Starting a small business

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P man

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I have been selling jeeps and parts as a mostly part time gig for a long time now. I got to thinking today about making it a legit business. This would require a tax ID and some paperwork.

My question is what are the benefits? LLC? I only do 10-20k in sales a year. Is it even worth it? I have a day job that pays the bills FWIW

One of my goals is to get a loan and buy a ton of inventory and find a dedicated shop or area away from my home to dismantle and pack/ship.
 
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Rickyd said:
Can you ramp up enough to cover the new expenses sustainably? Being a side job what about those costs when life makes you focus on other things?
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Good questions.

I can ramp up to a point but being a 1 man show that can't afford overhead my ramping up is limited.

My home life always comes first no matter what. If home life is keeping me busy then nothing moves in the garage.

If the business couldn't cover the costs it would have to come from my own pocket which wouldn't make me happy.
 
Don't take a loan to start a business...Use the proceeds of your current side gig to fund the purchase of Inventory. Until you're doing enough volume to cover your costs, make a profit, plus fund growth, the business isn't sustainable

If you DO have the capital to make it a full time gig, give yourself 6 months. If you can't make it make you money (like 10% or more), walk away.

Keep emotion out of it and be realistic with your dreams...

Oh, and Read a book called Profit First.
 
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Mike_H said:
Don't take a loan to start a business...Use the proceeds of your current side gig to fund the purchase of Inventory. Until you're doing enough volume to cover your costs, make a profit, plus fund growth, the business isn't sustainable

If you DO have the capital to make it a full time gig, give yourself 6 months. If you can't make it make you money (like 10% or more), walk away.

Keep emotion out of it and be realistic with your dreams...

Oh, and Read a book called Profit First.
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Thanks Mike I'll check that out
 
P man said:
I have been selling jeeps and parts as a mostly part time gig for a long time now. I got to thinking today about making it a legit business.
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How have you been handling the tax aspect so far?

P man said:
My question is what are the benefits? LLC?
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I'm not a legal expert, but being self-employed, we have to ask these questions. They way I understand it an LLC provides Limited Liability, as is the name. Simply, creditors are limiter to the assets of the company when collecting debts. If you buy stock (Jeeps to be parted) on credit, that is what an LLC is for, i.e. if you go under, the people whom you owe money can't come for your personal assets, but they might still send a guy to break your kneecaps. If you're not using credit to purchase stock, then an S-corp would probably be a better path. The S-corp would mainly be for tax advantages over an independent contractor, which I currently am.

I'm curious to see what others say, since I've been thinking of going the S-corp route.
 
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Do you have space to house a growing inventory? And a way to organize and track a larger volume? And lastly, do you want to grow? Would growing intrude on your other time, career, home life, hobbies, etc? Just some thoughts
 
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bbaldwin237 said:
Do you have space to house a growing inventory? And a way to organize and track a larger volume? And lastly, do you want to grow? Would growing intrude on your other time, career, home life, hobbies, etc? Just some thoughts
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All good questions to ask. I do not currently have room to grow where I am at. I would have to rent a shop or at least some land where I could work.

Part of me wants to grow but part of me knows that isn't possible without more space, time and money. I am at a point in my life where my kids are almost all out of the house so that frees up time for me.
 
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BlueC said:
How have you been handling the tax aspect so far?



I'm not a legal expert, but being self-employed, we have to ask these questions. They way I understand it an LLC provides Limited Liability, as is the name. Simply, creditors are limiter to the assets of the company when collecting debts. If you buy stock (Jeeps to be parted) on credit, that is what an LLC is for, i.e. if you go under, the people whom you owe money can't come for your personal assets, but they might still send a guy to break your kneecaps. If you're not using credit to purchase stock, then an S-corp would probably be a better path. The S-corp would mainly be for tax advantages over an independent contractor, which I currently am.

I'm curious to see what others say, since I've been thinking of going the S-corp route.
Click to expand...

I do most of my business on eBay and they take care of collecting sales tax and submitting for me. I do some in cash and do some locally using e payments.
 
P man said:
I do most of my business on eBay and they take care of collecting sales tax and submitting for me. I do some in cash and do some locally using e payments.
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Not just sales tax. You should be paying income tax on your revenue (or flushing the revenue through to your personal income).

Basically, an S-Corp is an independent entity, just like a regular corporation. The owners possese shares of stock proprotional to percentage ownership. The BIG difference between an S-Corp and a C-Corp is how income and profit are reported. The S-Corp is not an entity for the purpose of tax. All gains or losses flow through the individual shareholders...So if the business makes a bunch of money, that means the shareholders make a bunch of money and will be taxed on it...but not on an income tax level, but a corporate income level. So...watch that! The "standard" way to pay those taxes is to have the company cover them through a disbursement...so if the business is successful, you would get a quarterly disbursement to pay your estimated taxes. If you have losses, then the amount of tax (inc standard witholding income tax, if you take a salary) is reduced. That is NOT returned to you quarterly though...you gotta wait for tax season to get it back.
 
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A business like that would make me nervous since it sounds like it requires your time to wrench, find customers and process sales and delivery; all while incurring inventory storage costs.

But if you set something up where you add value (connecting buyers to hard-to-find cars and parts, with great, knowledgeable customer service) then you could go lean or just in time on inventory and charge more for your time.
For instance if I told you I want rust free TJ fenders and I would wait for the right ones, you work your network and find me the right set and I would have no problem paying $600-$700+ for a set I can trust from a reliable WTJF guy like you! You might pay $350 and pocket the rest, only having to buy and ship them once you found them.
There’s always the tax shelter a business offers, but that is really only a partial savings on money you have to spend. It only works if the business makes good money.
Good luck!
 
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As others have said, the biggest benefit is limiting the liability. Sell a bad part that ends up hurting someone? They can sue your corp and go after whatever assets the corp has but can't come after you personally (usually) to take your personal assets.

Spinning up a new LLC or SCORP is easy and fairly cheap but your biggest expense will be paying an accountant to do your annual filings. At 20k revenue, it may not be worth it.
 
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P man said:
I only do 10-20k in sales a year.
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Tell us more about your "hypothetical" operation. :sneaky: Based on your previous statements, I assume 10-20K annually is gross, what do you think net is? I hope you have receipts stashed, you know, for your hypothetical income. ;) Have you been doing any kind of accounting above what ebay sends you? Can you give us a basic rundown of operations? It might be best to stay sole proprietor at this point.

The fed boys won't like it, but I’d keep the small cash transactions a secret, since they are a small amount of your income. That's also why you should tip in cash. ;)
 
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BlueC said:
Tell us more about your "hypothetical" operation. :sneaky: Based on your previous statements, I assume 10-20K annually is gross, what do you think net is? I hope you have receipts stashed, you know, for your hypothetical income. ;) Have you been doing any kind of accounting above what ebay sends you? Can you give us a basic rundown of operations? It might be best to stay sole proprietor at this point.

The fed boys won't like it, but I’d keep the small cash transactions a secret, since they are a small amount of your income. That's also why you should tip in cash. ;)
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I should have stated this whole topic was just hypothetical..I was speaking 3rd person I guess you could say. 😉
 
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P man said:
One of my goals is to get a loan and buy a ton of inventory
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When I had my own business, for the first several rounds of business loans, even though we were an LLC with a proven revenue stream, the banks required my partner and I to personally guarantee the business loans.

This meant pledging our homes, 401k etc, as collateral in the event the LLC defaulted. It’s not an experience I ever plan to go through again and to anyone who is, are you willing to bet everything you own on this loan to grow your business because there is nothing worse then being in business, just to make loan payments. Especially with todays interest rates.
 
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Pretty sure S Corps are quarterly.

I've owned a business or two. At 10-20k keep it a side hustle.

If you need more space and the kids are almost out of the house think about buying some acreage where you could build or already have a bigger shop.

Love to come up some weekend and help out...we need to do more wrench and wheels.

-Mac
 
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