Not sure if this is the right place to post this but here it is. I have some metal working equipment in my garage and do some playing around as a hobbie. My question is: Is it worth starting a small part time business,or is it not worth the hassal of dealng with the taxes, Etc? I have a few people interested in having some work done and I want it to be all legal like if I were to do work for them.
Thank You

We have a part time metal art business since I'll be fully employed for the next two years. All of my business has been 'word of mouth', although recently we have attended one motorcycle rally, and one craft show, got an Internet presence and even set on the side of the road two times. Business was slow to start, but since I was working anyway, that was fine with me (did my cutting on the weekends).

Well it's grown to the point where I'm either referring business to my competitors, or refusing work. Once I retire, I'll rethink that, but ultimately, my goal is to make just enough money to supplement my other earnings...and take trips. Husband/wife business with no desire to hire help.

As far as taxes and the government goes, it's not all that complicated, or time consuming, and there is even the advantage of having a small side business, with your available tax write-offs.

Bottom line...I'm happy and glad I got into this line of work.

I agree with jmrsbrt that there are some definite benefits to starting a part time business. One of the biggest advantages is the additional tax benefits that you will be able to write off. You already have equipment, so if you can make a few dollars from something that you enjoy doing, that much better. Yes it is additional work regarding paperwork, but that can be manageable. For myself, I made up an Excel spreadsheet that totals all associated costs for business and home which separates the actual numbers that you can use for tax purposes. It's perfect for a home based business and saves the cost of an accountant and bookkeeper (sorry bookkeeprs!)

Its working out great for me. I bought the equipment to use for my own engine work. Lately I've had to put my projects aside to fill the orders and all the equipment is now a tax deduction.

Glad to hear that this is working out for you - another small business success story?

Engine work eh? A good friend of mine does custom engine work also.
I did his website - check it out.
http://www.LeitchPerformanceEngines.com

Best of luck to you & Merry Christmas to all!

Thanks
I started out to build a better cylinder head for a briggs OHV race engine. Who knew it would turn into a part time job.
www.mikeclementsracing.com/

Merry Christmas
Matt

Part time is a good way to have a hobby / small business get going. My only suggestion is to work your way toward having a somewhat special product or service as opposed to being entirely general purpose.

It takes a lot of setups and tooling to do ANYTHING, while a more targeted approach will eventually help your efficiency and simplifiy your life.

Part time is a good way to have a hobbie / small business get going. My only suggestion is to work your way toward having a somewhat special product or service as opposed to being entirely general purpose.

It takes a lot of setups and tooling to do ANYTHING, while a more targeted approach will eventually help your efficiency and simplifiy your life.

Tell me about it. I have built more tools than parts.....so far...

I didn't notice if you mentioned if your equipment is automated or mostly manual. I don't claim any great machinery skills, but my brother was trained as a machinist and has a manual bridgeport at home, along with some other related items and lots of tooling. (he does not work as a machinist for many years)

The thing I noticed watching him work is that while his results are very good, it seems to take about 4 hours of goofing around to do anything useful.

In his case, this includes digging his way back to the mill in his shed, doing all the testing he likes to do, etc, but the point is the same.

The first 4 hours are largely lost to "getting ready" and perhaps making "the first one". At that point, making 10 is only another 1 hour of work.

The items I am interested in are pretty simple, but it seems to take a lot more tooling for him to do the same job on his manual system as an automatic / cnc system.

I guess the point is, if your metal working tools are not cnc driven, then converting them should be high on your list if you are at all serious about this as a business.

Both are cnc...sort of.
The mill I use everyday is 1998 HH Roberts bed mill with a retrofit Anilam 3300mk, with auto oil and coolent. It can handle about a 1MB program.

The other mill is a YCM supermax-40 knee mill with a Bandit 2 controller. I typically only use it for facing and drilling operations. I have to write the Gcode by hand so I only do the simple things with this one.

I know what you mean about the set up time. It takes all day to set up and build one part, but I can build 4 in 2 days.

Here's a quick question (maybe)
I've been a small (hobby) business for a few years. Small money - but pays most of its bills. We are near to launching a single product line that will keep us on a "focused" business - as suggested earlier. Tooling and set up will be consistent.

Now the question(s): We want to migrate from DBA (doing business as) under my name to a LLC. Sure there are simple ways to do it Legal Zoom etc - any favorites? Any to stay away from?
Any idea how tax liability changes from one year to next when you change the name?
Thanks in advance Guys!
Cheers Jim

....Any idea how tax liability changes from one year to next when you change the name?....

It depends on what jurisdiction you fall under; your ID suggests you are mobile. :)

Very likely what you will find it that when you transfer business assets from a Sole Proprietorship to a Limited Liability Company the tax people take the view that you have 'sold' them to the LLC. This means that you, the Sole Proprietor, have to include this theoretical income in your personal income for tax purposes in the year of the transition.

You have to be careful how you value the proprietorship because of course if you value it high you finish up paying more tax, but if you value it low the tax people may come back and give it an imputed value which is way higher than is realistic.

If you own some valuable machines or have designs that have a future value you may need to consult with a tax advisor to make sure you do things correctly. Sometimes it is best for you personally to retain ownership of these things and lease or license them to the LLC.

At the very least do the transition at the beginning of a tax year so the transfer value does not add onto a full year's income from the proprietorship.

Just do it! You have nothing to lose but money...:)

Depending on your degree of commitment, you'll want to make an educated decision about sole proprietor, LLC or INC. I advise talking to a lawyer. There are a lot of factors that you probably don't want to discuss here, and probably shouldn't discuss here. LLC and INC can cover your ass in a lot of ways. Sole Proprietor is much more lienent on quaterly taxes, tax write-offs ect, but leaves the most personal responsibility... To where as, in my lawyers words, "You should INC, if for nothing else, if you get sued or run out of cash, you just bankrupt the business and it doesn't effect you personally, nothing compared to being sole proprietor. Stay away from partners and cover your butt... Every client starts off saying 'I didn't think it would happen to me' and I can tell you some sob stories" <=== decent advice! He's actually a corperate lidigation attorney so he's seen it all.

Either way, making your business legal and paying taxes is going to cost you money in the long run, don't let anyone BS you about that. Sure, tax benefits are great for small business owners, but I still have to pay every year! But you will probably find at the end of the day your paying a lower precentage than if you were working for an employer and your doing it legally, to where as running a business under the table better be cash only! I've never heard of the IRS fingerprint testing cash, but you'll have hell to pay if you were to get caught, the IRS is worse than the damn mafia, they do what ever they want and there is nothing you can do! So yes, start your business, pay your taxes and enjoy the misery of self employment, the novelty wears off fast! (it's not that bad... better than digging a ditch and better than working for someone else)
MC

Here's a quick question (maybe)
I've been a small (hobby) business for a few years. Small money - but pays most of its bills. We are near to launching a single product line that will keep us on a "focused" business - as suggested earlier. Tooling and set up will be consistent.

Now the question(s): We want to migrate from DBA (doing business as) under my name to a LLC. Sure there are simple ways to do it Legal Zoom etc - any favorites? Any to stay away from?
Any idea how tax liability changes from one year to next when you change the name?
Thanks in advance Guys!
Cheers Jim

My lawyer said "just goto this website and get these forms and do this and that, $150 to do it yourself! Easy as that. No need to pay me $600." Legal Zoom would be easier, probably $350 and they walk you through it. I almost used them to file a trademark, kinda wished I did now... One mistake on the app and it's become a total PITA! And cost me more money too!

.....The thing I noticed watching him work is that while his results are very good, it seems to take about 4 hours of goofing around to do anything useful.....

He is just an amateur; a really good machinist can goof around for forty hours without doing anything useful. The skill lies in making it appear all the goofing is necessary.:D

OK, I'll be the jerk here. Business is all about having a focused and intense attention on what what you plan to do. You cannot hope to succeed unless you do; it's not for laid-back people. 'bcnc' posted his question Dec 8 and a lot of people replied. 'bcnc' hasn't bother to reply since then. Not to say 'thank you', 'that's helpful' or 'I need to know more'.

My advice to 'bcnc' is: Don't bother, don't go into business; you don't have the right attitude. You will only lose money if you do. Business is people-skills besides your knowledge. No people-skills means continue to work for someone else who has them because you'll get killed otherwise. People-skills means you thank the people that try to help you, acknowledge those whose help was useful and generally put yourself out to make people feel good about you.

The secret to a successful business is a 4-link chain. Any link that's weak will break and you will be left holding nothing:

1) Have a good product: Better yet, have a uniquely good product. Produce something that in your heart you know is better than anyone else can make. That takes time because you have to put in the years to become an expert at what you do. Become good at at what you do by learning your trade and then improving on it. Live it, love it, make it your life. The effort is worth it.

Never be the other village baker that turns out loaves of bread. Not unless you put 'sprinkles' on your loaves while the other baker doesn't.

2) Promote your product: It is good so it's worth the effort to make everyone else know it is good. Think of yourself as a blade of grass on a lawn; a solitary unmowed blade of grass. The kind that gets noticed because it sticks out above the rest. Make yourself get noticed, stick out, paint yourself something other than green. Jump up and down if you have to; have no pride. No one will come to you no matter how good your thing is unless you do.

3) Have a good price. You think your product is good so it should be expensive. Wrong. Put yourself in the place of someone who would use your product. It must be priced where someone would take a chance on it because it's too good to pass up. Never get greedy; price should always be a fixed multiple of your time and the materials it takes to build what you make. Always have quantity discounts.

4) Support: This is probably the most important of all. Have a name, have a phone number always available where you can be reached. Be available when someone calls. Know enough about your stuff and how it will be used to give good help when you get called. Sales stuff convinces someone to buy your product, support is what you do after someone has spent their hard-earned money to buy it. Some need none, most need some, a few need a lot. You give them all your best; word gets around.

I mentioned a chain. It is a chain. A chain has links and if any fails, so does the entire chain. A business is a chain and if it is successful it is because all the links are maintained and constantly serviced. Good products, good promotion, good prices and good service. It seems very simple but it takes a lot of care and effort to keep it that way. Basically a lot of hard work all the time.:-)

Mariss

Mariss of course has some good points. I am always amazed by how much some of the "old fashioned - almost corny / simple courtesy - aspects of business are still so important.

High Seas - IMHO, an LLC is not the way to go - you should seriously consider setting up as a C corp or not bother with the change. I am not sure about your "location", but in california, it is easy for anyone to set up a corp themselves. I might go so far as to say it is "encouraged".

The financial flexibility afforded by a C corp is much greater than any other structure, and at least in my case, the tax savings more than make up for the "government fees". Perhaps putting it another way, the US tax law is written more or less "by and for" C corporations.

Another benefit for me, was that switching to a "C" corp for my business enabled me to feel comfortable doing my own (now simple) personal tax filings and just take the business tax filings to a pro.

Try to find a large business that is not structured as a "C" corp - very rare. There are a lot of reasons for this, and they are the same ones that keep most "partnership business structures" more or less little "Mom and Pop" businesses.

I recently formed an LLC entity after working as a sole proprietor. I worked through an attorney friend which was probably surely more expensive than online formation. On the other hand, my attorney makes sure everything is right, searches for conflicting business names etc. There are a number of details and the legal stuff is usually more complicated than you imagine.

The main reason I wished to respond in this thread is to point out that if you go from sole proprietor to LLC as a single member entity, the IRS will disallow the LLC status and for tax purposes you will still be taxed as a sole proprietor. Of course, you will STILL be an LLC entity once you make that formation, and you will have the liability, protective benefits of LLC. For taxes however, you look the same as a sole proprietor. This seemed the simplest approach for my needs. Being a one man show, I wanted to minimize administrative work that is required for C corp. If you are planning employees you may have different considerations. This is where consultation with a business accountant can help you to make the correct decision.

I'm not an attorney but, that is how it worked out for me. Good luck! i

-independentdesignsolutions- (http://www.independentdesignsolutions.com)

WOW Mariss!
That is exactly how I feel about running my buisness! I don't think I could have put it better. It takes a lot of drive and focus to make a small buisness get off the ground. I make my self avaliable for my clients even on Sundays.
I have friends that make fun of me for working so much. I strive for exceptional value at a great price and it's kept my little cabinet shop going strong for all of last year and already doing great this year. I am thankful people call!

You have to apprecieate the fact that people want to use your services and let them know it. YOU CAN NEVER SAY THANK YOU TO MUCH!

just my thoughts...
Nick

Some good info here.
I plan on starting a small part time cnc routing business from home and this was just the kind of info I was looking for.
If the business takes off well I will make it a CC which seems a better option
Thanks very much

I've had the 'misfortune' of being in business for myself my entire life and I have always done very well. I have never worked for anyone else since I was 18 and in college. This means I have never had things like medical, retirement and seniority provided by an employer so many people are afraid of losing when they contemplate starting a business of their own. I have always provided those things for myself so I'm used to it; it is my 'normal'.

Like everyone else, I have a family, obligations and I crave financial security. Were I employed by someone, had a family, house and was thinking about starting a business, I'd be nervous too. That 'bird in the hand' always seems to weigh more than twice as much as those two in the bush.:-)

Still, don't let fears stop your dreams; it can work out if you are careful. Never burn bridges behind you, start part-time while you keep your day job (and security) intact. You sleep 8 hours a day. Your day job is 8-hours Monday through Friday. That leaves 8 hours weekdays and 16 hours on weekends to work on your dream. Yes, figure on doing nothing but working and sleeping. Don't bother if you are not good with that because it will take that. 72 hours every week to get you towards your dream (well, maybe 40 realistically).

You have a good idea, it stands out and you are committed to putting in the time it deserves? Your effort and the market will judge its worthiness. If it's all good, the part-time income will equal, then exceed the day job income. Dump the day job and go pro only then. If it doesn't, hone your new skills until it does or until you discover you weren't meant for this. Know yourself, learn and know what you are good at.

Two friends, three stories:

Story 1) A good friend of mine (since deceased) but 15 years older than me worked for Hughes Aircraft as a EE in the '80s. We met professionally and my wife and I became close friends with him. He was thinking about retirement and starting a franchise business. He picked something like "MailBoxes R Us", invested his savings and moved from SoCal to New Mexico to start his new venture.

The whole thing was doomed from the start. He knew nothing about mailboxes; he was a EE after all. He threw everything he had and owned into it. He added pointless stress by moving away from the familiar to the unfamiliar. The biz lasted 2 years; long enough to bankrupt him.

Moral of the story? Three: Do or start from something you know something about. Your experience, education and skills are your tools. You use your tools to make living. Replace your tools for different ones if you must but do it one tool at a time.

If you play poker, you don't bet the deed on your property unless the hand you hold cannot be beaten. Keep perspective and be cautious about your saved money. Every time you put something in, you must see a good return. Throw everything in only when you hold a royal flush.

Starting a business is hard enough. It will take all of your attention and all of your effort. Anything that distracts you subtracts from what you have to give. Make sure you are centered, your wife is behind you and everyone knows what will be required as a sacrifice.

Story 2) This person I met through Hughes as well but this time their electronics division. Same situation, same time-frame but the guy was 10 years younger than me. Again, we became family friends. He was a cracker-jack electronics draftsman and CAD programs were appearing on the scene. His idea was to start a board layout business using CAD.

He rented a very nice tilt-up office space in an exclusive high rent industrial park area near Orange County airport. He had the technical knowledge and skills to run this business. He hired a lot of people, a few which were draftsmen he intended to train in CAD.

After his shop was up and running, he invited my wife and I to see his new operation. I still remember my impressions as I was given the tour. The lobby had granite tile floors. Glass doors with gold handles separated the lobby area from several conference rooms holding enormous teak conference tables. The executive offices were furnished with Koa executive desks, the best furnishings and the finest, most tasteful wool carpets.

The shop was in the back. It took up about 25% of the total square footage. There were some ratty drafting tables and two (2) PCs. That was it. The biz folded in less than a year.

Moral of the story? Just one: Know where the money is made. Hint: It's not made in the office. The best small companies I've been invited to see have the rattiest offices. All the machinery in the shop (>75% of total area) is new. No expense is spared on laboratory and test equipment. All assemblers and technicians have the best, latest tools and great workstations. You can eat dinner of off the shop floor. You worry about catching something infectious in the office though.:-)

Your start-up is not the place to resolve your ego issues. It is not the arena to put your ego on display. Doing so misuses resources that could better be used elsewhere. The office is the place where non-direct income work gets done. Remember; buff shop, crappy office.


Last story 3) These guys were acquaintances more than friends. They were in Minnesota and they worked for a medical equipment company. They had a good idea for some medical diagnostics equipment which is how I met them. They used our drives.

They moonlighted legitimately; their idea had nothing to do with their employer's product. Because they moonlighted, they called their venture "Lunar Radiation Inc". They worked all the time and they were dedicated and they did everything right. They had a buff production area and awful offices. They were bought out by GE and their company became the Lunar division of GE Medical.

Moral of that story? There isn't any. You do it right and there are no mistakes for anyone to learn from.

For me, I cannot think of a better way to have spent my professional life. It is always better to be a hungry dog without a collar than a well-feed dog wearing one. If the collarless dog is half-way smart, he won't even ever be hungry. The biggest advantage of working for yourself is the full freedom to pursue any dream that catches you. You don't have to answer to an employer who may not see what you see.

Mariss

WOW Mariss!
That is exactly how I feel about running my buisness!....
I have friends that make fun of me for working so much.....Nick

They are not friends if they make fun of you.

Mariss does explain what is needed very well and you touch on one of the unfortunate aspects of doing your own thing. The 'friends' who make fun of you for having a dream and working like a maniac, then when you are successful they resent it because "you are lucky and have your own business".

One small exception to point number 3 in Mariss" pints above.

THe price you charge for a product had to reflect the expectations of the buyer.

Example. Ccrarillo makes con rods for the racing pros. Their rods go for about 200 dollars each or more for the "cheap" ones. Real jewelry. Special proprietary steel, special SPS rod bots, Special SPS-Carr OPTIONAL bolts that are even more pricey. They essentially created the specialty con rod market of which there are now MANY more competitors.

DO you think for a minute that you can compete in this same market if you came up with a rod you could make profitably that was 'just as good" for say 1200?. How can you have something just as good for less money? think about it.

Sell cheap and your not respected, Yes there are price conscious buyers but een they are skeptical of "cheap". Get over consumed by price and cost, you can fall into the cusp of sacrificing quality for the former.

I could sell cheap cams, I refuse. EVERYBODY gets a NASCAR quality cam from me. Why? its is cheaper to make one quality and not have scrap than to give a crap about this guy and not the next.

I"m not disagreeing with Mariss, I"m jsut pointing out a reality alternative that exists in my industry.

Here's a quick question (maybe)
I've been a small (hobby) business for a few years. Cheers Jim

Don't know how it works over in Austrailia, but in the U.S, don't EVER refer to your small business as a hobby!. The I.R.S. will disallow many if not all of your deductions.

Not sure if this is the right place to post this but here it is. I have some metal working equipment in my garage and do some playing around as a hobbie. My question is: Is it worth starting a small part time business,or is it not worth the hassal of dealng with the taxes, Etc? I have a few people interested in having some work done and I want it to be all legal like if I were to do work for them.
Thank You

Best advice would be to get and read a book called "Small Time Operator."

Amazon.com: Small Time Operator: Bernard B. Kamoroff: Books


Follow the advice in that book and you can make sure you do all the paperwork (which these days is not hard) that will keep the IRS from calling you a "hobby" and negating your write-offs or causing you other problems.

Unless you have some insane/masochistic love of paperwork and bureaucracy, then the main thing you want to avoid (or delay as long as possible) is having non-family members as "employees" -- the amount of paperwork (insurance, unemployment, withholding, etc) that is necessary for even just one "employee" will drive you nearly nutso.

It is definitely wiser in terms of time (even if a bit more expensive in terms of dollars) to sub-contract any/all non-production work out to other local small businesses for as long as possible (i.e. if you or a family member is not competent at something then find some contractor to do your accounting, rather than hire an "employee" to do it; likewise, for as long as it is possible & practical, hook-up with independent sales and/or service-reps on a contract/percentage basis rather than hiring your own sales or service people, etc.)

In my experience, the only time you should hire employees is when you HAVE TO -- for your profit generating main "production" work (and even then only when you have "long term" production and/or contracts scheduled -- even paying a premium for "temps" can save you a lot of hassle if the need is to have help with some short-term "overload.")

ok I know this post has not been updated for a while but here is a delema i would be facing .
I am working for a machine shop know how to do just about everything from start to finnish for every part that comes in. I have been having thoughts about starting a part time on the side but here is the question my boss would find out I have a shop they would fire me then they would try to take same legal action against me.
how would some of you guys go about this.

Did you sign a no compete form with them?
Are you going to be doing work for their customers?

I think if you are doing it on the side for your own customers/contacts or if you are offering a little bit different service it is none of their buisness what you do with your own time/money.

Just my thoughts
Nick

I agree with the other poster, except, I see no need for a non-compete clause unless you're doing the same type of work (on the side or otherwise) as your employer. And if you ARE doing the same type of work, you'd better be looking for other employment.

I got fired once when my boss found out I was just thinking about starting my own shop. That said, usually you won't get much hassle if you are not directly competing. In other words, if the company you work at in the day time maKes gears, and you make say, custom motorcycle parts, most bosses will be cool with it and may even help you. Assuming said boss is reasonably sane. One guy I worked with had a CNC router, my (our) boss had the guy make some signs for him. :cheers: