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killemall8

Business taxes and profit

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I am really starting to wonder how building as a career is possible in any way.

I pay taxes 3 times a year, and none of my writeoffs are ever enough to reduce taxes to a point where i actually make a profit.

Along with my expenses (around 3000$ last year) I paid about 800 in state taxes.

When i just filed my federal taxes i had to pay 2100$.

My gross profit was about 8600 for the year. So that leaves about 3000 of profit, which doesnt even cover a few months of supplies at a time.

I really dont get it. How is it possible? The more i charge the more taxes i pay, and the less business i get.

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Sounds like you need the assistance of a good accountant. Dunno about where you live, but down here I believe there are all sorts of tax breaks and government grants/incentives to small business owner-operators to allow them to make a living out of what they do. Maybe there are particular tax rates that apply to small (registered? hobby?) businesses that make it possible to run at a profit where you live that you need to find out about?

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If you think tax is a bitch, there are so many more evils than just tax.

If I sell a guitar for $3000 (my average price), approx $1000 of that goes to tax (in reality its not that simple, but to keep things at primary school math, lets just say 30% of income), another $200 +/- per guitar goes to insurance (depends on how many guitars I sell that month how much it's divided per guitar), another $1000+ depending on specs goes to materials (freight to australia adds a LOT for freight of raw materials and hardware) then I have to allow for other business expenses like bank fees (sounds crazy but they add up to be hundreds over the financial year) plus overheads like cost of the workshop building, security, utilities, accountant fees, all the general running costs that effect every other business.

At the end you are left with stuff all. This is business. This is the same for all types of small business. Why do you think most guitar builder startups go belly up and run. It's not just guitar builders that this happens to. It happens in allelements of small business. Notice how many new little shoips pop up and then six months to a year later they're gone. Every time you see that, imagine that is someones shattered dream. It's someones life now dedicated to paying off a debt for their unplanned business which failed due to lack of knowledge and planning and research. I really cannot remember the exact percentate, but I think when I did Business management twenty years ago the percentage of businesses that fail due to lack of a decent business plan is 97%. One other thing I remember from Business Management is that most small businesses run at a loss for the first year or two years. Yet most of the people that do a start up businses do not have the financial planning to support themselves via these "start up" years, which is another reason they fail, but also comes back to being a bad business plan and a lack of understanding the business side.

Most people start as a hobby and think it's great, then you add the business side and realise it's a complete nightmare. Last year my expenses were a bit over $70k. I didn't even sell 70k worth of guitars, so like many other luthiers I work a second job to help cover living expenses, in my case I work six days a week as a luthier and then I work evenings in a factory. You'd be amazed how many of the luthier brand names out there that people think are well know successful luthiers are actually working a second job to make ends meet.

No such thing as a rich luthier. some might be able to support themselves, but they won't get rich off it. There's no fame in being a luthier either, it's not like you're up on stage in front of thousands of people every night. You may gain a reputation in a circle of society that is a minority, but thats not fame. You have to really love it to do it, or you're not going to last long when the hard times kick in.

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Sounds like you need the assistance of a good accountant. Dunno about where you live, but down here I believe there are all sorts of tax breaks and government grants/incentives to small business owner-operators to allow them to make a living out of what they do. Maybe there are particular tax rates that apply to small (registered? hobby?) businesses that make it possible to run at a profit where you live that you need to find out about?

NM has a lot of taxes other states dont. I dont know of any other tax breaks that i could get as a business.

NM is also one of the only states that taxes off gross income for small businesses as well.

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Curtis is right find an accountant You may be better off incorporating and then paying yourself a salary or some other bs like that

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Curtis is right find an accountant You may be better off incorporating and then paying yourself a salary or some other bs like that

At the figures he's mentioning, he's not a business he's a hobby and he shouldn't be needing to pay tax. Which brings it back to the same thing everyine is saying - get an accountant.

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Curtis is right find an accountant You may be better off incorporating and then paying yourself a salary or some other bs like that

At the figures he's mentioning, he's not a business he's a hobby and he shouldn't be needing to pay tax. Which brings it back to the same thing everyine is saying - get an accountant.

hmm. Well i am definitely not going to get an accountant, so i guess i will just suck it up and deal with the way it is going.

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