Should I start my own business?
 

I teach and perform belly dance. I'm not new to performance, but I've been teaching only a few months. I'm rather surprised at how relatively lucrative it is--which explains a lot about how newbie dancers take 6 months of classes then decide to hang their own shingle, grr!

Anyways, I've been wondering if the financial benefits of owning a small business would out weigh the headache of taxes. I've resisted starting a business previously because I wasn't really making much money, even though the tax write-offs would be nice.

Folks always tell me that i'd get great tax write-offs on the classes that I take, the trips I take that involve classes (including Egypt last year), the costumes, music I buy, and percentages of my house, computer, car, etc. However, the way I see it, I'd be getting a write off on money that I'm paying, right? If I wasn't paying it at all (assuming I'm not making so much that I am legally required to report it and pay taxes--guess I should find out what that dollar amount is), then I am keeping it all. Because you have to report a profit in the first what, two years? Five years?

Or am I looking at it wrong, and I should be seeing it as a tax write-off for my (substantially greater) day job income? But that will only benefit me monetarily until I have to report a profit, of which they take a tax bite.

I suspect my understanding is faulty, can you guys help me out here please?

Get thee to a CPA, my dear. Some of your questions are state dependent so we could easily lead you astray. :)

I agree, I always talk with my tax lady (CPA) about the best ways to evade taxes.

I understand, but I wasn't truely wanting specifics and figures, I guess I want opinions as to whether owning your own business is a good thing, in general...should I pursue it?

But thanks, that does remind me to talk to a friend and fellow dancer's tax guy, he specializes in taxes for entertainment industry folks.

AVOID!!!! Tax evasion is illegal. Good thought about using a CPA who's familiar with the industry.

It's likely he or she will tell you not to write off part of your house. It's a red flag for an audit, plus you might get hit with appreciation if you sell the house.

I don't know nearly enough about taxes (especially American taxes) to give any advice on that front.
You're passionate about what you do and from what I can tell, you're pretty good at it too. So why not make a living from it? I'd kill to have a job where I'm doing what I really love.

You're good at it, you love it, it could be really lucrative. Go Do It!

:thumbsup:

start small sultana..and see how you go. if its not lucrative enough in the first year..theres no problem in doing what u were doing before hand. i guess play it by ear. its not expensive to start your own business, theres relatively low overheads for something like this i take it? your a 'consultant' of some sort, and 'consultancy is the best way to make money.. low overheads, max profit, tax write offs...

i think ill be going back to consultancy.. i hate forking out 100K a month on construction bills... id rather be chasing money rather than paying it!

I've owned a couple of businesses outside of my main job, so obviously I'll be telling you to go for it. There are lots of benefits, but also lots of headaches.

I can tell you that for our Illinois-based fencing academy, we've been able to write off trips to Poland and the UK when we took kids over there to train. That's Illinois tax law, though, and may or may not translate. We've gotten away with some things that I thought were pretty hokey up front, but our accountant, who's pretty conservative about write-offs, is positive that we're fine. Since I own this business with 2 close friends, we've been able to take our wives out to "planning dinners", complete with wine, lobster and steak.

Then again, we've had immigration issues for coaches, disciplinary issues (tough when you're dealing with kids) and paperwork problems. Small business ownership is not for everyone, so do your research up front.

Just remember that write offs don't equal 100% equal in taxes. It's just a percentage of what was spent....


and you should go for it. you live but once.

I come from a whole family of small business people. I have a brother, (contractor) another brother, (well driller) a sister, (fast food franchise) a Dad, (hardware) an uncle, (turkey breeder) a Grandma, (boutique soap maker) a great-uncle, (ranching-investing) cousins, (auto body shop, violin maker, gunsmith, Toyota dealer, baker---and I've probably missed some.)
They all got into their own businesses because they had a passion for something, and thought they could provide goods and or services that someone else needed--or fill a need that no one else was filling. I can't imagine someone being passionate about soap--but my Grandma is. I know nothing about drilling wells, but my brother can find water where there isn't any, and in Western Kansas that is a very useful skill!

So I think that if you want to start a dance studio because you think you're the best damn belly dance teacher around, and you've got A MISSION to show the world (or your locale) how to belly dance, and you're pissed because there's no place around to buy finger cymbals, shoes, and veils, then those are great reasons to start a business.:thumbsup:
Starting a business because of the tax deductions just seems wrong-headed to me.:confused: I hear regular complaints from my business owning relatives about the pain-in-the-butt record keeping, govt. reports, OSHA reports, paperwork, sales tax, withholding tax, unemployment tax, hazardous waste tax, zoning problems, etc. What you really should want, is not for your business to run at a loss, but for it to make so much money that you don't have to work for someone else. My sister works her little butt off, but makes well over 100k with her Taco Johns, which is not bad for a college droupout in a small town.
The IRS frowns on businesses that are really just hobbies used to create tax deductions, but I don't think you have to show a profit in a certain time frame. You must, however, be able to demonstrate (through your business practices) that your intent is to make a profit (so that you can PAY TAXES.):)

Lindy

O/T--Maybe the best way to cut down on your taxes would be to vote for people who won't spend as much of your money.:lol:

Well, I'd be running the business out of my home, I rent a regularly scheduled time slot in a studio to teach group classes. I'd be doing this as a side business, not as my full-time job--I enjoy my day job, and it provides very well. I am passionate about dance and teaching, I do feel I am one of the best locally available, but I'm not out to convert the world. I think there is a sustainable market out here for the services I provide.

The main reason to start a business is to make money, part of that is to reduce (legally, of *course*) the amount of taxes one pays.

I talked to my Dad this morning to help me clarify tax deductible and he said that "tax deductible" is really a misnomer, that those expenses are not deductible from your taxes. What those expenses really do is reduce your taxable income. So, it amounts to something like a giant Flex-Plan, you get to pay those legitimate expenses with pre-tax dollars, so you pay taxes on a smaller amount. So, if you are at a 30% tax rate, it is like getting a 30% discount on all your business expenses. This is especially useful for things that could be business related expenses, but that you would do anyway--like a trip to Egypt, perhaps.
He suggests that you "shadow" it for several months. Keep track of your studio expenses and income so that you really know where you stand, and then decide whether to go legit--or keep this income as part of the "underground economy." Hope this helps.
Lindy

Lindy, it does help, thank you very much! :)

i really think you should go for it simply because you dont get rich working for someone else. it just dosnt happen. 99% of the time you wont be happy working for someone else. If teaching dancing is something you want to do for a while why not start up a business? Better to try it now and see what its like then to never try it and regret it the rest of your life. When you get older if your still teaching it insure your body that way when you break a hip or get arthritis or something that happens to most people when they age you can get a income from that as well since you wouldnt be able to teach yourself. But... then you can still hire others to teach for you. Belly dancing seems to be catching on as a alterintive exercise routine and i think now would be a good time to get into that if you have the chance. I would personaly love the chance to start my own business doing something i enjoyed.

I believe the main reason to own/run your own business if you are the type of person that relishes that activity. You need to immensely enjoy the business that you are looking to get into (in your case belly dancing) and also enjoy the prospect of owning and operating the business itself. So you might not enjoy it so much if you dont enjoy teaching it. If you do it just to chase the dollar signs, chances are you'll fail. Do it because you love it. If you don't love it, you'll quickly become annoyed with the amount of time required just to make it work. Frustration will also mount from having to learn all the gritty stuff, like taxes, write-offs, and eventually, if you get big enough- employee payroll, insurance, fica... the list goes on.

As someone that owned her own business (with my ex husband) for 13 years....I can honestly say its something I would never ever do again. People say having your own business is the "american dream" in reality its the "american nightmare". Just remember when you own your own business YOU are the last one to get paid, IF there is anything left.

We were a C-Corp auto repair shop, which I know is different from teaching classes and being home based. But..the IRS has so many rules for claiming stuff from your home its a nightmare, which is why we completely stopped even trying to claim my accounting related stuff for the business for taxes.

Good luck to you if you try....but speaking from over a decade of doing it....it was never worth it to me....I had to work a full time job while helping with the business just to pay our own bills.

Shani has points, but if your expenses are kept to a minimum you can do fine, and enjoy yourself.

Particularly since you don't have to rent a space all to yourself (I'm assuming you just pay an hourly rate somewhere), and if they don't try to make you sign some kind of long-term agreement, you're not risking a lot. Especially since you're not depending on the income from it.

Just be prepared for your introduction to the self-employment tax.