Author Topic: Starting a Small Business  (Read 2926 times)

MitchCraft

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Starting a Small Business
« on: October 04, 2015, 08:19:53 AM »
Hello all,

In my ever expanding quest to live a financially independent life, I recently quit my job commuting 1 hour each way to work, and decided to open up my own business.  I got sick of living paycheck to paycheck, dreading going to work, not using my skills to the extent I want to, and never getting ahead financially.  I am going to be building Tiny Houses, building both my own house designs, and building custom homes for clients.  SO, from where I am standing, it is a pretty simple business model;  I build something, you buy it. 
I have never ran my own business before, so I was hoping to get some suggestions from people here who have.  Are there any books/websites/information that you could pass along to me that helped with your startup?  I am just a single member LLC, so any information on taxes and how to run the financial end in the smartest way possible would be awesome! 
In what ways have you found Mustachianism and Small Business go hand in hand? 

Kroaler

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Re: Starting a Small Business
« Reply #1 on: October 04, 2015, 09:34:30 AM »
You got bigger balls then me, Im starting a small business too, but I kept my day job. What made you pick tiny houses? Is there a big market for that in your area?

Cpa Cat

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Re: Starting a Small Business
« Reply #2 on: October 04, 2015, 10:19:06 AM »
I see a lot of new business owners let their bookkeeping slide, then become overwhelmed at tax season - then they either get their taxes done in a rush, or they neglect to file.

So my suggestion, even for very small single-member LLCs, is to open yourself a no-fee small-business checking (shop around, you should be able to find one at a local bank or credit union), or even personal checking account, and keep your business income and expenses separate. If you use a credit card, have a separate credit card that you use only for your business (as a single-member LLC, it's fine for the credit card to be in your name instead of the business').

Then do your books on a monthly basis. You have the advantage of knowing how you did in the previous month - what worked? what didn't? who owes you money? - and being able to use that to improve your business. And, your books will be done in January, with no stress or fuss for tax season. It will also give you a jump-off point to calculate estimated taxes as you go.

As a single-member LLC, the IRS doesn't require you to have a separate bank account or credit card, but it will make your life easier. If you ever fall behind on bookkeeping, you know that you can just pull your statements and get a complete picture - no rummaging through personal accounts, trying to remember if something is a business expense or not. It also allows you to download all transactions at once and automate your bookkeeping.

You can use a bookkeeping software or Excel - here are the advantages and disadvantages:

1. Excel - Free (if you own it, or just use Google's version), but kind of clunky for bookkeeping with very little capacity for automation or reports.

2. Wave - A free cloud-based accounting software that will let you link your bank account/credit card. But it doesn't allow you to create automatic classification rules, which is essential to making bookkeeping efficient. Supposedly it eventually learns, but I've never had the patience to get that far. It's a small step up from Excel - but a step up, and still free.

3. Quickbooks - You can do Quickbooks online with a subscription fee or Quickbooks desktop with a disk/download. I favor Quickbooks Online - and so does Intuit - it's clear in how they direct their support and development dollars that they believe that Quickbooks Online is the future. You can get a subscription for $10/mo or less - be careful not to buy too much subscription, because though you can always upgrade your subscription, you cannot downgrade without restarting your company books!

4. Xero - Subscription based cloud-based accounting. Directly competes with Quickbooks. Works best if you direct link your bank and credit card, but overall it's similar to Quickbooks. It's more popular internationally than in the States, and as a result you might find that local accountants aren't familiar with it. But maybe that's a good thing - you can just weed out any accountant who is unwilling/unable to work with Xero, because if they're overwhelmed by accounting software, they probably suck.

MitchCraft

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Re: Starting a Small Business
« Reply #3 on: October 04, 2015, 06:05:17 PM »
I decided to start the tiny house business because I built and live in my own tiny house, and just found it to be something I am pretty obsessed/passionate about.  I am a skilled carpenter, and seeing the Tiny House market really take off, I figured now is the best time to start.  While they are gaining popularity a lot here in Colorado, I would say the same for nationwide.  It is definitely a niche market, but I think what I can build will hopefully prove to be something people will want.

Thanks so much for the information CPA Cat!  I have already started a separate business banking account at a credit union, which has it's own debit card as usual, and have a credit card as well.  I figured these would help track expenses.  I will probably be giving Quickbooks a shot, it has a pretty big reputation for being the go-to program. 

Sparafusile

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Re: Starting a Small Business
« Reply #4 on: October 04, 2015, 07:49:55 PM »
A lot of what you've said is downright scary. You got tired of living paycheck to paycheck so you quit your job? Hopefully there's something you left out. Do you have a business plan? Do you have a lawyer and accountant picked out? Do you have capital to start building? Do you know how many houses a month/year you will need to build to cover living expenses? What is the market size in your area for this type of business?

Here are some pointers from the 3 business I've helped start:
  • It's worth it to pay good people to do good work even if they are expensive. This includes lawyers and accountants.
  • Get insurance. This includes liability and disability.
  • File your taxes the year you form your company, even if you didn't do any work.
  • Expect to work much harder and longer hours than you ever did working for somebody else.
  • Hire somebody as soon as you can to be your backup.

If I had just one piece of advice for you, it would be this: get in contact with your local SCORE group. It's a free organization paid for by the Small Business Association (aka, your taxes) that is designed to help small businesses become successful.

puglogic

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Re: Starting a Small Business
« Reply #5 on: October 04, 2015, 08:09:14 PM »
As a tiny house fan AND someone who's been self-employed for 17 years, congrats!    There were definitely times in the beginning when I lived check to check.  But as long as I delivered on what I promised, was passionate about my work, and got the word out about my business, I continued to get more and more stable as years went on, and I couldn't be happier.  In fact, I think I'm completely unemployable.  I'm just no longer able to put up with the sh** that many employed folks seem to assume is normal.  I hated commuting.  I hated being in someone else's control, with them dictating how much I could grow my income. I hated working under people who weren't as smart as I was, and making less. 

In terms of a mustachian life, my commute is 22 feet in bedroom slippers, I ride my bike and take public transportation, I am healthier than I've ever been (mentally AND physically)  and I net about the same income for working half the hours and enjoying it twice as much.  I have time to grow a garden, do scratch cooking, hang our clothes to dry, home maintenance...  It all works for me.

Good luck with the tiny house business (I'm in Colorado too -- you'll do fine)  and let us know how it goes.

Kroaler

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Re: Starting a Small Business
« Reply #6 on: October 05, 2015, 02:59:29 AM »
Puglogic,

That was a good motivational speech lol.    In all seriousness this isn't even my thread but that made me feel better about what I'm pursuing as a side hustle.      I think all the mustachians want to get out of the rat race.

projekt

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Re: Starting a Small Business
« Reply #7 on: October 05, 2015, 05:27:24 AM »
CPA Cat: would this business typically be able to buy materials wholesale without sales tax and then charge sales tax to the customer on the finished product?

Kaplin261

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Re: Starting a Small Business
« Reply #8 on: October 05, 2015, 11:17:31 AM »
Hello all,

In my ever expanding quest to live a financially independent life, I recently quit my job commuting 1 hour each way to work, and decided to open up my own business.  I got sick of living paycheck to paycheck, dreading going to work, not using my skills to the extent I want to, and never getting ahead financially.  I am going to be building Tiny Houses, building both my own house designs, and building custom homes for clients.  SO, from where I am standing, it is a pretty simple business model;  I build something, you buy it. 
I have never ran my own business before, so I was hoping to get some suggestions from people here who have.  Are there any books/websites/information that you could pass along to me that helped with your startup?  I am just a single member LLC, so any information on taxes and how to run the financial end in the smartest way possible would be awesome! 
In what ways have you found Mustachianism and Small Business go hand in hand?

The obstacles I see with this is

 Who are the types of people that would live in a Tiny home? 1.)People who want to build there own home but a traditional 2000 sqft home is just to much work for DIY. 2.)People who can't afford a traditional home or do not want to dedicate as much financial resources to a home. 3.)Minimalists and Hippies

Banks are hesitant to loan money for these types of homes and county building codes.

You need to find a way to sell these homes cheaper than what they can build them for. If it were me I would manufacture as many items as I could like counter tops, cabinet, light fixtures etc. Make your profits from the items your manufacturing and upcycling. I would also not limit my homes to tiny ones and offer to build different sizes.

Cpa Cat

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Re: Starting a Small Business
« Reply #9 on: October 05, 2015, 11:20:04 AM »
CPA Cat: would this business typically be able to buy materials wholesale without sales tax and then charge sales tax to the customer on the finished product?

That will be state specific. You'll want to research sales tax information for contractors in your state.

If your state does require you to charge sales tax on the final product, then you likely qualify for a reseller's certificate. What you'd do is register for sales tax in your state, then you'd be eligible to give a reseller's certificate to your wholesaler (generally this is something you fill in yourself, the state probably provides a template). You'll likely need to file sales tax reports (even if you've collected 0). And then, of course, collect and remit sales tax on the final product.

If your state does not require you to charge sales tax on the finished product, then it's unlikely that you qualify for a sales tax exemption on wholesale materials.