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Your posts lacks understanding what a marketing edge is, passion, understanding barriers of entry and a whole lot of other things that would make you successful in business. Getting family involved is also a quick way to no longer have a family.
Stick to working for someone or if you must, investigate a franchise. You won’t get wildly rich, but someone else will have done most of the legwork for you.
Can you recommend a way to screen franchises ?
What do you think make family businesses successful ?
Most businesses succeed because somebody has a passion for it. A new business will require a lot of unpaid time to start, and money to invest. Businesses also succeed because the person owning the business knows more about it than other people. That might be something simple, like knowing where to purchase items at wholesale, or realizing that a business is underrepresented in a growing area and will be profitable. It might be a bit more complex, like having an accounting degree or an electricians license.
Unless you can start checking some of those boxes, starting a business is not a good idea.
People misunderstand tax benefits. You get a tax deduction for something you spend for the business. If you purchase a computer for your business, you can deduct it, but you still purchased a computer. Same thing if you drive for your business. You can deduct the mileage, but you still spend the gas. Remember that a deduction means you do not have to pay taxes on the profit, it is not a full credit for the expense. That means if you pay a $1000 for business insurance, you can deduct $1000 from your income, and pay about $200 less in taxes.
So if you want to pay $1000 to save $200, that is the type of tax benefit small businesses get.
You will also be subject to paying employer FICA, so instead of paying 6.75% for social security, you get to pay 13.5%
So if you are doing it mainly for tax benefits, you are going to lose your shirt.
Bad idea. Really, really bad idea. Businesses DEMAND time and responsibility. Starting one as an employment program for family means that you are going to be a relative and a boss/partner. That is a recipe for both business disaster and family fights.
Remember that loans are a burden on profitability, and need to be paid off whether or not your business succeeds.
Most banks will require you to sign personal guarantees for loans, which means if the business fails you still need to pay back the loan.
These things are relative of course.
I think you need to do a lot more thinking before you start a business. Explore the idea, but you need to understand a lot more about owning and running a business.[/quote]
Thanks for the detailed replies
1 paying more in SS means you get more SS when you retire ? Or makes no difference?
2 can you pay less taxes on your house if that is your primary site of work?
3 what kind of justification IRS wants for business expenses ?
1 paying more in SS means you get more SS when you retire ? Or makes no difference?
It makes no difference.
As an employee, you pay 6.75% of your earnings to SS, and your employer pays and equal amount. As a small business owner or self-employed person you pay both the employee portion and the employer portion.
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2 can you pay less taxes on your house if that is your primary site of work?
You are talking about a home office deduction. Warning, deducting a home office increases your chance of IRS audit.
Yes, you can deduct the expenses of having a home office, but the space used for business must be used ONLY for business. So, if you have a 2000 sf house, and you use a room as an office/guest room, you deduct nothing. But if you convert a spare room into office only, and it is not used for anything else, you can deduct that square footage.
What you can deduct gets comlicated, so talk to an accountant (which costs money...), but in a nutshell, you can deduct $750 a year pretty easily . Remember, that is a deduction, not a credit, so for a $750 deduction you wind up paying about $200-$250 less in taxes every year.
Is it worth giving up an entire room of your house for $200/year? Do you even have a room you can dedicate to business purposes, or will you need to get a bigger house to do this?
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3 what kind of justification IRS wants for business expenses ?
Typically receipts documenting direct expenses.
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4 will a LLC or S CORP limit personal liability ?
Definitely maybe.
One form of personal liability can be mitigated by insurance. You may be partially covered (remember deductibles) for business related damages, such as a car accident, structure fire resulting in business loss, etc.
The other liability you are shielded from with an LLC/sub-S is personal liability for loans taken out by the company ... IF YOU HAVE NOT PERSONALLY GUARANTEED THEM.
Back in the mid-90s, I opened up an LLC. I had to personally guarantee a line of credit of $500,000, but also the commercial rent on the space, and the corporate credit card. Some vendors demanded a personal guarantee, others did not. Had I declared bankruptcy, the bank could have seized my house and other assets to pay off any of those personal guarantees.
As an employee, you pay 6.75% of your earnings to SS, and your employer pays and equal amount. As a small business owner or self-employed person you pay both the employee portion and the employer portion.
You are talking about a home office deduction. Warning, deducting a home office increases your chance of IRS audit.
Yes, you can deduct the expenses of having a home office, but the space used for business must be used ONLY for business. So, if you have a 2000 sf house, and you use a room as an office/guest room, you deduct nothing. But if you convert a spare room into office only, and it is not used for anything else, you can deduct that square footage.
What you can deduct gets comlicated, so talk to an accountant (which costs money...), but in a nutshell, you can deduct $750 a year pretty easily . Remember, that is a deduction, not a credit, so for a $750 deduction you wind up paying about $200-$250 less in taxes every year.
Is it worth giving up an entire room of your house for $200/year? Do you even have a room you can dedicate to business purposes, or will you need to get a bigger house to do this?
Typically receipts documenting direct expenses.
Definitely maybe.
One form of personal liability can be mitigated by insurance. You may be partially covered (remember deductibles) for business related damages, such as a car accident, structure fire resulting in business loss, etc.
The other liability you are shielded from with an LLC/sub-S is personal liability for loans taken out by the company ... IF YOU HAVE NOT PERSONALLY GUARANTEED THEM.
Back in the mid-90s, I opened up an LLC. I had to personally guarantee a line of credit of $500,000, but also the commercial rent on the space, and the corporate credit card. Some vendors demanded a personal guarantee, others did not. Had I declared bankruptcy, the bank could have seized my house and other assets to pay off any of those personal guarantees.
If you have a small office building does that help with deducting rents
Business credit cards are they easier to apply for with higher lines of credit?
What was your driving force that makes you a business owner and How did you find the patient and the skills to overcome the initial obstacles
If you have a small office building does that help with deducting rents
Owning commercial real estate is definitely outside my area of expertise. My novice level of understanding is that all rental revenue is declared as income, all expenses are deducted from that, and the remainder is your profit or loss.
So if you have an office in a commercial building that you own, you wouldn't deduct the space as an individual line item, it would be wrapped up in general building expenses just like a hallway, entryway or mechanical room.
I guess you could form multiple companies, one of which leases the office from the other, so one company would deduct rent for the office, the other would declare that as income.
I am not educated enough on those nuances to give you any real opinions, but that seems much more complex than you are ready to take on yet.
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Business credit cards are they easier to apply for with higher lines of credit?
Not really. The issuing bank still wants to make sure you have the capacity to handle it (at least as much as any bank vets credit cards). If you have a new business, it will essentially be a personal credit card, personally guaranteed. Once you have a business established for several years, with established credit, then the bank may allow a credit card to be held by the business only. The line of credit will be based upon your gross business income, or net profit.
Business credit cards shouldn't be used that much. They are for incidental use, and I never needed one with a limit of more than $15,000 or so. You should have a line of credit with any major suppliers you have, and one with a bank to draw upon to address seasonal cash flow needs. If you are purchasing fixtures, financing inventory, or doing construction on a credit card, you are doing it wrong.
I mostly used my business card for vehicle expenses, office supplies, occasional client lunches and travel.
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What was your driving force that makes you a business owner and How did you find the patient and the skills to overcome the initial obstacles
This is sounding a bit like a high school essay question.
In my case, necessity. I worked for a company that was mismanaged and couldn't pay its bills. At the same time, I knew that the division I managed was profitable, and I had excellent relations with my clients. A portion of my job had always revolved around managing revenue, which is how I knew my division was making money and had been supporting the other money losing divisions for years. One of my partners was our accountant, so between us we had the skills necessary to form a company to take over from my employer that was failing.
I ran that company for a number of years until the industry changed, and I got out a couple of years before a national implosion.
Since then I have opened 3 more companies, all rather small. Two I sold to partners, one is my wife's company, where I provide the business expertise and she runs it. Those three subsequent businesses have all been replacement incomes to some extent, providing about as much money as a reasonable salary.
There are franchise matching services or brokers that might be able to help you. I started my businesses from dirt.
What makes a family business successful? Not hiring family.
Very true.
Managing employees is bad enough, but managing employees who happen to be family can be many times worse.
Some employees are bad because of their family issues. They are late, call out a lot, are distracted, or whatever because they have a chaotic home life. As a manager, you give them warnings, set expectations, and if they do not get better, you fire them.
You cannot do that with your sister or cousin, at least not without your father or brother giving you grief.
Managing employees is bad enough, but managing employees who happen to be family can be many times worse.
Some employees are bad because of their family issues. They are late, call out a lot, are distracted, or whatever because they have a chaotic home life. As a manager, you give them warnings, set expectations, and if they do not get better, you fire them.
You cannot do that with your sister or cousin, at least not without your father or brother giving you grief.
Yep, any business can easily have 50% plus turnover. Imagine if your family member quits on you or worse, you have to fire them. No win.
I had a commercial real estate oriented venture. That was the 10 year business.
The longer term one, 24 years, was related to consumer packaging.
I sold both in 2020.
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