Author Topic: Starting a Business  (Read 2401 times)

Mike2

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Starting a Business
« on: July 30, 2014, 10:19:43 AM »
I am looking for advice for starting a business.  My brother and I run a You Tube channel that is starting to generate some decent money and become successful.  Right now the income is sent to me personally and I take the very small hit on my taxes.  However, this revenue is growing and I want to create a business to take advantage of our expenses and whatnot to offset the income we are generating but have no idea where to start.  I'd love to hear from people who have been through something similar or find some websites where I can read up on what I need to do.  Should I enlist the services of an accountant? A lawyer? Thanks in advance.

TheSimpleLife

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Re: Starting a Business
« Reply #1 on: July 30, 2014, 10:36:52 AM »
I am looking for advice for starting a business.  My brother and I run a You Tube channel that is starting to generate some decent money and become successful.  Right now the income is sent to me personally and I take the very small hit on my taxes.  However, this revenue is growing and I want to create a business to take advantage of our expenses and whatnot to offset the income we are generating but have no idea where to start.  I'd love to hear from people who have been through something similar or find some websites where I can read up on what I need to do.  Should I enlist the services of an accountant? A lawyer? Thanks in advance.

Ok, so here are some of the basic questions you'd need to answer:

1.  Is the business a partnership (not in legal form, but in verbal agreement) between you and your brother?

2.  If so, you'd have the option of creating an LLC and filing a tax return as a partnership.  This basically means the income and expenses are split down the middle and after the partnership tax return is filed, you each receive a K-1 reflecting your portion of the profits/losses.

3.  Or you could elect to have the LLC taxed as an S-Corp.  At the early stage, this probably makes no sense as you would be required to pay yourself a reasonable salary.  The reason an S-Corp can be attractive is because all profits above and beyond the shh reasonable salary are not subject to the 15.3 self employment tax.  While at the beginning stages, you would probably pay out more in CPA fees and compliance costs than you would benefit from the lower self employment tax.

4.  It sounds like you are reporting things on Sch C of your tax return right now.  I'm not sure why you think forming a business would change your deductible expenses?  By forming an LLC (or any other structure), you still only get to deduct expenses that are ordinary and necessary in running your business (the same as right now!).  Maybe I'm missing something?

5.  As for hiring a lawyer, it depends on what you're wanting them to do.  LLC laws are applicable at the state level, so a small biz lawyer in your state might be worth a paid consultation, but the majority of states allow for LLCs to be filed online for a minimal fee.  In my opinion, the value in a relationship between a small biz owner and a CPA or lawyer is in the advice and guidance provided, NOT in filling out forms (even though this is usually handled by the professional).

Hope this helps.  Maybe you can provide some more feedback so I can better answer your questions.

I'm a CPA who works with a lot of small biz and new biz owners on the financial and tax side FWIW.

Mike2

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Re: Starting a Business
« Reply #2 on: July 30, 2014, 02:24:53 PM »
1. Yes, it is partnership between the two of us.  There are a couple others who contribute a bit but they aren't part of the business per se.

2. Our name would sound good with a LLC on the end of it. :)

3. To be honest we haven't made any money for ourselves and any revenue we have generated has been put back into the business.  However, that will be changing soon as we are past a majority of the expenses and should have some actual income here soon.

4. 2014 is the first real year of the business and the first time we have been paid any money so nothing has been reported yet--we also haven't kept an official tally of expenses but it would be easy to do that since almost everything was purchased online so I can find receipts.  At worst, I'll take the small hit on my taxes (I believe I will receive a 1099 from Ad Sense at the end of the year).  I'm trying to get my/our ducks in a row before the end of the year.  The whole idea of the business in my head was to make this endeavor more official as we start to generate more revenue.  Clearly I am just learning about all this stuff so I am open to all suggestions.

5. I was thinking a lawyer or accountant for the guidance aspect and not filing out forms unless needed.


Thanks for the input--I do really appreciate your help.

TheSimpleLife

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Re: Starting a Business
« Reply #3 on: July 30, 2014, 03:36:32 PM »
1. Yes, it is partnership between the two of us.  There are a couple others who contribute a bit but they aren't part of the business per se.

2. Our name would sound good with a LLC on the end of it. :)

3. To be honest we haven't made any money for ourselves and any revenue we have generated has been put back into the business.  However, that will be changing soon as we are past a majority of the expenses and should have some actual income here soon.

4. 2014 is the first real year of the business and the first time we have been paid any money so nothing has been reported yet--we also haven't kept an official tally of expenses but it would be easy to do that since almost everything was purchased online so I can find receipts.  At worst, I'll take the small hit on my taxes (I believe I will receive a 1099 from Ad Sense at the end of the year).  I'm trying to get my/our ducks in a row before the end of the year.  The whole idea of the business in my head was to make this endeavor more official as we start to generate more revenue.  Clearly I am just learning about all this stuff so I am open to all suggestions.

5. I was thinking a lawyer or accountant for the guidance aspect and not filing out forms unless needed.


Thanks for the input--I do really appreciate your help.

Are you on the Missouri side of St. Louis?  If so, check out the FAQs from the SOS site:  http://www.sos.mo.gov/business/faqs.asp 

It would be worth your time to spend at minimum a few hours reading that site and learning all you can before deciding to hire an accountant and/or lawyer.

Again, if in MO and if you are wanting to file the LLC with you and your brother both as members, the only option for taxation purposes is a partnership or S-Corp.  I would recommend off the brief discussion here a partnership.  That means you will have to file a Form 1065 and then report that profit/loss on your personal returns via the form K-1 I previously mentioned.

You can file a partnership return yourself using a paid tax software, but I've fixed quite a few mistakes after the client receives an IRS letter about problems, issues, etc.

IMHO, until the business is profitable, I would probably sit down and have a talk with your brother about not creating an LLC and just reporting everything as a sole-proprietorship on your (or his) tax return and settling up the tax benefits/payments after filing the return.

If you hire a CPA to file a partnership tax return on your behalf, you're probably looking at $600 as a minimum if the guy/gal has any reputation and plenty of work.

As for the expenses, try to keep all receipts you have, but still claim all true expenses whether you have a receipt or not.

For some really really basic advice, make sure you keep a separate bank account for personal and business.  Also, I'd get something in writing between you and your brother in case things go south.

As for the organizing docs and liability issues with an LLC if you decide to create one, a lawyer would probably be a better bet IMHO than a CPA.

Hope you guys do well with your venture!

Mike2

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Re: Starting a Business
« Reply #4 on: July 30, 2014, 08:23:05 PM »
Thanks for all the advice.  We are in Missouri so I'll give that website a thorough reading when I have a chance.