Ive done something similar, but designed my company as an LLC and using it for Real Estate. I know nothing about the laws and all of the specifics, but the point is that i am willing to try something and do it myself. It may not be the best way, but it seems to be a very good path to take to get some education and experience under my belt when dealing with a 'real' business and not so much a mom and pop operation. I mean I have some ideas, goals, and general thoughts on how I want things to work out, but in just a simple as spending as spending the money and getting started it has already taught me many things that need to be done and how to proceed. I actually just received most of my paper work back from the state and have also received my EIN. Im quite excited about my new venture and see this thing growing and taking shape quite nicely this coming year. Harvey & Harvey Holdings, LLC is what I chose for a name. Sounded professional and still incognito enough to where everyone isnt all up in my business. I sure hope Tim has a decent plan, and his thought process mimics reality. If not I am sure we wont be hearing the end of this.
There are many, many legal deductions you can employ as well as the top accountant programs to get the best deal. The IRS is at least 30 years behind in term of technology, but they use social networking, rat finks like ex-wives who love to report their cheating former partners, disgruntled people of various stripes that they will use to go after suspected significant under-reporting. I have found that Dan Pilla, Jr. and taxhelponline to be a useful resource for troubling cases. If they have not contacted you yet, why worry?
Tim: I have been looking all over for Intercept Shield holders for ASEs (40mm). If you ever stock these let me know.
No. You better consult a CPA on that, but I am quite sure you can not write off the entire price you buy a coin at for your business. You CAN write a loss of profit; however, for example if you buy a 1909 S VDB for $1500, but sell it for $1000, you can write off the $500 loss. But not the entire amount you paid to stock your inventory. You can write off all of your costs associated with running your business, your utilities, electric, gas, phone, internet.
The EIN bit is really of little consequence. It complicates filing somewhat, but, trivial in the grand scheme of things, assuming you actually have a operational business. As to buying coin's. Yes, you could. But, I think you misunderstand the concept of 'write-off". You do write off losses, but, expenses are generally just that, an expense or cost of goods sold. Giving the coin to yourself is not a write off. A write off is the loss where you paid too much and sold at a loss or where a customer paid you with a bad check and you never collected the funds from the sale. If you do purchase a coin the coin must remain as property of the business. And, if you sold it to yourself at a significant loss you are running the risk of criminal charges (at worst) and taxes/penalties (at best) when they audit you. If you want to go this route, I would highly suggest using the buying power to purchase coins you want and sell to yourself at cost or a small profit to the business on a small scale.
Not always, according to the IRS you can write off mileage (such as driving to a show), expenses (such as hotel stays or other travel), or expenses for your business such as a fax machine, etc. I have a friend who has a DBA for his ebay, and writes off the mileage of going to auctions.
Yes and no, Detecto. When you own the business the mileage may be a business expense or may be reimbursable mileage. However, what I stated still holds true regarding buying coins for you. Further, using mileage as an example, ask an accountant what would happen if you attempted to declare 100% of the mileage on your personal car was for business use and you were audited. The IRS does allow deductions for expenses, there's no disputing that fact. However, what you are talking about (buying a coin using business funds and writing off the cost as an expense or loss) is akin to embezzlement.
Keep your business and personal purchases, expenses and sales separate. You can deduct the cost of a coin you purchased for your business to compute your business income when you sell the coin, before it's sold the cost is added to your inventory. This way your income is matched to your expenses. You can deduct the cost of a coin you purchased for personal use when you sell it, but you'd compute a capital gain or loss separate from your business. This is the way it works, in general, but there are caveats. For example, you may wish to contribute a coin you purchased for personal use to your business for resale. Based on your questions, you need to do some reading and/or hire an accountant. Try starting with IRS Publication 334 for your business and Publication 17 for your individual taxes, both available online at IRS.gov.
If I were in your shoes, the last thing I would be worrying about is using my business to skirt paying tax on personal purchases. Beyond this, it seems as if you're again putting the cart before the horse (and jumping in face first), but since you've so slyly announced your (present) business venture, perhaps you can tell us more of how to plan to market this business and sell your supplies. Other than forum or similarly free ads, how are you going to get word out and bring enough business in to make this little venture worthwhile? The $7 advertisement budget didn't cut it for "the future of coin collecting" so hopefully you've lowered your expectations and/or have other plans. What reasons are there for someone to purchase from you over one of the larger, established, and reputable suppliers? Let's say I was in need of coin supplies and was not familiar with the Detecto notoriety... how are you going to get my business away from one of the many, many other retailers of such material? Successful retailing is more than getting a business license and finding a "wholesale" supplier; customers are not going to magically appear and start throwing money at you. I don't know, Tim... Not to be unsupportive, but we've heard very similar stories before and within a short period of time you're off on some other grand plan. At this point, the most important question is what makes this one any different from all the others?
Tim, I would be very careful with this. There are many different laws when it comes to running a business...and depending on what kind of business you are, there are various kinds of laws. My guess is you are a sole proprietorship (as I doubt you formed an entity of any kind). You need to know where the business money is. What you need to do is have a business bank account that is ONLY used for the business. The money in there belongs to the business. You will need to invest your own personal capitol to have some starting money. That investment into the business is tax deductible...because it was your personal investment into the business. Now, let's say you buy a $100 coin with the business. You have already written off that expense (since it came from a personal investment). Now, you sell that coin for $120...your profit is $20 which is taxable. Now, depending on how you use that $20 depends on if it is taxed. That said, purchasing personal property with business funds (which is pre-tax) is a big no-no. You will get caught. Now, some items are "grey area" items. The shredder...or even a cell phone can be used for both business and personal use, sometimes these items can be taken as a tax deduction. But, you will have a hard time convincing the IRS that a collectible you bought with your business funds and are making no effort to sell was a business purchase. Now, I doubt you won't respond to this...but don't try and skirt the system, it will only get you in trouble.
what he could do is give away 1000 ten dollar gift cards, and offer free shipping at his store the first month to attract customers. you run a 10,000.00 dollar loss your first month, but he can win over his customers with good service. word of mouth and service would be his best way to grow. ten thousand in free product would cost similar to good advertising plan, but it would be more effective in bringing traffic to his store.
BTW, I'm starting out very very very small, such as having a small online presense, and selling stuff to the local coin club members. If I hired attorneys, CPA's and all that other stuff. I would be so far in the red it wouldn't be funny.
Then how else do you afford it? If I'm the CEO of say...Walmart, and I buy a new house, that money had to come from the business, as it would be the only source of income. I'm going to open a business bank account. I'm not trying to skirt paying tax, but rather, write-offs. As I said, if your in the business of buying and selling coins (like one of the mods are)..and buy a coin, and put in your safe, along with the coins you have for sale, then who is to say you didn't buy that to sell it? That's why it's very tricky... I don't think the IRS is going to send some man to my business to watch everything I do and make sure it's kosher. Legally speaking, my state has a "use tax", and your supposed to pay taxes if you buy something off a buddy, or at a yardsale. Your also supposed to collect tax on both sales and income if your at a flea market, yet out of the dozens of flea markets I've been to...I've never seen nor heard of anyone collecting sales tax at one. The IRS does not see what you do, only what you report, and this is why many coin dealers are cash only at shows...all that money goes under the table and isn't seen on any piece of paper being mailed to the IRS. Why do you think so many dealers go to shows? Is a big event to earn income that they probably won't report.
