How to start a small business??

[Uncle Saggy]

I hope a CPA will jump on here and explain how my thinking is wrong.

Don't have a clue but I'll have to say you're wrong. Just because I can.



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[Playa]

What I've said is the truth. I've owned 3 companies over the last 20 yeard, a DBA, a corporation and now a LLC. I turned my first company into a Corporation as fast as I could after paying 38 percent taxes as a DBA under the advice of my accountant. The next year as a corporation my taxes were around 25 percent.

A corporation is it's own identity. Even if you're an owner of the corp. or majority stock holder you are still looked at like an employee of said corp. even if you're the president. Yes I personally take a salary and draws as I wish, the company files it's own taxes and I file separately individually.

I think his point was you are going to pay the taxes regardless. Your tax rate fell to 25% when you re-structured as a Corp, but that was just your personal taxes based on your income. The Corp still had to file taxes based on its revenue, I’m guessinf that was taxed at a rate of 25% or more... would need to know the actual income and Corp rev, but I bet you paid the same or more in taxes.

[Mexico]

I think his point was you are going to pay the taxes regardless. Your tax rate fell to 25% when you re-structured as a Corp, but that was just your personal taxes based on your income. The Corp still had to file taxes based on its revenue, I’m guessinf that was taxed at a rate of 25% or more... would need to know the actual income and Corp rev, but I bet you paid the same or more in taxes.

Actually no, I'm not going to put my personal finances up but my savings were dramatic as a whole. I have a great accountant.

[Charles]

I hope a CPA will jump on here and explain how my thinking is wrong.

I'm not a CPA but will gladly explain why.

#1: Your explanation did not have any grumpiness.

#2 Zero mention of an arse whooping

I think I can speak for the rest of the class in saying we would appreciate you not being so soft in your future banters.

Burn-a-Dell is saying the Corp. is paying Corp taxes on profits as well as payroll taxes, hence the double taxation. But again, I ain't a CPA.

To the OP. How you set up your business venture should be determined on what type of business.

[Throwin Darts]

Best advice I can give is to keep good books. I use Quickbooks Online. Not the desktop version, but Quickbooks Online.

I've had four business entities setup and having Quickbooks Online keep track of all my expenses and mileage helps out big time come tax season. You can add your accountant to have access and they can login and prepare your taxes in no time.

Also use the app to snap pics of receipts at the time of purchase. If I wait to add them all later I find that I forget to do them.

They run specials all the time and it's pretty cheap on a monthly basis

https://quickbooks.intuit.com/pricing/

[Texas Grown]

You could always start making duck calls. And call it Carter's Calls.

The fish are biting, and there's hogs to be kilt. Gotta go!

[Sika]

Can someone start a hunting guide service or cattle business as a side job? I have a friend who owes the government every year with no write offs.


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Of course...I run a guide service, tracking dog service and a kennel.

Those expenses can be deducted but it's against the income from the outfitting, tracking services and puppy sales that is reported.

To start my business, I filed the name with the county clerk (the county in which my business is located) and opened a small business checking account with a local bank. If you don't have employees you don't need a tax IEN.

You can always change the business structure later (set it up as an LLC.)

[Catarina]

People really over think starting a business..... you can go to a CPA or county tax office and have 10 companies filed before 5 o'clock today. It really is pretty simple, good luck and have fun with it.

[PondPopper]

DBA will kill you tax wise. I've been there done that! As a corporation you're looked at as an employee or board member not an owner... it's a huge difference. Somewhere around 10 to 15 percent...plus it protects your personal assets.

Yep...
All true..

[TeamAmerica]

Speak to a CPA. I have some initials by my name but i don't want to go through the legal disclosures. this is NOT tax advice. now....

What many are alluding to is the newest structure "du jour" if you will. the Sub S corp. if you are a sole proprietor or individual, everything from your business will be subject to self employment and medicare taxes. this is 12.4% social security and 2.9% medicare tax. if you work for someone, you pay half and they pay half as the employer. BUT, when you are self employed, you pay it ALL!

So, what many do is deem themselves an employee of the S corp. assume the S corp earns $100K in profit. They then pay themselves a salary of $50K which is subject to the employment taxes above. The remaining $50K is distributed from the S corp to the owner (still You!) as a dividend (still subject to income tax, but not employment tax). If there is only one owner and one employee in an S corp and magically that person is the same, you can bet the IRS will focus on this - they know it is a loophole so they scrutinize it as such.

RISKS!
Risks of S-Corporations
The IRS tends to take a closer look at S-corporation returns since the potential for abuse is so large. For example, if you make $500,000 in one year but only designate $20,000 of that as salary income, you might trigger an IRS inquiry, since you are avoiding so much self-employment tax. The guiding principle is that you must designate a "reasonable" amount of your income as wages, rather than a distribution. What constitutes "reasonable" can often be a gray area, but if you push the envelope too far, you put yourself at risk for an IRS audit and potentially penalties and interest on any back taxes assessed by the IRS.

https://turbotax.intuit.com/tax-tips/small-business-taxes/how-an-s-corp-can-reduce-your-self-employment-taxes/L4abUcaRn

Good luck and tell us about your business idea!

[Mexico]

Speak to a CPA. I have some initials by my name but i don't want to go through the legal disclosures. this is NOT tax advice. now....

What many are alluding to is the newest structure "du jour" if you will. the Sub S corp. if you are a sole proprietor or individual, everything from your business will be subject to self employment and medicare taxes. this is 12.4% social security and 2.9% medicare tax. if you work for someone, you pay half and they pay half as the employer. BUT, when you are self employed, you pay it ALL!

So, what many do is deem themselves an employee of the S corp. assume the S corp earns $100K in profit. They then pay themselves a salary of $50K which is subject to the employment taxes above. The remaining $50K is distributed from the S corp to the owner (still You!) as a dividend (still subject to income tax, but not employment tax). If there is only one owner and one employee in an S corp and magically that person is the same, you can bet the IRS will focus on this - they know it is a loophole so they scrutinize it as such.

RISKS!
Risks of S-Corporations
The IRS tends to take a closer look at S-corporation returns since the potential for abuse is so large. For example, if you make $500,000 in one year but only designate $20,000 of that as salary income, you might trigger an IRS inquiry, since you are avoiding so much self-employment tax. The guiding principle is that you must designate a "reasonable" amount of your income as wages, rather than a distribution. What constitutes "reasonable" can often be a gray area, but if you push the envelope too far, you put yourself at risk for an IRS audit and potentially penalties and interest on any back taxes assessed by the IRS.

https://turbotax.intuit.com/tax-tips/small-business-taxes/how-an-s-corp-can-reduce-your-self-employment-taxes/L4abUcaRn

Good luck and tell us about your business idea!

[2B4Him]

So, what many do is deem themselves an employee of the S corp. assume the S corp earns $100K in profit. They then pay themselves a salary of $50K which is subject to the employment taxes above. The remaining $50K is distributed from the S corp to the owner (still You!) as a dividend (still subject to income tax, but not employment tax). If there is only one owner and one employee in an S corp and magically that person is the same, you can bet the IRS will focus on this - they know it is a loophole so they scrutinize it as such.

This is not correct. All income from an S-Corp is taxed to the shareholders, regardless of your 'designation' as dividend. If you are an employee of the S-Corp, the corp. deducts your salary in determining its net income. But whatever the net income is, you (if the sole shareholder) are taxed with that whether you take it out or leave it in the corp.
If the S-Corp. would otherwise have $100K in profit, you will be taxed on $100K whether you pay yourself some of it as salary or not.

Comments from others making a 'DBA' seem like some type of 'entity' are also erroneous. 'DBA' means 'doing business as'. You file with the county in which you do business so others know that the business being conducted as 'Acme' is actually another entity - an individual, a corporation, a partnership, etc. The 'DBA' is not a taxable entity - it is the name under which an entity conducts business. John Smith could file the name 'Acme' as its 'DBA'; or ABC Corp. could file the name 'Acme' as its 'DBA'.

[Playa]

This is both proof and an example of why our tax codes will never go away. They are so convoluted that intelligent citizens can not decipher thus they are a lever to subject on the people.

Flat tax- every citizen and every Corp pays the same amount

[ddcainjr]

I hope a CPA will jump on here and explain how my thinking is wrong.

I am a CPA and I think you're correct. LLC and S Corps are "pass through" entities which means you pay the same taxes. C Corps are not pass through entities and they pay taxes and then the owners pay additional taxes.

As others have said, you do not need to incorporate. The benefit is reduction of liability. If you are DBA, all of your personal assets are at risk. If you incorporate, only the assets of the entity....Assuming you did not do anything to "pierce the corporate veil", which would cause your personal assets to be at risk.

[txhunter-1]

Here you go, this should give you some info.

https://businessintexas.com/start-business