as sole proprietorship ( with insurance).

Agreed.