At what point should you "start a business"?

I have been helping people with web development for some time. I am not great designer or programmer. I help schools and businesses not get ripped off. I help classrooms incorporate the internet. I read journals to determine the new trends in education as it relates to online communications. And I put good companies in touch with people I find on DP.

I have started doing pretty good for myself. Nothing great but it is paying the student loans.

At what point should I file for a business or should i?

What should be my first step?

 

If you're just a web designer/programmer doing freelance work for others, then there's really no need to register as a real business. I'm pretty sure that there's no major benefits to yourself, and as a client, I'm much more interested in your portfolio than if you're a business or not (infact in my experience, I prefer freelancers to companies when it comes to web design).

Unless you're doing major projects, employing other people or have your money on the table in some way then I don't see the point in filing. Then again, I could be wrong

 

the tax man would say.... straight away or face going to jail.

you first step would possibly be to have an impartial chat with an accountant, they are pretty reasonable about telling you the shoulds and should nots.

James.

 

You might want to start the business for a few reasons.

1. You obviously like doing the work so it might become your career. Starting the business will give you heaps of experience.

2. You will avoid being hunted by the TAX man.

3. It will appear more professional to all your clients and probably lead to more work.

 

I agree with "right away". two words: 'Write Off's'

Digital Camera
Computer
Media
Internet connection
Home Office
Hosting
Office supplies
Software
The list goes on...

 

Taking business deductions during any year in which the business does not have any revenue is like waving a red flag in front of a bull. It will almost surely result in an IRS audit and then you'll be expected to produce receipts for every pencil that you bought.

IRS agents are not stupid. If you do not have any revenue, they are going to assume you are making it sound like you have a business in order to deduct personal expenses from your income taxes.

Try to delay your expenses whenever possible until such time as you have some revenue to offset it against.

 

Who said anything about not having revenue? He states that he has revenue, and you're supposed to report that anyway. Starting a sole prorietership is fast and cheap.. no reason not to IMO.. but I'm not a legal professional so take my advice with a grain of salt.

What I do is save all of my receipts organized into folders - every last one - and then bring them to the tax man at tax time and let him do the work. Sure you pay more for a professional to prepare your return but you still come out ahead when it's over. Haven't been audited yet (fingers crossed), but as long as you're not defrauding the IRS then it should be little more than an inconvenience...

 

Over in Europe they would already throw you in jail for not paying taxes .

 

At a point when you feel confident and knowledgeable.

 

Agree with Think here... he says he has income so why not deduct against it? You get many more deductions under a company than as an individual. Get yourself a business, business checking account, business credit card (if you can - depends on the bank if you can get one without being an established business first) and some accounting software. I use QuickBooks to keep track of income and expenses. At the end of the year I have a nice record of income and expenses and then I just let my CPA figure out what is deductible and what isn't. I find that an LLC is the easiest route to go, especially for a service-oriented business such as the one you describe. Best of all, this is all completely legal and within US Tax Code. Why not take advantage of it?

 

I make enough that it adds thousands to my annual income.

How easy are the steps to setting up the LLC, the checking account? How much do accountants cost?

 

Here's a good place to start: http://www.sba.gov/

 

There are lots of places out there that will fill out the papers for you. Do a search on Google for "incorporate", "form an LLC", etc. Most people choose either Delaware or Nevada companies due to favorable state laws. If those aren't your home states you'll have to pay an annual registered agent fee to someone in that state. I think I pay $90/year to have a registered agent in Delaware. Your accountant should be able to tell you all about it. It's a pretty easy process. You should be able to use the accountant that does your personal taxes for you, or else they can recommend you to someone.

 

Go to your local B&N and purchase a book on starting a business in your state. Or, get a similar book from Amazon. Make sure it is specific to your state as the laws differ greatly.

When to start a business is really too complex a question to answer easily. There are many, many variables to consider.

 

In your case, you could file for a sole proprietorship. Here's a good place to start: http://www.irs.gov/businesses/small/article/0,,id=98202,00.html

 

In the good ole USA, unless you really start making bucks, and even then you really don't have to, just file with the long form, schedule C for business, and list your income, your expenses, etc there.

It does not raise a red flag at IRS to have more expenses than income.
Unless we are talking big damn difference!

When I was in the cattle business (any decent Texan as some point in their life just has to have cattle), I always had more losses than income and never had a problem (of course, my other income was like way more than the cattle could lose me).

Now back to my 80's video music!