becoming a business Question

[PeggyB]

Hi, I am new to posting but I have been reading the messages for a month. I will be getting a Millenium in July.

I have done quilting on a midarm setup (megaquilter with Inspira frame) but I know I have a lot to learn yet.

I had planned to do mostly my stuff, develop my skills etc for a bit of time and start working for customers in the future. I retire in 4.5 years and definitely want to be doing some customer work by then.

Looking at information it seems like it would be a better plan to start as a business (I know I will have a few customers this year if I want from my bee and guild) now rather than later:

save on sales tax on the machine

deduct expenses to take classes

Am I correct?

PeggyB

[dtreusch]

Hi Peggy. Depending on where you are the rules might be different. In my case, my business has to show a profit 3 out of 5 years. Another option I had was to declare this as a hobby business. Then all I had to do was report the income, but there were no deductions, depreciation, etc. If I remember correctly, in either case I needed to have a sales tax permit.

[PeggyB]

Thanks, I am in Texas, and the dealer has given me information on getting the sales tax permit.

[Bonnie]

Don't forget business insurances (i.e. equipment, property, personal injury to customers to name a few), and bonding if they apply to your state....

[quiltmonkey]

Peggy, a good resource is your local small business development center. You can get free advice, free resources/references, low cost training on how to start up a business. You should write up a business plan. If anything your business plan is your roadmap to help keep you on track to meet your goals. A consultation with a CPA can also give you good advice on business startup so you don't miss any important steps in the process. Each state is different, so it's best to get local advice.

[yeoldeforest]

There is something called an IRS 179 deduction from your federal taxes that is a huge benefit if you are seriously considering being a business when you buy your machine. Basically, you can deduct the entire cost of your system from you taxes in the year you purchase it.

However, if you are not serious about starting your business when the machine arrives do be careful. If you get audited by the IRS, and they do no think you are "in it" as a business, they can classify you as a hobbyist and you could owe big time. As a hobbyist, you can net your expenses against your income but you just can't deduct a loss. As a business, you can deduct or net your losses against your or spouse's income. Of course, the IRS knows that people want to owe as little as possible so they tend to audit home businesses more than others. The IRS also expects that if you are running a legit business then you are "in it" to earn a profit not to just get a tax write-off.

Great advice from Bonnie and Shana. To really start a business, you do need to get an accountant (CPA), possibly an attorney, business insurance, etc. and follow all of the local and state laws. SBA and community colleges are a good resource.

Congratulations on your Millennium purchase and welcome to the APQS family! It's a wonderful adventure as a business or as a hobby! Oh, did anyone tell you how addictive it is yet? ... and how hard it will be for you to work your "day" job knowing that you have a Millennium waiting for you at home?