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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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#1
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Biz #######
Hello everyone ! I finally got my profile printed in the February BLADE knifemaker's showcase section. This is a very exciting thing for me and my family, however something strange started happening: ORDERS!!! Somehow I wasn't expecting that to happen so soon. I know now that I will be very busy for a while. I have a question though; at what point should I seek a business #######? This was only a hobby until now, and I'm quite sure I'll not be able to quit my regular job any time soon. Any advise would be greatly appreciated. Thanks, WALKER
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#2
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When? As soon as your expenditures become larger enough for you to wish to claim them as a business expense. That's probably right now.
As you will earn income from your work, you will have legitimate expenses, all of which are covered by your business--if you have a legitimate one. That's where the business ####### comes in. All of a sudden you have a tax write-off for things that were simply fun to have and part of your hobby. From what I remember, you get no benefit whatsoever by declaring your knifemaking as a legitimate 'hobby', even though there is an area to claim such on your long 1040. The downside will be obvious: The need for documentation and going through the required start-up paperwork and tax work at year end. It may involve an accountant. I don't do my own taxes, but spend the money on a pro to help guide me. Coop |
#3
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Coop, I did have some initial expense for equipment, materials, tools, and consumables. However that was a few years back. My current expenses are generally for materials and consumables like buffs or sand paper (materials too- but still not a major financial burden). I already pay to have our taxes done. Is there a minimum dollar amount that you would consider 'not worth the effort'? If the larger expenses I incurred in the past will apply now then it's a no-brainer. Thanks, WALKER
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#4
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Walker
I have a tax number and turn in everything i sell, also it keeps you from paying taxes on supplies for your business. I kept recipts and group them catorigys. Your "materials for resale" will count as inventory. And you can depreciate your equipment and shop. __________________ Ricky D. Finch http://www.finchknives.com/ |
#5
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Walker
I have a tax number and turn in everything i sell, also it keeps you from paying taxes on supplies for your business. I kept recipts and group them catorigys. Your "materials for resale" will count as inventory. And you can depreciate your equipment and shop. I do this as a part-time business. __________________ Ricky D. Finch http://www.finchknives.com/ |
#6
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Get a CPA
Hi Walker,
First, as far as the IRS is concerned there is no such thing as a "Part Time" business. You either have a business or you don't. Second, never call something a hobby if you can call it a business. Third, get a CPA. Like Coop I do my own taxes and then give them to the CPA for the once over and his signature on the tax return. Having a CPA signature on the tax return provides an additional benefit of your CPA being the first person the IRS contacts should they find a problem. For 2005 you should declare yourself as a "Sole Proprietorship", you need not show any profit but you can take all the expenses and depreciation. For 2006 look at becoming a Limited Liability Corporation (LLC). This is very similar to a sole proprietorship but provides additional legal protection from frivilious law suits. As well it can shelter you personal assets. __________________ Les Robertson Custom Knife Entrepreneur Field Editor for Blade Magazine www.robertsoncustomcutlery.com |
#7
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Hi Walker
A Little off subject but how did you go about getting your profile published |
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