Found this forum today while looking for information on starting my own business. I have been reading a few threads and although my situation seems to be somewhat different from the norms of this forum's members I'm going to bet that you may be able to help me. Sorry If this gets long as I have many questions and thank you very much in advance for reading and hopefully posting any wisdom you may have to offer.
Here's my situation: I'm a 22-year-old tool and die apprentice working full time. In addition I have an excellent relationship with a few past employers who still wish to continue to employ me part time to complete maintenance and construction projects for them (I have formal training in carpentry, a good deal of knowledge on motors and machinery, and I've done my fair share of landscaping). This also means that I am on multiple payrolls. Due to hiring regulations/criterion (i.e. Iím no longer a college student) one employer will no longer be able keep me on the payroll but still has requested that I come back and work for him as a contractor.
Now I understand that as a private contractor I can just claim my earnings on my personal income tax, however I'm wondering if it wouldn't be to my advantage to take this opportunity to start my own part time business. Here are my reasons (and questions) for (and about) pursuing this....
1) What are the first/best steps to registering a business? Fees? (Ballpark figures)
2) I'm assuming a sole-proprietorship would be the way I'd want to go with this (the business entity would not require the use of credit thus my only liabilities would be injuring myself or the accidental damage of property).
3) While I do know accounting basics, the majority of work that I do is not completed on paper but in a shop or on site. Being a tradesman I'm not sure how business savvy I'll be.... how difficult is the paperwork to manage? Since I'd only be using this business to generate investment money in my spare time I'm not expecting to make more than $9,000 - $12,000 in a busy year (seeing as I'm limited to working weekends and on my vacation time)...
4) What if I get really busy with my primary job and am unable to generate any activity from my business for an extended period of time (say 12 months for debate's sake)? Can I still legally own the business if it sits stagnant?
5) The type of work I do requires me to operate a pick-up truck. With gas prices being what they are the long drives to job sites and frequent trips to hardware stores)are eating gas. I want to keep the truck in my personal name but have my business pay me for kilometerage (mileage for the Americans out there
) when I'm using it for the related business. I could build it into my hourly rate or bill it directly to the customer on the invoice. Pros? Cons?
6) I have been given some advice by some people around me at work about setting this up however they seem to be focused more with tax evasion whereas I'm only looking for legitimate tax advantages. I believe in doing everything on the level and I don't want this to be any different. Where can I get information as to what exactly I can and can't claim on my taxes as business expenses?
7) How hard is it to keep ledgers and such on your own and still have them pass the scrutiny of a 3rd party or government audit?
All this started out with just doing work for one extra person and it seems like each year someone else will contact me to begin doing extra work for them. While I mostly do extra work for two main employers if you add up all the individuals who I do projects for over the course of a year it probably has averaged 5 or 6 in the last 3 years (been doing this on and off for 5 years). With a business it gives me the flexibility to add new clients as they find me without getting another T4 (income tax earnings receipt for those in the USA) in the mail every February.
Another advantage I was thinking is that if I ever get laid off while the manufacturing industry is slow it would be relatively easy to make it through till I found another job (or it finds me) with the clientele base that a business could gain me.
8) Given that this is not my primary source of income is this (setting up a business rather being on multiple payrolls) too much effort to take on when I may only gross $10,000 in a busy year?
Thereís more questions but Iíll cut this off here for nowÖ
Am I way off base? Anyways I can expand?