Start of new business question . . .

[HIFI]

My young daughter is starting a new business in the women's beauty field. This is a business that requires a small rented space, very small amount of inventoried product and no employees. In short it is a one person business like a hair dresser.

Because I have always been an employee of someone I can't advise her on direction regarding business title. Do one person business's like hairdressers simply go into a business with their social security number or do they get a name, tax ID and file something beyond personal income tax. The business income and sole income would be less than $100k first year and estimated $125k second year. Of course that total includes all product purchases, rent, business insurance. BTW . . . The product purchases are not for resale . . . just for the cosmetic service she will provide.

The question is how does claim income/expenses . . . Personal income tax and her SS number or get a tax ID and conduct business separate and, I guess, pay herself?

Thanks in advance for helping.

 

[Sprint7TW]

I have no idea about the laws in Texas but, I assume it is located there from your information.
I would suggest that she either visit with an accountant or business attorney before she starts the business.
Within an hour they can have her on the right path.

 

[HIFI]

She is in Texas .

 

[dwna1a]

Start right, call an accountant and set it up. They would be able to set her up and guide her as to how things should be. If she pays herself she would then qualify for unemployment if things go south

 

[dicor]

Ditto...hook up with an accountant. She will more than likely be told to apply for a EIN and keep separate bank accounts. You may want to talk to the accountant about possibly incorporating as a LLC. It may sound a little over the top but if someone finds a reason to sue her in the future and takes everything at least the LLC will protect her personal property.
Disclaimer: I'm not an accountant or lawyer so I'm going on what I've been told. I used Legal Zoom.com to incorporate my business short sweet and cheap.

 

[jrseitz]

My first reaction would be to form an LLC to protect her personal interests from a business loss or bodily injury lawsuit. She definitely needs to talk to an accountant and a lawyer to look at all of the options. Each one will have some trade offs. Best of luck to her!

 

[Larry&Leisa]

Worth the small cost and peace of mind to get professional help and guidance, especially with the sort of sales she is anticipating. ( it's also worth letting the accountant handle your books at least quarterly if not monthly for tax reports, filings, etc)

 

[JimG]

In the simplest terms... Pay quarterly estimated tax during the year, and at the end of the year, file a schedule C and SE as a sole proprietor. Expenses and income are claimed on the schedule C, social security is paid with the SE (Self Employed) form.

My wife has her own dance studio, so we have done this for 32 years.

 

[northern]

When I was retired in 1998 I started a buisness. I am in the design and managment of projects. It does not matter what you do, if you set up a buisness as a seperate entity it be comes a stand alone entity. It is what people sue if you do something wrong. The cost to set up a buisness entiy in 1998 was $1,000.
Your state probably has a lot of help available to help her. In Canada the Unemplyment Insurance office offered courses for free on how to set up and run a company. Start with a call to them and ask before she starts paying for information. Based on what I did it is best to keep your personal income sperate from your company. State laws are probably different to provincial laws so best to find a local to help. A college might offer a night course on small buisness operation or there may be a mentor program where a person who has set up and run a buisness will help guide her along. I have given advice to people starting up in my area. It is not that hard if you know the rules.
If you PM me I can go over in detail how I set up and ran my buisness.

 

[tdschafer]

Hifi,

When I bought my bar last year I contacted Spiegal & Utera. Here is their website:

http://www.amerilawyer.com/

They are an inexpensive law firm you can search online but it doesn't look like they cover Texas. Maybe you can find something similar for your area. They set me up with an "S corp" and procurred my State Tax ID number. Your daughter is definitely going to need one unless you are in a state that doesn't collect state tax. I'm not sure what the fed's require otherwise. I set up my quarterly taxes via the NYS website. I then contacted my accountant and shared the password etc with him. He calls me when the info is due and basically enters it for me on the state site. I'm not sure what else you will need. Your daughter is going to want to establish a corporation to shield some of her liability of the business from her personal finances. Obviously a good liability insurance plan is a must in case someone gets hurt or pulls a slip & fall at her shop. I don't think she needs an LLC Aka: Limited Liability Corporation for the business unless she owns the property. Then she should establish one of these for her real estate holdings as I understand.

I am certainly not an expert in this area. I only know from my research and what my brother has done with his businesses, both restaurant & real estate holdings. I hope that this helps and at least gives you direction on what questions to ask your attorney/ accountant.
Good luck to her!!

 

[Kreole Kid]

FWIW, My wife and I did went with an LLC title, registered our business with the Secretary of State to secure our name, and put the high insurance limits (100/300/50) on all our vehicles. IMHO it's probably best to keep business stuff totally separate from personal stuff because God forbid anything happen, they won't be able to come after your daughter with a personal lawsuit.

Call me a little over protective, but, I'm covered.

 

[Dave 205]

I cost me about $1,000 to form a LLC with an attorney. I paid a CPA for about an hour of consulting when setting up a simple 1 person business. As things took off, I've been able to figure out a pretty simple pattern of what my basic expenses will be each year, and what will represent profit each quarter that needs estimated taxes paid on. The CPA prepares a personal tax return and one for the LLC each year. Get an umbrella liability policy, it's nice when someone else has a million or two million reasons to back you up with relatively little annual cost.

 

[BritLady]

From my business experience she will definately want to set up a seperate entity: LLC or similar otherwise she will be personally liable for anything that happens in her retail unit that could result in a law suit. Although she could claim her business income/expenses on her 1040 Schedule C, I personally would prefer the LLC route for protection purposes and they can be setup fairly reasonably. If she is going to use a local lawyer make sure she gets a quote for costs first, don't get a nasty surprise with the bill I would advice trying to locate a local business mentor program to help with set-up ideas, taxes, EIN # etc. I would also advise her to learn how to do her own books, quarterly taxes etc., (Quickbooks is a good program), it's not that hard and at least she will get a real feel for how she's doing, save herself a few $$$ (every penny counts at start-up) and if, down the road, she employs someone to do it she will know if she's being taken advantage of. I wish her all she wishes herself in her new venture

 

[northern]

When I started out I used 3 ring binder and set up sections for each billing, expense, tax and pay role. I found it best to become an employee of my company and let the company get all the buisness deductions. The US tax system is different. Good book keeping will make the end of year go easly. In Canada you can set your year end to any date you want. If you pick a date that is months after individual filing you may get a better rate with an accountant youwill definatly get better service.