[ire]

This is kinda a stupid question...anyone here have either a sole proprietorship or corp for yourself/team? My boss and I were BSing and he asked me if I made any money racing and I said well... I'll win around a grand in prize money during cross season, but then I spend 5 times that much on cycling every year. He mentioned that I should setup a business and claim a loss for two years and then disband and then in a year or two do the same thing. There are rules around how long you can claim a loss before the business is considered a hobby. I like the idea of writing off my bike expenses, I don't like the idea of being audited

 

[skatetokil]

Considering setting up the business is going to cost you 3-500, you'd have to do the math to see if it's worthwhile.

 

[ire]

Considering setting up the business is going to cost you 3-500, you'd have to do the math to see if it's worthwhile.

If I set it up as a sole proprietorship (which has shorter limits on how long you can claim a loss), it would cost less. Good point about the cost though. If I spend $5k a year though, that's $750 in tax for a single year.

 

[skatetokil]

The thing is, an LLC (sole proprietorship) doesn't actually have any tax effects, it just limits your personal liability for debts and allows you to sell shares. Basically, claiming something as a business expense as part of an LLC is the same as claiming an unreimbursed business expense on your personal tax return. If you wouldn't feel comfortable writing off all that bike gear without a fictitious company to hide behind, don't bother. And if you can justify it, just do it, no reason to mess with the incorporation.

 

[maddog17]

so if Ire sells shares we could do a hostile takeover of his "company"?!?!? i'm in!!! LOL!!!!

 

[ire]

The thing is, an LLC (sole proprietorship) doesn't actually have any tax effects, it just limits your personal liability for debts and allows you to sell shares.

I would incorporate to limit my liability from teammates who injure themselves while racing (this is under the assumption that I build a team).

so if Ire sells shares we could do a hostile takeover of his "company"?!?!? i'm in!!! LOL!!!!

You could convince my teammates that you should have a seat on our board...just like Carl Icahn!

 

[skatetokil]

Yeah, if you have other teammates, by all means. However, how often to people sue their own race team? You honestly might be better off as a non-profit so that you can solicit tax write off donations from sponsors. . .

 

[OGRipper]

An LLC and a sole proprietorship are not the same thing. You don't need to form an LLC to have a sole proprietorship, but forming an LLC will give you some liability protection.

A single member LLC can be treated like a sole proprietorship for tax purposes (i.e., disregarded), but a multi-member LLC is ordinarily taxed like a partnership.

Talk to a lawyer before you do anything based on what you read in these forums. Just sayin'.

 

[reflux]

I would incorporate to limit my liability from teammates who injure themselves while racing (this is under the assumption that I build a team).

If the business entity isn't well-capitalized (funded), a business owner can potentially find themselves personally liable for the debts of the business.

Also, an LLC is a pass-through entity. Aka. losses and gains flow through to the individual owner(s).

There is a no hard-set rule pertaining to how long you may claim a business loss before catching the watchful eye of the government. However, your business must show a profit motive, as well as be a viable business entity. If your business plan is "To claim a loss for tax purposes for a few years" you might have to revisit your plans.

 

[SuspectDevice]

If you make money in the real world, do it. You can write off every single expense you have relating to bikes, including all the bike stuff you already own, and anything you can justify at all as a reasonable cycling expense. For realz. My MBA accountant sez so.

 

[reflux]

Basically, claiming something as a business expense as part of an LLC is the same as claiming an unreimbursed business expense on your personal tax return.

Sorry, I get irked when people give poor or flat out wrong tax advice. Unreimbursed business expenses are deductible as an itemized deduction, in excess of 2% of your AGI. Business losses (non-passive generalizing, deal with it) are taken into account when calculating your AGI.

 

[skatetokil]

Sorry, I get irked when people give poor or flat out wrong tax advice. Unreimbursed business expenses are deductible as an itemized deduction, in excess of 2% of your AGI. Business losses (non-passive generalizing, deal with it) are taken into account when calculating your AGI.

I've come to terms with my wrongness when dealing with the US tax code. At least I'm in good company (most of the current cabinet, congress, and business community).