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The Business of Knife Making A forum dedicated to all aspects of running, managing and legal operational issues relating to the custom knife making and custom knife selling industry. |
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#16
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I may have missed the answer to the initial question in this thread - the question asked how much could one make from the sale of knives before its considered a taxable business.
Profits from a hobby are taxable as income, regardless of amount, while losses from a hobby are not deductible. As a business, profits are taxable and losses are deductible, but there is usually an end to the number of years for which losses can be taken - at least for small, part-time businesses. As a general guideline, the IRS will tend to look at a small business, particularly a home business, as a hobby (with non-deductible losses) if losses are reported for more than two out of three years. There are many exceptions - this is just a guideline. As mentioned earlier, if in doubt, get advice from an accountant on tax issues, and an attorney on liability issues. |
#17
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Here in Louisiana anything over $1 above the cost of materials is taxable if your work is a hobby and you are selling that work. Nothing is deductible for a hobby.
However, as a business there are a lot of breaks. They will vary from state to state. Some of the deductible things for me are:
I'm sure there's something I'm missing here, but you get the idea. Regarding the zoning thing, a lot of it has to do with how you present yourself and the wording you use when you go to the town clerks office to set up your business. I did not go up there in my nasty shop clothes. I looked like a business man. I never used the words manufacture, produce, or knives. When asked what type of business this was, I said that it was a custom "cutlery" business. Before receiving my ####### I received a call from a city rep who wanted to come by and check out my office space and parking arrangements. He was on a cell phone and on his way to my house. I told him he was more than welcome, but that this was primarily an Internet run business and that it was not like a store where customers would park and look at products on a shelf or a display case. I also mentioned that the only business conducted away from the phone or computer would when I traveled to shows. That satisfied him completely. He said that he was just going to head back to his office and send me my #######. It all worked out quite painlessly. Everything I said was absolutely true. I just chose my words carefully and only provided enough information to get the job done. [ Edited to add more things to the list ] |
#18
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MP,
Legal and tax advise is exactly what a new business needs. You don't go to jail or pay fines, penalties and interest for picking the wrong logo. You do however pay these things if you make a bad decision regarding Legal and Tax issues. Guys if you are going to be a professional. Then hire professionals. Remember, the advice you get for free is worth every penny you paid for it. __________________ Les Robertson Custom Knife Entrepreneur Field Editor for Blade Magazine www.robertsoncustomcutlery.com |
#19
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An excellent summary, Terry. Thanks.
I do think that grinding belts are deductible as expendable supplies, and that this might merit further discussion with your tax advisor. |
#20
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Hi Kelly,
Yes, grinding belts are deductable (Durable Expendable). Anything you use to make a knife, sell a knife, ship a knife, etc. is deductabile. Just remember to keep those receipts! __________________ Les Robertson Custom Knife Entrepreneur Field Editor for Blade Magazine www.robertsoncustomcutlery.com |
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