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Just the basics please...what do I need to know

    • 46 posts
    July 28, 2007 6:09 AM EDT

    Soo, I hired an accountant.  he spent an hour with me explaing what needs to be done in the state of Florida for my Limited Liability Corporation.  i will be taxed as a Sole proprietorship.  I have my EIN, and am filing online for my Sales Tax Exemption Certificate and that is all I need.  

    I will have an online retail business selling logo`d tshirts and other apparel items.  By Christmas of 2007, I will also sell/manufacture an outdoor water resistant blanket.   I source the fabric, notions etc.  the sewing contractor produces, I ship it. 
    I am keeping every single receipt, for shipping prototypes to the sewing contractor etc.  along with my fabric purchases, notions etc.

    I am also hiring a web designer and programmer. I will be using Quickbooks Pro for bookkeeping and inventory control.

    I am scrimping on buying my inventory for apparel products, and my imported beach jewelry.  Should I be?  If i cut cost right now, is it worth it when tax season rolls around.  He explained how I won`t make any money the 1st year and that is a good thing? Really?  Maybe I am trying to understand something that requires a college degree, Thank God for accountants. 

    Thank you.

    Dianne

    • 46 posts
    July 28, 2007 7:06 AM EDT

    I didnt understand what is considered tax deductible. 

    My products I purchase, the screenprinting, my fabrics I purchase to make my products. Are services like, graphic design, web design and programming fees deductible?  

    that whole deductible expenses discussion just didn`t register as i was mentally overloaded at the time.

    is there a book or website that can explain all of this?

     

    • 46 posts
    July 28, 2007 9:21 AM EDT

    Thank you glgcpa

    Thank you glgcap -I am going to read the irs site right now, yee ha that should be fun. My accountant did tell me he likes Quickbooks Pro, but did not state if this also applies to keeping track of inventory.  I just left him a message to call me on Monday. 

    Thank you pipertax I am reading thru your website also.  

    The terms i was looking for was `ordinay` and `necessar`  it is making more sense now. 

    • 46 posts
    July 29, 2007 4:24 AM EDT

    CraigL...Now that makes sense and spoke right to my core problem.

    I am going to invest in my initial products in small amounts and build up my customer base slowly.  I am very money smart in my personal life because I `live below my means` and will carry that on over to the business.  That is what works best for me and my ability to stay one step ahead of the men in white coats!

    one more decision accomplished and understood. 1000`s to go. 

    Di

     

    • 46 posts
    July 29, 2007 8:06 AM EDT

    sorry for the confusion....I will be selling my own brand/company name on my apparel products. I have to buy the blank tshirts etc. then have my local screenprinting person apply my logos and artwork.

    Di

    • 59 posts
    July 28, 2007 8:43 AM EDT
    The IRS has several free resources for sole proprietors, which you can find here:
    http://www.irs.gov/businesses/small/article/0,,id=115044,00. html

    In short, you are allowed to deduct any expenses that is considered both "ordinary and necessary" in order to help you make a profit.  An expense is generally considered "ordinary" if other businesses in your same line, would have the same type of expense (it`s then ordinary in your industry).  An expense is generally considered "necessary" if you need to spend the money to make a profit.

    As for whether or not you`ll be making a profit at the end of your first year, unless your "accountant" has a crystal ball, he has no way of knowing this.  Most businesses do not make a profit in their first year, so my guess is that is why he told you that.  The reason most businesses do not show a profit in the first year is because there are many elections that can be made on a first year tax return, which allow you to expense items that otherwise would need to be capitalized.  These "additional" expenses coupled with start up revenues usually results in a loss.

    I would call your accountant ASAP and ask him if he concurs that using QuickBooks Pro is appropriate since you have inventory.  QuickBooks (all versions) only track inventory on the "average cost" method.  This is NOT an acceptable IRS method for tracking inventory.  Thus, you will either be reporting an unacceptable method (along with the required disclosures necessary, which usually result in increase audit risk) or you will be paying someone in additional time and labor to convert your "average cost" inventory into an acceptable IRS method before you file your tax return.


    glgcpa2007-7-28 16:59:25

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    Gina L. Gwozdz, CPA
    http://GLGcpa.com
    http://TaxTreasures.com

    • 79 posts
    July 28, 2007 6:37 AM EDT
    I`m a little confused as to what exactly you are asking.

    If he`s saying that it`s good to be not making money, that makes as little sense to me as it does to you. Granted, with no taxable income, you pay no tax.  But...no taxable income still means no income. Doesn`t sound ideal to me.

    If you have some specific questions or things you need explained, go ahead and ask.

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    Accounting Made Simple | Sole Proprietor Tax Guide

    • 434 posts
    July 29, 2007 7:24 AM EDT
    I will have an online retail business selling logo`d tshirts and other apparel items.



    Let me know when you are up and running because I am considering purchasing logo t`s and polos for my business.


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    Steve Mann
    Internet Videographer
    MannMade Digital Video
    My Email


    • 434 posts
    July 29, 2007 10:29 AM EDT

    sorry for the confusion....I will be selling my own brand/company name on my apparel products. I have to buy the blank tshirts etc. then have my local screenprinting person apply my logos and artwork.

    Di



    DOH!

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    Steve Mann
    Internet Videographer
    MannMade Digital Video
    My Email


    • 6 posts
    August 30, 2007 1:15 PM EDT

    Hello, could you please send me you ebook?  What is the price?

    Thanks,

    Jacquelynn