So over the past few months I've seriously considered starting a business. I currently live in Texas and want to start a Sole Proprietorship where I may provide mobile computer repair and handyman services to everyone in the Texas border. Eventually I want to take the business to multiple states as I travel and enjoy life on the road. However either due to my OCD or a misinterpretation of the legal requirements I'm absolutely surprised anybody can have a business, much less a mobile one that provides services not in a fixed area.
I mentioned that I wanted to take my business on the road. My dream has been to get a van or RV and travel while living a minimalist lifestyle
. The obvious course of action is to have either passive income coming from a fixed location or to use my skills and earn money as I travel ( or both ). Since I wanted to start local I did research on my state's requirements to establish a Sole Proprietorship. Since I'd be using my legal name for my business, will have no employees, will not pay freelancers or other people $600 or more during a year for services rendered to my business, and the state doesn't require a general business license or licences/permits for the line of work I would be doing, I thought I was in the clear and it would be simple.
Well local laws are different. Each county has its own right to add requirements on top of the state which as I've come to find out is vastly different from county to county. Top this off with no clear county lines on either a physical map provided by the county or with online tools ( I've called and requested such a map from my local comptroller and nobody can help me ) but several counties and other tax/regulation entities overlap or have very grey areas for where a location stands for being enforced. This puts serious strain on knowing if I'm legally supposed to get a business license to operate in a county as well as if I should collect and withhold sales/use tax on my services for that county which in Texas can go up to 2%.
This problem is amplified when even considered doing business in multiple states. Texas doesn't have an income tax, but most states do and therefore any business conducted within its borders must have taxes known and set aside for. If doing business in 4-5 states in a given year I will most likely have to keep track of federal income tax and 3-4 state income taxes. Not to mention keeping track of the counties in those states I'm having to keep track of tax-wise that will have to be reported and paid to the state I earned income in.
By trying to learn what handyman services I can provide without a license to perform it ( such as electrical and plumbing work ) that ends up being crazy in how vague and diverse it can get. Some states and counties don't mind a handyman unclogging a toilet or changing a light bulb in a residential building or painting a small picket fence. However some won't even let you do those things and require a professional license for the service. Even more confusing is that those that do allow the services such as changing a light to be done by a non-electrically licensed handyman require it to be under a certain billable amount that varies from $300, $500, $1000, and $3000 have been what I've seen being thrown around for the values.
So to resolve this issue of utter chaos I figured it would be best to only do business on one state ( Texas ) and one county ( the one I currently live in ) and stay well within the county lines to avoid being close to the edge and possibly falling under another tax entity. It would be really depressing to never live my dream but at least I could have a business right? Well it's still not over as now my brain has to fully wrap around federal laws and taxes. I keep getting very conflicting information from varying sources.
To be less vague I'm talking about the IRS website with their publications, how-to's, and tax tools that while handy seem to be so general, omnipotent, all-encompassing, and vague ( vague being what really hurts me the most ) that I've just come to believe I'm taxed on anything and everything and that everybody breaks tax law without even realizing it or just can't help it. It's scary, since now I know of several instances where there was no possible way for me to figure out that some action was taxable nor how much the taxable amount was and therefore am at the mercy of the IRS.
I'm not trying to paint an evil big brother picture here on purpose but can't I at least be able to have well defined tax code so I can know what I'm taxed on and what I owe? I also tried to use other business help sources since everyone has always told me taxes are very complicated and the IRS might not be the best source to make it understandable. If I need to cite the other sources I will but after reading the forum's rules about advertising I'm trying to be restrictive on this throughout this post.
So I basically can't legally start a business if I can't understand the legal requirements I must obey. I'd hate to be that guy who tries his best, still somehow did something illegal without realizing it, and ends up being pictured as a criminal in the eyes of everybody because he wanted to start a business and couldn't figure out the "super simple" and "you have to be evil or a crook to break the law" situation going on and didn't pay an accountant, a tax adviser, and a lawyer for a business that will make no more than $10,000 a year ( and that's on the high end where I'd be no longer accepting work to prevent it from going higher ). I'm a minimalist, I don't need much money or the finer things in life and I'm not trying to steal/be a crook/not pay taxes/not be polite to others.
I'm turning 21 this year, have been out of high school since 2012. I had work with an employer for a year afterwards but due to my OCD I had to leave due to medical reasons. People my age have a hard time obtaining a job without going through college ( where you get debt most of the time and end up with a useless paper at the end ) but that is probably the global recession I keep reading about. My reason for wanting to work for myself is for that reason and to live my traveling dream while embracing my minimalist lifestyle. I don't expect life to be easy but I shouldn't expect to be terrified of each move I make or even consider to make.
You can rest assured now my situation/rant is over now as I'm sure it looks like one big mess of "I hate taxes, complicated government, and searching for work" but hopefully this can be looked through and see a guy just trying to understand what applies and doesn't to him legally. So to make it easier to not have this post deleted and to get some insight on how everyone else copes with these things I'll list off my constructive questions now.
Has anybody here started a Sole Proprietorship in Texas and can give a nice little explanation to what you went through for setting up shop and how you manage your federal, state, and local requirements for licensing, reporting, and tax?
Does anybody know a good reference, service, or tool that provides accurate and detailed county lines in each state ( or at least Texas )?
My current understanding for potential IRS audits is to have your business account and personal account as separate as possible. I've planned to have my business account receive all income, a tax account that the business account deposits and stores my yearly taxes in ( I'm just going to take the 3% fine when I file in April for not doing quarterly estimates since it seems to complicated to estimate accurately ), and to pay myself from my business account to my personal account which will transfer funds to my various savings ( car repair emergency account, HSA, general emergency account, big purchase account, etc ). Is this a good way to do it or am I missing something here?
For those who might have a traveling business, what do you do to keep your tax ducks in a row? Do you simply look up the state and county website for where you're going each time you move location to figure out the laws there?
Is a business that makes no more than $10,000 a year simply not worth the effort? Should I just pick up a W-2 position and once I save enough money pick up stakes and head off to the next location?
I appreciate anybody who actually read through all this. I noticed many of the posts are short and very relaxed aside from stickies with links to info so hopefully this isn't a wall of boring and un-constructive text.