Bassgrabber Posted February 23, 2009 Report Share Posted February 23, 2009 (edited) Hi Everyone, I designed a bait last year, created the proto type, field tested, modified the design, created molds, and been pouring them. I decided that it was time to see if the general public would be interested in all my hour's, days, weeks, and months of effort. Patent and legal stuff is already in the works on these because I had a feeling. I posted on Ebay 3 weeks ago (edited) to see what the interest would be, and it is taking off bigger than I imagined. I can't keep the dang things in stock long enough so I am doing runs every night to replenish stock. I guess it is now official that "Bassgrabber Custom Baits" has been born. My question to you all is, when do I need to start thinking about getting the business license and tax info? Is there a $ amount that needs to be reached before I can be considered a business and not just a hobbiest? I've been dreaming of doing this, but it seems to be happening quicker then I thought. ( Not complaining at all.. Thanks in advance for your assistance.. Edited February 24, 2009 by redg8r Quote Link to comment Share on other sites More sharing options...
Vodkaman Posted February 23, 2009 Report Share Posted February 23, 2009 I think NOW is the answer, but I am not American. Lots of very good information in recent weeks on the subject, about tax and stuff, so get reading, QUICK! Dave Quote Link to comment Share on other sites More sharing options...
Bassgrabber Posted February 23, 2009 Author Report Share Posted February 23, 2009 I did a search on this site and found some good threads.. I am going to call my accountant/tax guy and get the ball rolling on FET, State Tax, Business Lic. Uncle Sam needs his cut and the Governator is going to "be back" to make sure he gets his. My excitement about this has turned into Ahh Crap!! But hey, I gotta do my part and that's okay.. Quote Link to comment Share on other sites More sharing options...
JSC Posted February 24, 2009 Report Share Posted February 24, 2009 Make sure you have records of all the sales and purchase expenses you have had .... Much as I hate to say this "Ignorance of the Law is no Excuse" at least that it was I have been told a time or two. JSC Quote Link to comment Share on other sites More sharing options...
Bassgrabber Posted February 24, 2009 Author Report Share Posted February 24, 2009 Thanks for the tip. I actually just got done talking to everyone from the State of California to the City of San Diego as well as being on hold for the IRS for 40 minutes.(Only to have them hang up on me)Will try again tomorrow to get the FET info. According to the IRS web site, Exise taxes seem to really spin around fuel?? In California if you sell on EBAY you must have a Sellers Permit. Free(Filled it out and will be in the mail tomorrow.) Business Lic requirements vary from City to City and Unincorportated areas of the county. Since I live in a unincorporated area of San Diego, no business lic is needed. (That saved me 100.00) All of my records are detailed and current. I checked my sales and financial reports on Pay Pal and Ebay and I am good to go. I hope this info can help someone else out. Quote Link to comment Share on other sites More sharing options...
JSC Posted February 24, 2009 Report Share Posted February 24, 2009 "According to the IRS web site, Exise taxes seem to really spin around fuel??" You only saw part of it ... The Old Dingle-Johnson Bill is the bill that added a 10% Excise tax to Fishing Tackle ... be advised you need to get all of that straight ... JSC Quote Link to comment Share on other sites More sharing options...
MTfishingrods Posted February 24, 2009 Report Share Posted February 24, 2009 On a possitive note, if you lose money for more than 3 years in a row the IRS will call your buisiness a hobby again and you can no longer use it to gain any of the advantagous write offs. Quote Link to comment Share on other sites More sharing options...
bassrecord Posted February 24, 2009 Report Share Posted February 24, 2009 Open up a business checking account and deposit all sales money into it and write all business checks out of it. Get a business telephone number, business credit card, PayPal account, letter heads and business cards. Your accountant will show you how to handle start up expenses and capitalize hobby expenditures. Buy Lassiter's 2009 Tax Guide (or similar) which will show you what legitimate business expenses you can pay from your business check book and credit card. Look at the IRS Schedule C which you'll have to submit next year for 2009. This is the simple stuff to start. As you get rolling later on, you may want to start buying and depreciating some equipment. You may have business travel and entertainment expenses which require a diary and specific reporting. There's other stuff. Again your accountant will gladly help for a fee. My general advice is to keep everything simple, stay legal and maintain records posted in business terms. Start thinking of everything in a businesslike manner. Write business notes. Document things as if either the IRS or Franchise Tax Board will audit you - they may - so be prepared. Have professional looking records - not backs of envelopes, sticky notes, etc. Move away from hobby terminology and thinking and invite your family to move away also. Welcome to business land! Good luck! John Quote Link to comment Share on other sites More sharing options...
nova Posted February 24, 2009 Report Share Posted February 24, 2009 You made a comment about selling this bait on Ebay already. If you've done that you have made the bait "public" and may not be able to get a patent. I'm not a lawyer and I'm only going from memory. There was a giant discussion about patents and such a while ago here. Do a search and see what you find. www.novalures.com Quote Link to comment Share on other sites More sharing options...
charmerbaits Posted February 24, 2009 Report Share Posted February 24, 2009 (edited) You can lose money for more than 3 years as long as you show the business is growing. If your business is stagnant and not growing then yes the IRS will change it to a hobby and you cannot take the rightoffs. Also, in the plastics business I wouldn't worrying about patents or trying to protect "your designs". Anyone can duplicate your bait and only have to change it 10% and be outside your patent. Most people that I have talked to in the business for many years don't mess with it because your willing to put in the money and time to keep people from doing copying your baits its not worth the expense and time to begin with. Charlie Edited February 24, 2009 by charmerbaits Quote Link to comment Share on other sites More sharing options...
WannabeeFishing Posted February 24, 2009 Report Share Posted February 24, 2009 Look at sites like NOLO.com, Legalzoom.com and Intuit.com and follow the incorporation (LLC) links. Obviously they are in the business to sell you something, but they do a pretty good job of explaining the pros and cons of incorporating vs staying a proprietorship. For various fees, these companies will complete your forms and file them with the state and provide your needed documentation. In addition to any fees they charge, there will be a fee paid to the state for incorporation (in Georgia, it's $100). Gary Quote Link to comment Share on other sites More sharing options...
Bassgrabber Posted February 24, 2009 Author Report Share Posted February 24, 2009 I really appreciate all the input folks..Keep it coming!! Quote Link to comment Share on other sites More sharing options...
Vodkaman Posted February 24, 2009 Report Share Posted February 24, 2009 Bassgrabber, I just read another post of yours. http://www.tackleunderground.com/forum/soft-plastics/16244-how-many-trick-worms.html#post120457 I fealt it more appropriate to comment in this thread. If you do intend to make a business, you will need to factor in many other costs, many of which will be tax deductable, but will still affect your unit price. Electricity, rent, tools, equipment, clothing, health insurance etc. I'm sure the actual list is a lot longer than mine, but you get my point. Dave Quote Link to comment Share on other sites More sharing options...
Bassgrabber Posted February 24, 2009 Author Report Share Posted February 24, 2009 I am working out of my garage so no rent. If I could deduct some of my 3700.00 dollar a month mortgage that would be nice. I do need to look at my electricity usage and associate a cost to that. Everything that I am using is gear that I bought a couple of years ago when I first got the bug to try this crazy thing.:lolhuh:I just recently decided to go for it and see what happens. My invoices for materials that I have purchased this week are all accounted for and filed away. I will be getting a couple more heating plates and CNC molds. All my other benefits are covered thru my day job. (Thank God!) Quote Link to comment Share on other sites More sharing options...
Vodkaman Posted February 24, 2009 Report Share Posted February 24, 2009 Yes I do see your point, but you might not be quite seeing mine. If your baits take off and you find that you want to go full time, you will then need to account for the other bills too. To meet these extra committments, you will probably have to raise your prices. Chances are that your now solid customer base will not be as forgiving as you thought they might and sales will drop all of a sudden, rocking the boat. Better account around a bait number that would cause you to go full time and set your unit price that covers the bills, so that the transition will be a smooth one and not cause any ripples. Dave Quote Link to comment Share on other sites More sharing options...
Birdman Posted February 24, 2009 Report Share Posted February 24, 2009 What a great thread for those considering taking the plunge. I wish some of this info was at my disposal when I first started. I also wish some had stepped in and asked ' What, are you out of your feakin' mind!?' but no one did and now I so much wiser for the experience. Thank god for blind ambition-without it our species would cease to exist (reference to young people having children then looking back and saying "if I only knew then what I know now'). One clearification on patents: You are allowed one year to file your patent after its initial public debut. After that, it's the public domain. I know because I went this route on the Baby Bird Popper. Another thing about patents-they're useless unless you are willing and have the funds to back them up. They do help keep the little guy from copying your design but the big boys love to test your resolve. Quote Link to comment Share on other sites More sharing options...
bassrecord Posted February 25, 2009 Report Share Posted February 25, 2009 OK so you are working out of the garage now. Gotcha. Many businesses started that way. You are in good company! Sounds like you have the records under control. Soon you'll be at level two. Hello - technical issues (patent), cost/price analysis (Vodkaman's ideas), make (you do it) vs. buy (pay a buddy to do it) decisions, how to do your business promotion, and many other issues. Everybody who runs a business out of the home wants to write it off and your CPA can help keep you out of an IRS audit there. A key item at level two is the mother's milk of business - working capital. This is the hard, cold cash you put into your business checking account which you use to pay your business bills BEFORE PayPal debits and checks arrive from customers. As sales start ramping up, this cash must increase also. Understanding and managing this working capital is a key to the success of your business. Another key item for you to resolve at level two is your salary or your draw from the business. HOW to resolve this is a huge topic and I bet this board's members could share lots of experiences but it MUST be resolved. For example, if you take cash out of working capital it will cause serious consequences and not many of them are good! As you, or anybody, handles working capital, salary draw, and other key business issues you will truly understand when your hobby has become a business. Good luck! John Quote Link to comment Share on other sites More sharing options...
rxfish Posted February 25, 2009 Report Share Posted February 25, 2009 Just a thought along these lines. The U.S. auto makers have lost money for years and have shown no growth, so I guess their business is considered a hobby. Quote Link to comment Share on other sites More sharing options...
Wayupnorth36 Posted February 25, 2009 Report Share Posted February 25, 2009 You can find all the Federal Excise Tax info that you need on the IRS website and even apply for and get your Tax Number (also called Employer Identification Number even if you don't have employees) all online and immediately. Also, there are probably links to your state gov't sites and other sites that have useful info on starting a business (like SCORE), a lot of which has been covered by the previous posts, but some differs on a state-by-state basis. Quote Link to comment Share on other sites More sharing options...
Bassgrabber Posted February 25, 2009 Author Report Share Posted February 25, 2009 I really appreciate all the help guys.. I filled out and sent the following: EIN - Got my number Excise tax registration form Sellers permit for the state of California Contacted my CPA to let him know that I have more work for him Next steps are: Open seperate checking account and credit card for business Get business Email account established Train Wife on how to package baits.. Is there anything else that I am missing? Quote Link to comment Share on other sites More sharing options...
WannabeeFishing Posted February 25, 2009 Report Share Posted February 25, 2009 If you are going to sell thru a website, take a look at the merchant services from Paypal. Gary Quote Link to comment Share on other sites More sharing options...
Bassgrabber Posted February 25, 2009 Author Report Share Posted February 25, 2009 Is that different than the paypal account I already have for ebay sales? Quote Link to comment Share on other sites More sharing options...
COBRA Posted February 26, 2009 Report Share Posted February 26, 2009 i have been in business for 10 years, i was an llc up until this year, i am the only owner now so i am a sole propriotor. my cousin luckily is my accountant and he said why pay the state $250 a year for the llc. excise tax is 10% on components ect related to the manufactured product, which some of my suppliers i have forms filled out, and other places i just pay it. you can just float the 10 cents on a pack of baits no biggie. if your selling on ebay, you can float on there i would say and not worry about it but if you are serious about becoming an actual business then go ahead with it. do you have the time to put into the baits to really make a go at it? do you want to get into stores? ebay you can sorta fly under the radar but if you want to go into stores or have an online store i would def. say get a business license. the patent, my personal opinion, no way. i have gone back and forth on this for years, i have talked to lawyers. if you really really think you have a great idea, and to actually apply for and get a patent that will hold up then go ahead but you will be looking up towards the 5 figure mark. patents can be great, but if you dont have the money to take people to court who infringe on that patent then forget it. my only bait that i havent publicly released yet, i keep thinking of trying to get a utility patent on for how the bait works, but still, someone can change a bait 10% and your patent wont cover it. also there are so many people out there who arent legit business's who do sell on ebay or on the side that will copy it that it would be wasted money, slug-o, sweet beaver, senko, look at all the knock off's, slug-o is patented but how many knock offs where there. look through the lure craft catalog and you will see what i mean. but like i said a patent is only good if you have the means of taking someone to court to make them stop producing what you are trying to protect. hope some of that helps, like i said its a personal deal if you want to put the time and energy to make a go with the baits. Quote Link to comment Share on other sites More sharing options...
gunnie3035 Posted February 26, 2009 Report Share Posted February 26, 2009 This is real easy.... When your wife wants half your inventory in divorce court. Quote Link to comment Share on other sites More sharing options...
