As some of you may remember, I am considering a business opportunity. I'll give a run down of what I am considering and then my concerns. Keep in mind that I will be doing this as a side job on my days off from my regular job.

Opportunity:
I will provide services as a vendor to an asset management company. I will work alone and will have NO employees. I will NOT be considered an employee of this company. My role will be to provide cleaning, debree removal, inspections, lawn service, winterization, and boarding of vacant properties that the company receives through foreclosures. I will provide the company with a W-9 and proof of general liability insurance.

My concerns:
Do I take all of the legal steps to form a business or do I do this as an individual?
As far as I know there will be no tax withholdings from payment so how do I take care of taxes for payments that I receive from the company?
How do I depreciate my equipment such as my truck, trailer, generator, and other tools?
Is there anything else that I need to consider before making the decision to do this?

Thanks for any advice.

 

You will be self employed and have to pay taxes quarterly on what you earn. Go to irs website for info on that and be sitting when you see how much you will be paying.Find a good accountant and he or she will be worth the money.they can tell you how to set up stuff so your taxes will be lower.There are lots of things ,like office space in your home,mileage for a designated work truck or one you use for other things.also if you can get a tax # so stuff you buy for work you don't pay tax on at the store.

 

How do I get a tax number?

 

not sure ,my sister has one for her realestate business and uses it at sams club.I was self employed for 16 yr. and wish I had talked to an accountant.

 

I have been in business 36 years. Get a good and creative accountant. Your taxes will not be a problem. I used to do it myself and all I did was give money to the government. Everything my accountant does is legal, but he saves me a bundle. I didn't know how to depreciate equipment and things like that. The tax laws are too complicated. Ask around about accountants in your area. They can set you up with all the tax numbers and everything else you need. Keeping your job and also having a small company is a great move. Good luck with it.

 

I think so too. I have a lot of time off and school takes up quite a bit for now, but I graduate in February. As it is right now, I plan on doing the second job on Fridays until I get my Business Management Degree and then I'll work two to three days a week. I could reasonably make an extra $1000-$2500 a month or more dpending on how much I want to work. The way I see it, with all that time off if I'm not making money I'll be spending it. If my wife and I have a little self-discipline then we could save a pretty good nest egg and maybe go into real business.

I have a tax advisor that I have been using for a couple of years now. I'll go talk to him this week and see what he has to say about it all. He's probably bored out of his mind since tax season is so far off anyway. He owns a Tax and Business Services company so I'm sure it is right down his alley.

Thanks guys

 

Just found this on the IRS website.

Does a small company need a tax ID number?

A sole proprietor who does not have any employees and who does not file any excise or pension plan tax returns is the only business person who does not need an employer identification number. In this instance, the sole proprietor uses his or her social security number as the taxpayer identification number.

 

Usually a tax id number is for state sales tax. Don't forget state income tax as well. To obtain a tax id number you can look up the info at your state's web site. What the id number does is allows you to collect state sales tax on products or SERVICES you provide. You need to find out if the service you provide is subject to sales tax. Also if you have an id number, it exempts you from paying sales tax on things you buy for your business for resale. You still have to pay sales tax on items you or your business will consume. What I've found though it some businesses have 3 prices. 1 for retail, 1 for wholesale and 1 for business sales with a tax id number. Guess which is cheapest.

 

Do you guys think he really needs to pay an accountant for such a small business?

My dad has done construction for 30 years and never had an accountant do it. It's simple enough that he does it. He's a 1 man show.

Anyone else agree? I'm thinking from a cost aspect...whether or not it's worth it.

 

With a one-man show, its hard to find that balance point between paying an accountant and hopefully leveraging some tax advantages and saving that expense but possibly paying more in the long run. As a former busines owner, I was discouraged to learn there are not as many "tax loopholes" as one would expect - at least not for small businesses. On the other hand, there were always several tax deductions I was not aware of. Nevertheless, an accountant can give some peace of mind when dealing with the IRS as well as keeping you on the straight and narrow.

 

If you are good at keeping records and documentation then you probably don't NEED and accountant. As a sole proprietor, any income is treated as personal income as everything goes on your s.s. #. Depending on what kind of work you are doing, as a sole prop you take on all the liability and if something happens your personal assets are at risk. You also have to deal with self-employment taxes, possibly quarterly tax payments, etc.

There are programs like Quickbooks that will help you keep track of income and expenses.

If this is something you plan on sticking with for a while, you could form a Limited Liablity Corporation (LLC) for short money. They are a piece of cake to set up (I am in two different LLC's) and if anything were to happen related to work done by the LLC (you), your liability is limited to the assets of the company - they couldn't go after your personal property.

At least in my state, you need the tax number in order to purchase stuff without sales tax - this is stuff that you will either be reselling or that directly contribute to generating taxable revenue. You collect the sales tax and have to submit it on a periodic basis (called a Trustee Tax). Don't screw around with this bit of business like by buying stuff for your personal use without paying sales tax - consequences could be severe.

Do you need an accountant? No. Should you have one? Yes. A lawyer that can also do taxes is a good combo. You don't have to spend a lot of money either - a couple hundred extra bucks a year for tax prep should do it. That expense is deductible too.

Good luck.

 

Paying an accountant for advice can be a one time thing and might cost $100 or less. If you tell them a little of your business plan, like you've done here, they might suggest going sole perp. or exempt LLC if your state allows. This might mean once a year taxes with a 1040 and Sch. C. and no EIN with the IRS. They might tell you that buying your equipment and leasing to the company makes sense. Again, a local Accountant can answer this kind of stuff quickly. Whether you hire them full time to do the books is up to you. Most of them hire or sub out bookkeeping, so they can't afford to be too expensive - they are a business, too. I can tell you from experience, going to the IRS with an accountant with you feels pretty good, well worth the $300/yr I was paying at the time...

 

I absolutely agree here. End of debate, if any. When I was running my restaurant, doing MORE paperwork at the end of a 16-hour day was just what I had in mind. I had about 14 employees, to start, so that was part of my motive....and in my case, I paid per month what most of her other lients paid per a single pay period in terms of expenses. What I handed over to her every week, though, was something her assistant was able to handle, so I got off easy. $30/month easy.

Either way, they are a good resource to have and "know people" to help you out.

The accountant can also tell you of any (dis)advantages to incorporating, which you can do as a one-man show. I just did not have the extra money to shovel into that when my biz took a dive.

 

Well its official. I am the proud sole proprietor of my own business. I went down and got my CRS# and business license today after talking to my tax advisor. He spent 40 minutes on the phone explaining some things to me. He gets bored and likes to talk. He said that as long as he is doing my taxes that I have nothing to worry about and he is cheap. He has done my taxes for two years and I haven't payed him more than $120 total. Now I just have to get my General Liability Insurance, get my tools together and get to work.

Basically, if I used my SS# instead of a business it would come back to haunt me within a couple of years because of my primary job. It is complicated, but I'm happy with the business aspect of it.