The problem with hiring a paid professional to help, is the fact I would go into debt before I even turn a profit. I would be looking at in excess of $200 to hire someone to get all of this smoothed out. That means I would have to profit $200, which means I would have to make sales over $1,000 to make this kind of money. The reason I posted this, is so that maybe someone who has had a small business, or currently owns one, could get me some help on getting started. If I planned on this to be some large business where I would make making sales of 3k a month, then I could justify paying someone for help. However for the time being, I'm lucky if I'm going to make $150 a month in sales.
Tim.... also you will want to consider that if you can't make a profit in X number of years then the IRS is liable to consider it not a business, and can go back and re-visit your previous years 'write-offs' etc. Starting a business on the cheap can be done. There are a lot of people who pull this off. But many if not all of those people IMO put so much time and effort into their business that it's not funny. Are you the type of person who will devote constant effort to get your business off the ground and into the red? Could be. But you may want to start with a business plan rather than just diving in. Make one that shows that with X number of dollars investment, how you plan to make the business succeed (that is turn a profit of some sort) in 2-3 of the next 5 years. If you can't even do this on paper, defining your plans and sources, who you plan to market to, and why, etc., it is not too likely that you will do it in real life without a plan. And if you can't make a profit from this, even in one of the next five years, then it's not a business. I think the IRS has time tests in years as to whether it is a business or not and if you did, say 3 years of losses you write off, which are items you could also be using in your chosen hobby, then the IRS is liable to deem it a hobby and re-assess all your taxes as if you had no business. Choose wisely, young Tim.
I think that after a 5 year period, Tim would be much better off doing education (perhaps in a business major ) and then having either a real job, or at least the knowledge to run a business of his own, than trying to build one now and a life on $150 a month with no available start up funding. Many of us have started poor and education has made us successful in our lives.
Starting a business is like giving birth to a very hungry child and that child has to be fed. Accounting is only small part of it. If you can't feed the child, you don't need the business. Operating at the level you are talking about, the best move is to keep it personal until you reach the point where you have the volume to need a business. The most important part is to be able to find a clear distinction between what you are doing for hobby and what you are doing for a living. PS; I killed my corporation to win back the love of what I do and took a day job. I still made money on the side, but I no longer had to rely on it to keep the doors open.
Answer me a question, do you really want to trust the answers you get here ? I mean trust them enough to keep you out of jail or having to pay fines ? If you don't, then you shouldn't be asking here. What you seem to fail to understand is that if 5 different people who all owned businesses gave you answers, those can and probably will all be different. That's because the rules can change depending on many different things - each business is different. So don't do this, either go talk to an accountant or just forget this idea.
This is what starting a business is. You can't just start a business with no money. You need to have some money in the bank (probably at least a few thousand dollars for something like this) to get the process started. You need to save that money...and then once you have it, invest it into your business as initial capital to pay critical costs (such as an accountant) and to buy a small inventory to start with. It takes money to make money. If you are serious about this, work your day job and save every extra penny (cent). Once you have enough in the bank to start your business, then start it. It takes hard work. FYI, when I bought my dental practice...I had to include in my purchase loan not just the money to buy the practice but also some working capital. It was a lot more than a few thousand dollars.
As far as what others are saying on here, since I don't really plan on making much money, can I just keep it personal instead of a business? Since I got a tax number, do I now have to report taxes? I'm starting to think a lot of people don't pay taxes. I know alot of coin dealers and antique dealers that go to auctions, and they always write one check, even if they buy coins for the business, and themselves. You obviously can't write one check for two accounts. Also, I don't plan on not going to college, I'm going to college either way, but if my business picks up 2-3 years from now, I may or may not get a job related to my degree.
Tim, In my opinion you are "in over your head", and naive. You have done what was necessary to satisfy the desires of your supplier, and. nothing further should be needed if you've acquired the forms they've requested. I recommend that you start your business as a sole proprietor using schedule C for reporting until you learn the rules for IRS reporting. You can acquire the specific instructions for Schedule C by contacting your local IRS office by phone. You should acquire the publication 17 also, which will help you to understand the book-keeping/tax-filing process. You don't need an accountant to operate a business, but you must learn the basic rules business activities, which can be learned by reading appropriate free government documents. I've read some of the advice advanced by disinterested parties on this site, your naive understandings, realizing that this venue isn't a reliable source for tax information, and that you need some government documents to read. Be forewarned that many government rules change annually, and that you may be broad-sided as many of my associates were in 1986 when the government completely changed depreciation rules. I'm warning you, as the IRS is an isolated entity, immune from civil litigious processes/practices. You could acquire the education of my next door neighbors, who were arrested in the middle of the night by a IRS government SWAT team, where the wife is in jail, and the husband is free to earn money for government penalties repayment. Willie Nelson, Wesley Snipes, and many other prominent individuals with teams of book-keepers, accountants, attorneys, etc. learned of IRS rules, and a similar educational process. JMHO
The problem with taxes is that it's way too confusing and redundant. For example, you have to: 1. Collect and pay Illinois sales tax, and collect and pay "use tax" on inventory purchased out state lines. 2. Fill out a schedule C with a 1040. 3. Pay "estimated taxes" every 3 months, and if your business makes more money than expected, you are fined penalties and interest for not paying more. 4. Pay self employment tax, ON TOP OF regular income taxes, which includes medicare and SS. 5...and if that's not enough you ALSO have to pay income tax for the STATE as well. Be honest, in a retail business, how the hell do you know how much money you will make? How do you know some customer won't come in and spend 5k on coins, or have no customers at all? It seems the IRS expects you to have a crystal ball. It's impossible for a retail store to know the volume of business you will have!
detecto...just out of curiosity...what do you estimate your total sales and total profit for 2014 to be in this venture? if this is too personal, dont answer, but i think a hard number answer will help you out alot....honestly, i think you are anticipating a problem that is never going to happen.
Take people who go to flea markets, they never know how much they will make. My freind is hardcore at flea markets. Some months he makes over $1,200, and some months he is lucky if he makes $200, and that's with the same amount of stuff! That's the issue with retail, you do not know if you will make money. If I have a website, I do not know how many people will visit it. I don't know if someone just inherited $15,000 worth of coins and needs 1,500 paper flips. You can't estimate volume in a retail setting. Even the place I work for (Kmart), announced a couple months ago that black Friday sales were less than predicted. It's really idiotic for the IRS to ask someone how much money you think you will make. There's thousands and thousands of variables to expected income, you could get sick and not be open for a week, you could get snowed in for 3 days and not make it in,etc etc etc. If businesses could do a good job at predicting how much money they would make, then there would be no such thing as bankruptcy, which is usually based upon a business expecting a certain amount of sales and not getting them.
Say a coin collector decides to become a dealer, starts a business as a b&m. He is no longer interested in collecting. There appear to be two 'correct' ways for the coins to get from his home to the showcases: he basically invests them with the business, then using their sale price and/or marked values he can write them off as personal money used toward the startup of the business(inventory)............ Do I have that right? a business loan for inventory could be used to buy out said business owner's collection? OR, say the business does well on its own for a while. The dealer now decides that the revolving inventory pleases him more than the personal collection he has locked away somewhere and never sees anymore. His business can buy those coins from him at or just under retail. He must claim this as personal income / business expense. since it is the topic, I may as well ask. You can only have one start and it can determine everything.
Right. Like I've said money times, I'm not doing this as something to quit my "day job" and make $10,000 a month in sales. This is a very very small operating and even if I make $200 month, it's money I didn't have before. I also don't want to borrow one red cent to start it, because if I don't make enough sales, the bank will be wanting money I don't have, then I will be SOL. That's why I'm starting out really small to test the waters before going larger.
The vast majority of people do pay taxes...especially if they are running a business. Those who don't either end up in jail or with fines that are many times the taxes they owed but didn't pay. You can write one check...there is nothing illegal about that. You just have to be really good with your books. I find it much easier to keep everything in separate accounts...one person and one business. That way, there is no question what money is being spent and on what. If you are REALLY good at record keeping, then you can use one account. It just makes it way harder.
That's fine Tim...but you still need to put money into the business to start it up. You can't just one day decide you are going to have a business...invest nothing and "poof" money is coming in the door (even $200 a month). You have to fork over the start-up costs. Like I said before, this could be a few thousand dollars.
I have put some money into the business. I contacted BCW coin supplies who is supposed to be mailing me a wholesaler's catalog. I plan on purchasing about $100 worth of inventory and selling it to coin club members. I plan on doing that for a few months and using the profit to purchase a larger amount of inventory and taking it to flea markets and selling it, and giving people my business card directing them to my website if they need to buy more. Then once I get a significant amount of profit built up ($2,000), I will start a small scale operation of buying coins off people and reselling them on my website.
Actually...you can estimate volume in a retail setting. It's not perfect...but that's how you decide how much inventory to stock. It's not idiotic for the IRS to ask how much money they think you will make...that helps you plan for your tax obligation. An estimate might not be perfect...but it does help you plan. Take my office for example, I know how much revenue I need to produce in a given month to meet my expenses. I know if I make more than that, I turn a profit. I don't know if my expected expenses are exactly correct each month...but estimating lets me know where I'm at.
Well in michigan we have use tax as well but coins arent taxed which means when ordering coins theres no tax its difierent from supplies
