new thread about business and bookkeeping?

[LZRDGRL]

As an alien resident in the U.S., I just founded my gecko business with license, tax ID, and authorization, but like probably many new people in the hobby I struggle with some hurdles of bureaucracy.

Thus, I recently learned that the notice of a new business has to run in a local newspaper for three weeks before one gets one's license. (In my opinion, it does not make much sense to announce a business before it actually has anything to sell... but, oh well!)

I think it would be helpful to have a thread where people can exchange experiences with opening/operating/maybe even liquidating a business.

For example, I would like to know what kind of bookkeeping software/product people use. Do you keep your records on paper, or in self-made xls files, or did you buy a complete program? (Which one, and how expensive is it?) Any tips for making the first tax declaration? (Yes, the very FIRST one where one didn't sell anything yet, but had lots of expenses acquiring the breeders, feeders, cages, etc....)

International tips and tricks might be helpful as well.

Let's see if anybody else is interested in business-related stuff...

Chrissy

 

[Haligren]

Considering all the businesses that are present on this site and take part in this community, a forum for this sort of thing seems logical.

 

[T&KBrouse]

I'd love to see something like this come about. This is my first year in business and I feel like I'm steering blind and having to learn alot the hard way. Hearing about some of our seasoned vetrans' experiences would be a great learning experience. :main_thumbsup:

 

[Snowy & Petra de Gecko]

My two cents well wait it was more than 25 cents

As an alien resident in the U.S., I just founded my gecko business with license, tax ID, and authorization, but like probably many new people in the hobby I struggle with some hurdles of bureaucracy. (Welcome to the wonderful world of being a small business owner.)

Thus, I recently learned that the notice of a new business has to run in a local newspaper for three weeks before one gets one's license. (In my opinion, it does not make much sense to announce a business before it actually has anything to sell... but, oh well!) (Running of an add in the local newspaper is to put the General Public on Notice that you are starting a business and that you may use a fictious name or what type of business entity you are doing business as. And ... since you are applying for a Local Business License then the Local Laws apply. Since Local Laws apply the laws vary from city to city, county to county and State to State.)

I think it would be helpful to have a thread where people can exchange experiences with opening/operating/maybe even liquidating a business. (It might be interesting to have a thread.)

For example, I would like to know what kind of bookkeeping software/product people use. (Some people use a business checkbook and summarize their expenses at the end of the year. Some people use a business checkbook and input the info into excel. Others use a small business software product like Quicken (assuming it is still use) and some small businesses use QuickBooks. But, if you use Quicken or QuickBooks then please ... please ... please come up with a Chart of Accounts before you start posting stuff into the program.)


Do you keep your records on paper, or in self-made xls files, or did you buy a complete program? (Which one, and how expensive is it?) (See above as it all depends on how many checks you write, how many deposits you have, whether or not you have a business checking account which you should, how detailed you are and what you really want to do.)

Any tips for making the first tax declaration? (Yes, the very FIRST one where one didn't sell anything yet, but had lots of expenses acquiring the breeders, feeders, cages, etc....) (The very first tax declaration? Well ... the Tip of the Day is to report all income, capitalize all expenses that are nonoperating, and deduct any expenses that are trade or business related.)

(Well that really is an open ended question. I assume that you have already been filing an individual tax return and that you are going to be running the business by yourself or as an individual business owner. What I mean is that you are not a partnership, not a limited liability company, not a corporation and not a Subchapter S corporation. So with that out of the way you will be filing a Schedule C, Business Income & Expense Schedule with your individual income tax return.

If you have any Net Income from your business then, you will pay income tax on the net earnings. Additionally, you will have to pay Social Security Taxes on the net earnings. It is almost like being taxed twice in the same year on your income.

Expenses ... well what is an expense? In general, any amount that you incur while you are engaged in a trade or business that is ordinary and necessary is a deductible expense. Then, there are exceptions.

So let's keep it general very general. Since you are going to be a Small Business then, you can deduct everything. Well ... as long as it is ordinary and necessary.

Usually, a business will capitalize and depreciate items that will last several years. So breeders, cages, cages accessories, etc. would be capitalized and depreciated. However, you can take an Section 179 expense deduction for those items but, you can only take the deduction to the extent that you have business income.

Or you can depreciate them. Probably, maybe, I not sure, over MACRS five years or MACRS seven years. MACRS is the name of the tax depreciation system ... Modified Accelerated Cost Recovery System but, that is a quarter word.

The cost of advertising, going to trade shows, feeder insects, travel, vet bills, tax return preparation, are probably expenses that can be deducted in the year paid.

Meals and Entertainment expenses or 50% of the amount can be deducted if certain requirements are met.

Also going to trade shows, travel, hotel stays etc. have to be for business and you cannot have an element of pleasure mixed in with the activity or the expenses that you incur will not be totally deductible.

What is most important is that you keep detailed records and run your business like a business. You must maintain these records otherwise your business would be considered a hobbie and that is BAD.

Now that is some general tax information. And the advice is free and you should consult with your tax advisor for any additional information. I have to add that as a disclaimer.

Go to the IRS Website ... irs.gov and look up Publications and see if there is one on Schedule C, Small Businesses or something like that.

You can also buy a little book from QuickFinders on Accounting & Bookkeeping and that would give you some general advice on Bookkeeping.)



International tips and tricks might be helpful as well. (In general, DON'T. Well it all depends on what you mean by International, what country you are talking about, and what laws control them. In that case, Good Luck because the laws can be very complex and it would be too expensive to pay for the advice. In any event, your income from any foreign activity is still taxable to the United States no matter where you may conduct your business. Well ... it will be or may be different for you because of your duel status. But, that is another discussion which is very specialized.)

Let's see if anybody else is interested in business-related stuff... (Ok, Let's See)

Good Luck

 

[LZRDGRL]

Hey Snowy & Petra de Gecko, thanks for your informative, detailed reply! :main_yes: That is very appreciated.

Chrissy

 

[THE WHISPERER]

Hey Snowy & Petra de Gecko, thanks for your informative, detailed reply! :main_yes: That is very appreciated.

Chrissy

I second that, there's a lot of good info there. this stuff can be quite confusing for someone just starting off.

 

[lamarr]

Ditto

I am encountering some "doom and gloom" attitude from the GF over breeding geckos because she's worried about taxes!? The local shows don't ask about business liscenses or sales tax, so what's the story here?

Just where do you folks find the dividing line between what i hope is a self sustaining hobby and a business to be? Any horror stories out there to act as a word of warning? Does having a website come in to play at all?

This aspect of the hobby/ business would make a great addition to the forum topics!

 

[Snowy & Petra de Gecko]

Now, I am up to 55 cents

I was previously just talking about federal income taxes and Local Business Licenses. Now most of those rules also apply to State income taxes.

A local business license is just that. I is a way for a city or county to collect some revenue from the businesses in there area.

Some businesses must have a local business license and must also have business licenses in any other city that they do business in. For example, a construction business may be required to have multiple business licenses because they may be working in various cities in the county.

But, if I was a manufacturer and I made a product in San Diego and shipped it to Los Angeles I would only need a San Diego local business license and not a Los Angeles one.

What a business does and what business needs to have a local business license varies from city to city, county to etc.


Now I have said anything about Sales Taxes (Which probably do not apply to Leopard Geckos) but, I those laws are different than income tax laws.

I have not also said anything about Personal Property Taxes ... Business Property Taxes ... which are typcially 1.2% of the cost of the property used in a trade or business in California (Cages, Heaters, Hides, etc.) and I have no clue in any other state.

I am encountering some "doom and gloom" attitude from the GF over breeding geckos because she's worried about taxes!? (I hope that I have answered some of those questions. Just set aside 50 percent of your net income and that should be more than enough for your taxes. In California, 28 percent for Federal, 15.2 percent for Social Security Taxes and say 7 percent for California (but it could be 9 percent).)

The local shows don't ask about business liscenses or sales tax, so what's the story here? (Well ... taxes are complicated. The original question was about business and bookkeeping (Quickfinder Handbook, Accounting & Bookkeeping, Thomson Publishing, 800-510-8997). I added some info about taxes and business licensing. But, I was not talking about Local Shows. Now ... in general with income taxes the general rule is "All income is taxable from whatever source it is derived from." The rule is not wages are income, or interest income is income, or dividend income is income. The general rule is " All income is taxable from whatever source it is derived from." This is not the real general rule because I did not want to look up the Internal Revenue Code Section. Now, after apply the general rule then, you have "the exceptions" and there can be a lot.

The Local Shows ... the promoters are not required by law to do anything other than what they do, a city or county may not have the manpower to go the all of the shows, there may be exceptions under the local law that may apply. The Exceptions can be many ... they can exclude from a Local Business Licenses ... trade shows, infrequent transactions, type of products or goods being sold, and so on and so on.

And well ... sales tax is sales tax.

In California, the cages, mats, heaters, ect are subject to sales tax if you are selling to a consumer. But, I do not know if the animals are subject to sales tax but, I doubt it.

If you sale to a business who has a sales tax permit then, you do not have to charge sales tax unless the business is not going to resale the item that it bought from you.

In California, Aluminum Foil is taxable when you buy it at the market. However, in California, if you own a Restaurant and buy a Potatoe that has Aluminum Foil that covers it (Baked Potatoes), bake it and then sell it to a customer ... then, as a Restaurant owner you pay sales tax on the Aluminum Foil if you take it off before serving the customer and you do not pay sales tax on the Aluminum Foil if you leave it on when you serve it to a customer. What? No Sales Tax if it is on but Sales Tax if it is off. Yeap. Now, that is the way the California Sales Tax Laws were years ago and it has been a while since I have looked at that specific issue. But, the point is that under tax laws not all things are equal.



Just where do you folks find the dividing line between what i hope is a self sustaining hobby and a business to be?

If you have a Self-Sustaining Hobby and you keep track of your business expenses but, year after year you report all of the income and show a profit and pay your taxes then, you should be ok.

If you have a Hobby that loses money and you take these losses on your income tax return then, you may have a problem. Losses incurred from a Hobby activity are treated as losses from an activity not engaged in a trade or business activity and the losses are only deductible to the extent of income. When this happens it is said that the Hobby Loss Rules apply.

An activity is presumed not to be a hobby if profits result in any three of five consecutive tax years. So if you have a Schedule C, Small Business Schedule, and you had losses in year 1 and in year 2 and then, if you have losses in year 3 your activity may be subject to the Hobby Loss Rules.

Now, I guess that the Hobby Loss Rules would be the dividing line.

However, based on the "facts and circumstances" a trade or business activity that is a Schedule C Business can have losses for 20 years in a row and not have the Hobby Loss Rules apply. (Well I am just saying 20 years but, definately more than 10 years.)

But ... the reason that the Hobby Loss Rules did not apply for losses for 20 years in a row was because of the "facts and circumstances" and the taxpayer was able to provide support to the "facts and circumstances". So it was special.


OK - Go to the IRS website ... IRS.Gov

Forms and Publications

And print off the following ...

a) Schedule C (for Form 1040), Profit or Loss from Business. Print off the form and use summarize your expenses with the same categories.

b) Instructions for Schedule C - Print off the instructions and read it.

c) IRS Publication 334, Tax Guide For Small Business. Print off this Publication and read it. It makes great reading to fall asleep by.


Any horror stories out there to act as a word of warning?


Let's wait and see but, I doubt it. It is possible but, I still doubt it.


Does having a website come in to play at all?


Who has a website? What kind of website? What are you doing on the website?

Wait a minute ... your are not playing 20 questions.

So let me say that ..."It depends."

Was that vague or what?


Read the other stuff and ask the website question again. I have already given TMI and you need time to digest and I need time to see & think about a website.