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Discussion Starter · #1 ·
I've tied and sold flies for a long time now, but it's just been to buddies, and word of mouth type thing, and basically just covering materials. Now I'm starting it as a proper business. I'm going to do an LLC and I've been to michigan.gov and found the form to submit to establish it, but that's where my trail goes cold and my simple non-business mind goes numb.

It says not all businesses in MI require a license...fly tying is not listed, so I'm good without a license and my LLC covers me as far as tax ID and good standing with the state?

Then it talks about the annual statement that needs to be submitted...well annually. Again, fine, but what is that? What am I stating in that statement?

I'm just a bit lost here and am not absorbing what I'm reading online. So if anyone here has an LLC or has knowledge thereof and could shed some light on the basic "big picture" and what I need to be aware of and look our for, it'd be much appreciated.

(And I understand I'm not getting binding legal advice here, just looking for a layman's explanation of what is to me a whole new game.)

Thanks,
Jeff
Crazy Moon Custom Flies
 

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My understanding is this: an LLC or other corporation protects you personally from your business liabilities. Your fly gets hooked on a kids eyeball and he looks like Rat Fink. His parents sue you and get your business assets (if you're REAL unlucky) but not your house, your car, and your a$$. The way I understand taxes is they are filed on your personal return under Schedule-C. Joe Simasko (Taxman here) does mine and many others' here. He is the man and explained everything to me in great detail. For a tax id my bank only wanted my social security number; I didn't have to go through the pain of filing for a federal tax id number. I think the annual LLC fee is $25. Any other layman questions PM me or e-mail me.
 

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Oh yeah - don't forget to check with your city or township to see if they are gonna hit you up for $ for running a business outta your home...
 

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My company is an S corporation. It was done 20 years ago mostly for liability reasons. As stated above my personal assets(not much lately) are protected should I get sued.

Also taxes are much easier. I am an employee of the corporation and get a paycheck with regular withholding. When I take out profits(again not much lately)it's reported somewhere on my tax return don't remember where but it makes things much easier for me.

My dad is also my bookkeeper and I will ask him but I'm pretty sure the business does not file a tax return. It does file a yearly report of some kind but I don't believe it's financial.

I will ask him tomorrow what is in that report.

How's that for not much help?

Matt
 

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A LLC is a quick and easy way to set up a separate entity from yourself. Very easy to get a FID number online at IRS.gov also.

As a LLC you can elect to be taxes as an S-corp, which is beneficial in many circumstances, discuss the pros and cons of this with your tax preparer.

The annual statement is a simple cash grab by the state for $25 per year. They send you a form to verify your address and that you still exist and you sign it and return with a check for $25.

One of the most common mistakes people make after setting up a LLC is co-mingling funds with themselves personally or another entity. As the sole member of the organization you can make investments or receive proceeds to and from the LLC, but if you do things like write a personal check to buy fly tying material to use and sell with the LLC you are essentially operating an alter identity and this can possibly allow the corporate shield to be pierced. Almost every small business person seems to do this. So, after forming your LLC you do want to get a FID number from the IRS so you can open a bank account for the entity.
 

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Don't forget about the Federal Excise tax.....as a manufacturer of fishing tackle, you are required to pay this also.

Form 720, and they are paid quarterly.
 

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There is a lot of good information on the IRS.gov website, under the business tab, "starting a business" has articles that talk about the various entities and more than just the tax implications. Also see http://ref.michigan.org/medc/services/startups/?m=12;7 for similar info from a State perspective. My advice is once you have researched this and have your potential plan, talk to someone that can really understand the various issues and help you determine the best choices, like a CPA or tax attorney (Hopefully someone you know that won't charge you by the hour!).

Be sure to look at the "business vs. hobby" stuff on the IRS site.
 

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Discussion Starter · #11 ·
Thanks for the input. I'd already decided to do the LLC thing before posting this, but what I want to watch out for is as soon as I do it all and become "legit" then I slammed on some tax code somewhere and because I'm not a "business" in the eyes of the gov't, I get hit some fee or charge from nowhere.

I know it's a third party story, but a buddy at work told me about his brother or cousin or someone who started a business and got the tax code and all of that and at the end of the year ended up owning like $1000 for workman's comp or something like that when he didn't even have any employees; he just had to pay into the sate for the sake that he was a business. That's the sort of thing I want to avoid.

I'm only at the "just above a hobby" level here, so we're talking maybe a $400-$500 profit in a year. I don't make much at all after materials and shipping. I'm just wanting to cover my butt and also be able to approach some of the material wholesalers and buy from them in bulk as a business and save money that way as well as I grow. I'm not wanting to open a can of worms that ends up clobering me on a technicality.
 

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Discussion Starter · #12 ·
QUOTE(NINJA @ Aug 25 2009, 07:04 AM) <{POST_SNAPBACK}>Don't forget about the Federal Excise tax.....as a manufacturer of fishing tackle, you are required to pay this also.

Form 720, and they are paid quarterly.

Yep, already on it. I was told by one of my tackle venders it was a form 637...is there a 720 too?
 

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Since you brought up the topic of L.L.C. Vs. a Corporation there are differences.

First of all an L.L.C. is a corporation in which you need a license to do business. Such in the case of a Real Estate business, doctor, lawyer, etc... It is a way to shelter yourself "professionally" from the licensed work you do.

In a Corporation, you can do not only the work or occupation you enjoy or purpose which it was formed under, but also any other legal enterprise that your hearts content.

Both entities have the ability to print and sell stocks, encumber debit, and enter into legal agreements (like buying real estate, auto, etc..) It is the "entity" that will be the vested owner with the board of directors and stock holders who direct the asset.

The trouble with an L.L.C. is that many of them walk the fine line of being a DBA and if any circumstance which might require that the "entity" needs defense from a law suit, the L.L.C. is easily defeated and the corporate veil is pieced (judgment crosses over into your own personal assets.) Many good lawyers suggest to file a Corporation, as opposed to an L.L.C. for this very fact.

You may file as an (S) corporation in either "entity" see your trusted tax attorney for this help. As for the annual filings, it it just a simple form sent in with $$$$, the way the state not only gains revenue but also to see if you are still in business.
 

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Discussion Starter · #14 ·
Seriously, is there a "Small Business for Dummies" book out there because this all sounds like I'm in over my head on this. I file a 1040EZ every year with Turbo Tax and this business is mostly just in name so I can get the wholesalers to sell to me. This all has me thinking I should've kept my mouth shut and just stayed under the radar, and has me wondering if I'm even capable of doing this a a business now.

I just want to sell my muskie flies and make a couple bucks on each one and cover my a$$. Maybe this isn't a good idea after all.
 
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