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Starting a small business

Started by Justin Walker24 · · 👁 36 views · 1.1K replies

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Participants Justin Walker24AMegan Chavez38Elizabeth Miller8Aaron MendozaRobert KimEric Martinez2Kenneth RobertsSophia Gonzalez6shadowjackal88vividstag31redscout61Robin Rodriguez5Nicole Morales3Chris Ruiz10coastalviper8Dana Miller6John Thomas2Steven Bishop2Jerry Martinez3Kevin White53Emily Ortiz25silentpanther15Dennis Lopez46 …
mellowfox56 mellowfox56 Active Member
94 messages
joined Mar 2012
#301 ·
Henry Edwards33 said:Any gear you picked up before officially launching your small business can be rolled into the company via a small business owner decision. You can just use your old receipts as backup to prove exactly what that equipment is worth.

Honestly, you don't even strictly need those receipts. As long as the asset is functional, you can list it as an existing item and assign it a fair market value on your inventory list, backed by a formal record of transferring personal property into the business. This covers everything from your laptop to your desk and office furniture—basically anything you need to get the job done. You don't need to show this document to anyone right away; you just keep it on file and attach it to your first tax return.
neonstag5 neonstag5 Member
16 messages
joined Jan 2009
#302 ·
Robert Hall7 said:You know what really terrifies me? The fact that so many young people graduate from high school, college, or any degree program completely unprepared for the actual workforce or real life. It’s even worse because you're left to just figure it out on your own as you go. I have nothing more to say. No, this isn't your fault.

Yeah... we're prepared for exactly what we studied for. I mean, how am I supposed to know anything about taxes, sales tax, or bookkeeping if my degree is in electrical engineering?

That's why everyone should just stick to what they actually know. I tried finding work in my field, but honestly, in this part of the country, it's basically impossible. Out here in rural West Virginia, the wages are bottom-of-the-barrel and unemployment is through the roof compared to the rest of the States. And I'm done living off my parents... so I decided to make a small business owner decision😁
I guess we'll just see how it goes :P
Matthew Ruiz2 Matthew Ruiz2 Member
18 messages
joined Jun 2007
#303 ·
neonstag5 said:Spot on. Those small businesses inside the sales tax net use the R2 designation... but it's not just them. Even those operating outside the tax system have to account for it, they just have to explicitly state that status right there on the invoice itself.
At least that's what my accountant told me... and she usually knows her stuff, so I assume she's right... 🙂

Don't listen to old wives' tales. If you aren't in the VAT system and you're running a sole proprietorship, you simply issue "Invoice No. X" along with a note stating you aren't subject to sales tax per specific IRS guidelines.
If you are in the VAT system as a sole proprietor, you issue an "R2 Invoice."
If you are operating as an LLC within the VAT system or a corporation, you issue an "R1."
neonstag5 neonstag5 Member
16 messages
joined Jan 2009
#304 ·
So, I’m not part of the sales tax system, and I’ll be issuing R2 invoices, whether you believe me or not... 😁
Matthew Ruiz2 Matthew Ruiz2 Member
18 messages
joined Jun 2007
#305 ·
http://www.accountingtools.com/accounts-payable/
neonstag5 neonstag5 Member
16 messages
joined Jan 2009
#306 ·
I read through that... Honestly, I just wanted to mention that I can just use I an R2 invoice, which means I don't have to deal with the sales tax section at all, nor do I need to explicitly state on the bill that I'm not registered for sales tax. That's all...
Matthew Ruiz2 Matthew Ruiz2 Member
18 messages
joined Jun 2007
#307 ·
neonstag5 said:I read through that... Honestly, I just wanted to mention that I can just use I an R2 invoice, which means I don't have to deal with the sales tax section at all, nor do I need to explicitly state on the bill that I'm not registered for sales tax. That's all...

Why on earth would you record an R2 on an account when it goes against standard practice? Does that just sound good to you? You can write whatever you like—you could even draw Mickey Mouse next to the date—but you asked the question because you were uncertain. You followed someone's advice, received confirmation, and yet your bookkeeper either got confused or simply lacks the necessary expertise. This information serves everyone else who might be equally lost. It’s about preventing people from wandering aimlessly.
neonstag5 neonstag5 Member
16 messages
joined Jan 2009
#308 ·
honestly, I’ve already thrown $4.00 out the window for that R2 bill, haha...
Karen Rodriguez3 Karen Rodriguez3 Active Member
80 messages
joined Apr 2017
#309 ·
Wait, I think I saw someone mention obrtnik_01 earlier? Or maybe I'm just tripping. Anyway, whatever. kaže:
Yeah... I guess we're basically just prepared for whatever we actually went to school for. Like, how am I supposed to know anything about tax codes, sales tax, or bookkeeping when my degree is in electrical engineering? It just doesn't add up.

I mean, honestly? Everyone should just stick to what they actually know how to do. It’s probably for the best that way.

That applies if you're just grinding for someone else in the field you actually studied for. But if you're thinking about going solo and starting your own thing? I guess you should probably get a handle on all that stuff ASAP. Even just the basics, really. You can't exactly run a successful business without it, I mean.
Matthew Ruiz2 Matthew Ruiz2 Member
18 messages
joined Jun 2007
#310 ·
What was the point of even buying it? You could have just printed the same thing using Word, Excel, Microsoft, or Adobe Illustrator.
Karen Rodriguez3 Karen Rodriguez3 Active Member
80 messages
joined Apr 2017
#311 ·
Jonathan Sanchez7 said:Does this apply to small businesses that stay out of the sales tax system, or is it strictly for those who opt in? I’m actually planning to launch my own graphic design studio in a few months, and I’ve already started picking up some equipment. My plan is to stay exempt from sales tax during the first year, so I have to wonder—should I still be keeping all these receipts? I actually bought some machinery overseas, and everything was cleared through customs properly, but I paid for the stands using my credit card. Will a standard transaction record count as proof if I need it later?

Just a heads-up for anyone thinking about skipping sales tax registration for their first year: keep in mind that if you aren't part of that system, you don't have to charge sales tax on your services or products, but you still have to pay it when you buy things for your business. Since you aren't registered, you can't claim those taxes back as credits. You really have to weigh the pros and cons. If your business is mostly selling your own expertise or services, it might make sense. But if you have to buy a ton of supplies, hardware, or equipment, you'll be paying extra on everything and won't get any of that money back, which makes your overhead higher than someone who is fully registered.
neonstag5 neonstag5 Member
16 messages
joined Jan 2009
#312 ·
Exactly, Karen Rodriguez3 🙂 That’s why I opted out of collecting sales tax altogether...

@Migra

Why on earth would I be working in Word? When I'm out on a job site?
I need to be able to issue an invoice right there where the work happens... I'm not exactly going to lug a laptop and a printer around to some client's house just to print out a receipt >.<
Steven Ruiz13 Steven Ruiz13 Member
32 messages
joined Jan 2009
#313 ·
velvetrider16 said:Precisely. You can opt in immediately, or just wait through that first year. Ultimately, it comes down to your own strategy and your CPA's advice...

You can actually opt out of the IRS system if you decide to join voluntarily during that first year. There's a little trick to it, though. When you fill out the registration form, you just list an "expected revenue" figure that's higher than $85,000 $0.00. If your actual earnings end up being lower than what you predicted, the tax authorities will approve your exit. That way, you aren't stuck in the system for five years. But if your turnover ends up exceeding $85,000 $0.00, then you're legally required to stay in the IRS system, no exceptions
.
mistytinker26 mistytinker26 Active Member
63 messages
joined Apr 2013
#314 ·
Karen Rodriguez3 said:Just a heads-up for anyone thinking about skipping sales tax registration for their first year: keep in mind that if you aren't part of that system, you don't have to charge sales tax on your services or products, but you still have to pay it when you buy things for your business. Since you aren't registered, you can't claim those taxes back as credits. You really have to weigh the pros and cons. If your business is mostly selling your own expertise or services, it might make sense. But if you have to buy a ton of supplies, hardware, or equipment, you'll be paying extra on everything and won't get any of that money back, which makes your overhead higher than someone who is fully registered.

I might be out of the loop on the latest regulations, but this is news to me. Isn't collecting sales tax a requirement regardless of whether you're officially in the system or not???
Karen Rodriguez3 Karen Rodriguez3 Active Member
80 messages
joined Apr 2017
#315 ·
mistytinker26 said:I might be out of the loop on the latest regulations, but this is news to me. Isn't collecting sales tax a requirement regardless of whether you're officially in the system or not???

Nah, paying the tax is the requirement, not necessarily charging it. If you aren't registered under the Value Added Tax Act, then you don't charge it. You just put a note on your invoice stating you aren't part of the system and cite the specific section of the Value Added Tax Act explaining why you didn't calculate it... but you still have to pay it if you're buying goods or services from someone who *is* registered. And since you aren't in the system, you can't claim that paid tax as a credit.
http://www.irs.gov/content...ROSPEKT_69.pdf
brisktinker15 brisktinker15 Member
47 messages
joined Feb 2012
#316 ·
When I'm out on a job, I usually just carry a pad of standard invoices (A-643/NCR), though I once made the mistake of buying those specific "R" series ones where you have to manually fill in an extra digit—totally useless, honestly, because they force you to list tax IDs and formal business info that nobody actually needs when you're just dealing with a regular guy off the street.
Since I’ve been operating outside the Sales Tax Law system from day one, I’ve never had anyone even ask me to use those specialized R1 or R2 forms.
mistytinker26 mistytinker26 Active Member
63 messages
joined Apr 2013
#317 ·
Karen Rodriguez3 said:Nah, paying the tax is the requirement, not necessarily charging it. If you aren't registered under the Value Added Tax Act, then you don't charge it. You just put a note on your invoice stating you aren't part of the system and cite the specific section of the Value Added Tax Act explaining why you didn't calculate it... but you still have to pay it if you're buying goods or services from someone who *is* registered. And since you aren't in the system, you can't claim that paid tax as a credit.
http://www.irs.gov/content...ROSPEKT_69.pdf

Yeah, exactly. I honestly don't know what I was thinking, suggesting that someone outside the sales tax system would be required to charge it.🙈
Betty Gonzalez91 Betty Gonzalez91 Newcomer
1 message
joined Feb 2009
#318 ·
I found what I was looking for: it turns out I can start my own small business even if I'm currently employed elsewhere (assuming that rule hasn't changed recently). However, I am wondering if my employer needs to be officially notified that I've launched my own venture?
mellowfox56 mellowfox56 Active Member
94 messages
joined Mar 2012
#319 ·
Betty Gonzalez91 said:I found what I was looking for: it turns out I can start my own small business even if I'm currently employed elsewhere (assuming that rule hasn't changed recently). However, I am wondering if my employer needs to be officially notified that I've launched my own venture?

You’re good to go. You can absolutely run a side hustle while holding down your main job; nothing has changed on that front. As for your employer, they don't really need to know unless you're starting a business that directly competes with them. If you're working in the same industry, that's when things could get messy.
silverbison293 silverbison293 Active Member
94 messages
joined Feb 2009
#320 ·
Betty Gonzalez91 said:I found what I was looking for: it turns out I can start my own small business even if I'm currently employed elsewhere (assuming that rule hasn't changed recently). However, I am wondering if my employer needs to be officially notified that I've launched my own venture?

Just a heads up—don't forget you'll be staring down double taxation, both for Social Security and Medicare 😲(based on the pay stub you're looking at)
... turns out being your own boss isn't all sunshine and rainbows.

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