Replies

1. 
   hammer1 | Nov 19, 2003 05:32am | #1

   Start simple. Sole proprietor. Get a checking account and put what you make into it and use it for all purchases. For the IRS all you have to worry about is paying taxes. Most of us pay on a quarterly basis. The first year you have to pay a percentage of your tax burden from the previous year. I forget the percentage but I think it is 75%. So if you paid $100 last year you need to pay $75 by the third quarter due date. Don't take my word for it though. Find a high end tax accountant, not some bookeeper or an H&R block type. Take your back taxes for a couple of years. The accountant will probably pay for his/her services by getting you back some money from old taxes. They probably will set you up with a simple double entry book system. Don't waste your money on those DIY systems. A good accountant does not cost a dime.

2. 
   10fingers | Nov 19, 2003 09:22am | #2

   I have run a couple of operations that were non-woodworking but will offer a few suggestions.  Get some liability insurance quickly.    A Corporation will protect you and your future earnings if someone does something stupid with something you built and wants to blame someone else.   You might lose the corp. but would keep your house and other stuff.

   Chuck

3. 
   forestgirl | Nov 19, 2003 10:58am | #3

   The IRS puts out a CD "The Small Business Resource Guide."  Might be a good idea to pick that up or order it.  As long as you don't have employees, things are fairly simple.  Get a CPA to help you set up your books.

   forestgirl -- you can take the girl out of the forest, but you can't take the forest out of the girl   ;-)

4. 
   SparrowHawk | Nov 19, 2003 02:48pm | #4

   Many laws that you will need to follow will be local as well as federal. I would suggest that you make an appointment to talk to a lawyer to find out what is required and what he thinks you should do. First consultation is generally free so it will just be your time. Then I would also talk to an accountant and get their take on things. Between the two you will have a good understanding of the road you should follow. I own a computer shop in Florida and have been advised to remain a sole proprietor for convenience and cost - apparently being an LLC or corp. will do nothing for me and will cost more in cash and time - but your area and job liabilities may be entirely different.

   Be safe,
   Ken 

5. 
   JMartinsky | Nov 19, 2003 04:05pm | #5

   Here in CT, I am able to operate an LLC as an individual. My attorney and accountant both suggested that I go that route. It gives me a layer of protection and some tax benefits. I whole heatedly agree with the post that suggested Liability Insurance. Even here in the land of 26% Workers Comp. Insurance, Liability is still pretty inexpensive. I think that I have one million dollars coverage for something like $700.00. I really should upgrade to two. When and if you have employees, don't screw around, pick up the Worker's Comp insurance as well. Yes, it is highway robbery and all the insurance companies can burn as far I am concerned, BUT, if someone gets hurt, you won't lose your house. Find a good accountant. If you are in CT I can recommend some names. Let's see, what else. Get big deposits, BEFORE doing any work.

   Good Luck,

   John

   
   

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   Edited 11/20/2003 7:11:58 AM ET by JMartinsky

1. 
   Ecbntmkr | Nov 19, 2003 05:20pm | #6

   Thank you to everyone that has replied. I appreciate any input as I start this adventure.

   Forestgirl,

   I got a couple disks from the IRS called "A virtual small business workshop" and the "small business resource guide". They have a lot of information but seem to be things that don't apply to me. I had to wait 8 weeks to get them. I also need to thank you for a post that you had a couple months past that I followed up on. I purchased Dan Ramsey's book "Pricing Your Work" after I read one of your posts. A very informative book for anyone that is looking to turn their hobby into business.

   To everyone else,

   I live in WI so if anyone has any experience in dealing in this state, I would love your input. Right now I am in the process of getting my shop site approved by the village board. I will have to get a variance to build my shop but that should not be a problem. Any more suggestions would be appreciated.

   Thank you

   Eric

1. 
   jackplane | Nov 19, 2003 09:59pm | #7

    Plan how much you expect to earn in a year,before starting.Job costing(estimates) is where most independents fail.So whether that's 25K or 100K,break it down per job and per week,aside from materials.Apply in your estimates all expenditures;e.g. travel time,design work, installation and overhead for materials, office and otherwise.

    Good luck.

2. 
   BrianF | Nov 20, 2003 06:18pm | #9

   Eric, I'm up in Green Bay, where are you? I am in the same boat as you, so I'm following this thread closely. Right now doing alot of work for friends and family but have had offers from two interior designers to do work for their clients. They would of course prefer for me to be a business so I am also thinking of going legit. My plan is to look in to this closer after the holidays.

1. 
   Ecbntmkr | Nov 21, 2003 05:44pm | #10

   Brian,

   I'm in the Watertown area. I sent you an e-mail but I'm not sure if you got it. I'm at the point with the business where I am going to take the advice of those who have posted and confer with a lawyer or accountant.

   Eric

1. 
   numbfinger | Nov 25, 2003 05:16am | #11

   I know that the lawyer / accountant path is probably the smartest, however...

   We've been at it for about 10 years now, sole proprieter, no accountant, no attorney. Sometimes, especially when starting out, there just isn't the capital to do things the perfect way.

   Use your social for your business, or get an EIN if you intend to have an employee or two. Taxes and bookkeeping are as simple as Quickbooks and some time spent learning the program. Turbo tax takes care of the tax end of things.

   I would never run a business without general liabilty, and we have had two comp claims in 10 years. It's worth the comp costs to make sure that if an employee gets hurt, he is taken care of.

   We write absolutely everything, (as far as i'm concerned, the best reason for having our own business!) and we passed an audit twice now with flying colors. In fact, the IRS wrote us a check for 45 bucks after last years audit!

   As far as they're concerned... you just have to say you have a business, and you do. I like the idea of having aone man shop... employees can be great, but they can also be the largest cause of stress for any small outfit.

   The IRS website has a ton of stuff to helpyou out!

   Good luck and I'm sure you'll be glad you took the step out on your own!

6. 
   badoyn | Nov 20, 2003 04:46am | #8

   Talk to an attorney about setting up an S Corp. You'll get some protection and the tax rate is much lower. As a sole proprieter you'll essentially pay twice for taxes...at least that's how I understand it.

   Michael

7. 
   Dan019 | Dec 09, 2003 11:17pm | #12

   I took a "Small Business Start-up Class" thru the local community college run by SCORE,Senior Core Of Retired Executives. The course was $65 but the info they presented was worth the cost. Also, they counsel people on an individual basis for free. They are funded thru the Small Business Administration. They strongly suggest taht you get a lawyer and an Accountant also, in addition to a few other professionals. Very good course, they answered alot of questions I never thought to ask.

   Dan