Starting a small business

First off, I think there's definitely a cost involved here.
Second, we really need to look into how that part works.
Third, I checked about hiring students or freelancers—apparently, it's strictly either a contract role or full-time with reduced hours.

Hey there.
I've got a few things I'm chewing on. My spouse and I are thinking about starting a small business—just a little rural general store. I was wondering, what actually happens if we opt into the sales tax system right out of the gate, but by the end of the year, our revenue hasn't even hit $85k $0.00? Is it probably smarter to just stay out of the sales tax loop initially?
Basically, the shop would be in a small town where (from what I can tell) there’s definitely a need for this kind of thing, though we aren't expecting to make a killing or anything; just enough to keep the lights on, I guess.
Also, what kind of operating hours would make sense if it's just one employee—which would be me, since I'm the owner?
The location happens to be in a federally designated rural development zone. Are there any other grants or incentives for opening a business in an area like that?
We’d be running the shop out of our own house.
Hopefully, someone might be able to point me in the right direction!

Sophia Collins11 said:Hey there.
I've got a few things I'm chewing on. My spouse and I are thinking about starting a small business—just a little rural general store. I was wondering, what actually happens if we opt into the sales tax system right out of the gate, but by the end of the year, our revenue hasn't even hit $85k $0.00? Is it probably smarter to just stay out of the sales tax loop initially?
Basically, the shop would be in a small town where (from what I can tell) there’s definitely a need for this kind of thing, though we aren't expecting to make a killing or anything; just enough to keep the lights on, I guess.
Also, what kind of operating hours would make sense if it's just one employee—which would be me, since I'm the owner?
The location happens to be in a federally designated rural development zone. Are there any other grants or incentives for opening a business in an area like that?
We’d be running the shop out of our own house.
Hopefully, someone might be able to point me in the right direction!

I'll try to help with whatever I know—whether to opt into sales tax is the age-old question... I assume you'll have an accountant handling your books who can give you more specific advice, but... whether you jump in depends on whether you're selling to everyday consumers or businesses (not a dealbreaker, but still...), and also whether you're planning big upfront investments. If you have massive startup costs, you can offset them against your sales tax obligations (you buy inventory where the total sales tax paid is $16667 and sell goods totaling $15000—the government basically "refunds" you the $1667 difference, which you can use for other stuff like payroll taxes and such...). Just a heads-up: if you volunteer to join the sales tax system, you're usually locked in for five years; if you're forced into it next year because you blew past the threshold, you can request to opt out the following year. You can't do that if you chose to join voluntarily. By the way, the limit is $230,000, not $28333. As for hours, just use common sense—if you're selling bread, you'll be busy in the morning, right? Besides, since you're the boss, you can technically work 24/7 if you're crazy enough.
Regarding incentives, I haven't a clue—you'll need to do some deep digging. It all depends on what you're doing... manufacturing always seems to get perks, but for retail, I'm not sure. The SBA used to offer certain grants if you had been registered as unemployed for over six months... you should look into it. Good luck! 😉

Thanks for getting back to me. We’re looking at a small rural corner store setup that would be handling retail receipts... but I’m also curious about the whole VAT registration side of things since the owner would be picking up some stock from big-box retailers like Walmart while getting other stuff straight from wholesalers. So, I'm wondering which route actually makes more sense financially. If they're using standard consumer receipts for purchased inventory, does the sales tax even get credited back? Or what

So, here’s the deal with the paperwork. An R1 invoice is what you get from a corporation or an LLC—basically any business paying corporate income tax. An R2 is what you'll see from a sole proprietor under personal income tax. I might be overthinking this, but if you’re buying inventory straight from a wholesaler or even picking stuff up at a big-box retailer like Target, you need that R1 invoice. It needs to clearly list both the supplier's info and your business's name. That's the golden rule if you want to actually write it off as a business expense. If you happen to be registered for sales tax, you can use those invoices to offset your own tax obligations. But, if you aren't in the sales tax system, those suppliers who *are* in the system will just charge you the full amount including sales tax, and since you can't claim it back, the whole thing—base price plus tax—just counts as one big business expense. And since you aren't part of the sales tax system yourself, when you send out your own invoices, you just add a little note saying sales tax isn't included because you're not registered.

If you aren't looking at some massive upfront costs, I don't see any real reason to bother registering for sales tax, especially if you're strictly playing the retail game.
Maybe try running the numbers on actual paper before you make a call. 😉

Henry Edwards33, this "rule" mostly applies to service-based businesses—I highly doubt it makes sense for retail if we're talking about staying strictly "on the books."
A small mom-and-pop shop has a low EIN, so if they just have minor overhead—accounting, utilities, maybe some gas...—it might actually pay off to register for sales tax, at least according to my math. But look, you really need to run the numbers on paper first to be sure. One major headache with opting into the sales tax system is that five-year commitment obligation that amberbadger17 already pointed out.

Thanks guys... I get why being in the sales tax system makes sense, but since they bumped it up to 230 $0.00, I highly doubt my tiny little rural shop would even bother. All those overhead costs people talk about would be basically zero anyway, since the shop is just run out of our house—well, more like our cabin—and I'd probably just handle all the bookkeeping myself.

Maybe it’s actually smarter to just sit this one out, at least for this year. If nothing else, once you're running the books yourself—you'll be simplifying the whole accounting process... fewer headaches to deal with later... 😉

Yeah, well, at least for the first year, I guess.

Hi there,

I’m looking for some clarity. Once I launch my small business and opt out of the sales tax system for the first year, what kind of invoices am I supposed to be sending out—the simplified version or the full itemized ones—and what's the actual distinction? I already know I need to include a note at the bottom stating that I'm not registered for sales tax.
What’s the specific revenue threshold before I'm legally required to start collecting sales tax and join the system?

Look, if you aren't part of the VAT system, don't bother using the R2 code—which basically means you're just a sole proprietor filing income tax—and like you already mentioned, just add a note saying you're not in the system.

Here’s how it breaks down: R1 is for corporations like an LLC or anyone paying corporate tax;
R2 is for those independent contractors or small business owners filing under individual income tax...

...and the big kicker between the two is that the first group has to pay sales tax on invoices even if they haven't been paid yet, whereas the second group only deals with it once the cash actually hits their account.

Just a heads up though, if your total revenue for the year climbs above $76667, the law basically forces your hand and you have to join the VAT system.

amberbadger17 said:Look, if you aren't part of the VAT system, don't bother using the R2 code—which basically means you're just a sole proprietor filing income tax—and like you already mentioned, just add a note saying you're not in the system.

Here’s how it breaks down: R1 is for corporations like an LLC or anyone paying corporate tax;
R2 is for those independent contractors or small business owners filing under individual income tax...

...and the big kicker between the two is that the first group has to pay sales tax on invoices even if they haven't been paid yet, whereas the second group only deals with it once the cash actually hits their account.

Just a heads up though, if your total revenue for the year climbs above $76667, the law basically forces your hand and you have to join the VAT system.

So, do I still need to include standard fine print in my notes,
"Late payments are subject to statutory interest."
"In the event of a dispute, the venue shall be the courts in Washington, D.C."
Or is all that unnecessary since I'll be collecting payment upfront?

A small business owner intends to operate out of their own property, essentially running an office out of a residential space located at their registered business address. Since they can't exactly sign a lease agreement with themselves, I suppose the question is whether they need to formally transfer the property into the business entity, or if they can simply use the space without officially recording it anywhere.
Just to clarify, we're talking about a single-family home where one room would serve as the office space.

A sole proprietor can just keep their personal assets separate if they want; there’s no need to officially roll them into the business's books unless it actually makes sense for them to do so. 😉

thanks

I was reading somewhere that you need at least two years of professional experience before you can open your own travel agency, but does anyone know if that’s actually true?
😢

You might find this topic 😉
interesting.

I wouldn't have started this thread if I hadn't been driven to distraction by conflicting information today. I’ve been Googling and searching everywhere, but one source says one thing while another says the exact opposite. I even called the Social Security Administration to ask if I'd still be liable for self-employment taxes if I already hold a full-time job with a steady employer who handles all my withholdings. The woman on the phone told me it was fine, as long as I provide proof of employment when setting up my sole proprietorship. However, when I tried to visit the office in person, they told me that wasn't possible—which completely contradicts what I read online. So, if anyone here has actually dealt with this or is currently in the same boat, please, I just need a straight answer. If I were to reactivate my old sole proprietorship, would I really be hit with extra tax obligations? It wouldn't be a high-revenue business; maybe a maximum of 10-15 $0.00 per year, and that's it. Thanks in advance.

Michelle Barrett3 said:I wouldn't have started this thread if I hadn't been driven to distraction by conflicting information today. I’ve been Googling and searching everywhere, but one source says one thing while another says the exact opposite. I even called the Social Security Administration to ask if I'd still be liable for self-employment taxes if I already hold a full-time job with a steady employer who handles all my withholdings. The woman on the phone told me it was fine, as long as I provide proof of employment when setting up my sole proprietorship. However, when I tried to visit the office in person, they told me that wasn't possible—which completely contradicts what I read online. So, if anyone here has actually dealt with this or is currently in the same boat, please, I just need a straight answer. If I were to reactivate my old sole proprietorship, would I really be hit with extra tax obligations? It wouldn't be a high-revenue business; maybe a maximum of 10-15 $0.00 per year, and that's it. Thanks in advance.

The second you open that sole proprietorship, you're on the hook for payments.
Social Security, both parts of it.
Medicare.
Chamber of Commerce fees.
Business taxes.
If you're running it out of your home or a warehouse, you'll have to register for commercial electricity rates and adjust your water utility tariffs.
And some businesses end up paying extra for things like:
Water districts, state forestry services, local utility levies, etc.

It doesn't matter if you're already paying Social Security and Medicare through your day job.

Just set up an LLC instead.$3.25 That’s the move for you.