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Thread: Hobby shop Business? Is it worth doing?

  1. #31
    Join Date
    Feb 2008
    Location
    Grand Rapids, MI
    Posts
    383
    Hello Mike!

    I know I'm late to the party, but I figure it wouldn't hurt to share my opinions/experience.

    For years I worked at a Woodcraft retail store. I worked 30 to 38 hours a week, but the whole time my goal was to go into woodworking full time. SO....I got my LLC set up, and started taking jobs "on the side". The whole time I did this I knew that if the city I lived in really wanted to shut me down there was nothing I could do since I was running things out of my house. Now, because I wanted to go full time I claimed EVERYTHING that I brought in. I knew if my shop blew up my home insurance wouldn't pay. If someone broke in and stole my tools I was SOL. If someone got injured in my shop I was liable, but had no insurance. Those were the risks I KNEW I was taking, and by golly I was gonna get the shop off my property as soon as I could. After a few years I moved into a small shop space, 1350 square feet. I had to pay a bunch in build out costs, but it was great. BUT BUT BUT, now there was overhead. $750 each month plus insurance. The insurance company never even came to my place of business, and I was covered for $40000 worth of equipment, had $1000000 in leability coverage, etc.. for $105 a month. Easy peasy, but it became more difficult to make money.

    So that was the city. My friend who also started a wood shop lived in my city's township. He had a separate building for his shop, he got approved to run his business out of it, and he paid his taxes. In his case, he NEVER was at risk, everything was done in accordance to "the rules", AND it was not too difficult to stay in the black. In fact, he even had to put his approvals to the test. A neighbor drained their pool right down the hill that led to his shop. He made a claim and got covered. He also took the neighbors to court and won. Later on he moved into an industrial space as well.

    So I guess what I am saying is that if you set up a proper business/business name just keep it legit and pay what the government wants cuz by starting a business you basically state "I am prepared to pay the necessary taxes, insurance, etc..." Interestingly, you actually may be able to set things up on your property and be good to go in the eyes of the powers that be. It would be fairly easy to make money, and you wouldn't be "at risk". That would awesome for sure!

    In the immediate future, if you don't set up a business I don't think there is anything wrong with letting people pay you for making stuff from time to time, nor do I think the government cares. That said, at a certain point if you are really bringing in some coin you may want to get your ducks in a row.

    Anywho, there's what I have been exposed to. (By the way, I personally had a lot of help cuz my father-in-law is a CPA and attorney) I wish you the best, and I am happy to hear that people in your life are responding to your woodworking!

    - Hutch

    P.S. I have never had issues with not showing much profit. For years, before I was full time and after, I poured everything back into the business. Never an issue, cuz it was all on the level.
    Last edited by Matt Hutchinson; 04-06-2017 at 10:45 PM.

  2. #32
    Join Date
    Aug 2007
    Location
    Reno NV
    Posts
    13,245
    Wow, That's a great post Hutch! Soo good to see you!
    Programmer - An organism that turns coffee into software.
    If all your friends are exactly like you, What an un-interesting life it must be.
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  3. #33
    Thanks for the input Hutch! Gives me something to think about. I did talk to my CPA....said to keep track and everything and keep it seperate. If I start making good money start and LLC or DBA. If it ends up being more a hobby and make a little coin ...put the cash in a sock!

  4. #34
    Charles and Leo,
    If I build something for someone (outside of family) I would charge accordingly.....Most of the folks who contacted me on building stuff I suggested that they look at a few places to see what type of costs they would be looking at.....Less than half contacted me back and I had to decline to do anything until I get my woodshop built. I had 2 different car dealerships want tables. One wanted 3 another 2.
    We did do one of the car dealership (2 tables) that was fairly local. The other was 385 miles away. The 2 tables were 8ft long...charge then $1750 per table. They paid and all were happy!
    We had about wood cost and about 70 hours in it. That was 2 of use at 70 hours. So split between us thats only $12.50 per hour.......not counting material cost. Material cost for the 2 was less than $500
    So we didnt get fat on it! But we made a little. Its hard to figure what your time is worth......and how long it will really take. We enjoyed the build and I hope we didnt under price it much, Learning curve!
    I am pulling the trigger on starting the wood shop in the next 2 weeks.

  5. #35
    Shop update:
    I am pulling the trigger. Gonna get the shop build started in next 2 weeks...Hopefully! Going to end up being 24x26 200 amp electric service. Electric heat.... Window A/C unit. 1 man door Set of French doors ( Not allowed by city code to have garage door) . 3 double hung windows. Concrete pad in front 6 feet out 26 ft across and sidewalk to my house patio.
    It is going to be a hobby shop....no official business. My homeowners insurance tells me I am already covered for the cost of replacement of outside accessory building with contents up to 104K covered under current policy. Guess I had too much coverage for the last 26 years! I will end up drywalling the walls and ceiling. I am going to regret it but I am doing 8 ft ceilings. I also have height restriction....But Im sure I could do higher ceiling but had to compromise with the boss. I will be using the attic for storage of all the crap ( as the boss calls it) that I have in current garage and basement!
    Last edited by Rennie Heuer; 05-01-2017 at 11:01 PM. Reason: CoC Issue

  6. #36
    Join Date
    Nov 2006
    Location
    Constantine, MI
    Posts
    7,645
    Quote Originally Posted by mike kleinsmith View Post
    I am going to regret it but I am doing 8 ft ceilings. I also have height restriction....But Im sure I could do higher ceiling but had to compromise with the boss. I will be using the attic for storage of all the crap ( as the boss calls it) that I have in current garage and basement!
    Yes, you may. If your office, rest room, finishing room is at one end, consider using scissor trusses over the open shop area to gain ceiling height. Then use the areas over the office area as attic space. This should help you stay within the exterior height requirements and maximize your ceiling height.
    Last edited by Rennie Heuer; 05-01-2017 at 10:59 PM. Reason: CoC issue - Hieroglyphics
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  7. #37
    Join Date
    Nov 2006
    Location
    Austin, Texas
    Posts
    1,408
    I agree with Rennie - you WILL regret the 8 foot ceilings. I have just under 10 feet in my garage, and the "just under" is a frequent irritation. I don't mind trimming lumber to 10 feet, but hate cutting it to 9 1/2 feet to lean it against the wall. Pivoting a sheet of plywood requires almost 9 feet, and with ceiling lights, becomes a challenge.

    I suggest you renegotiate that one number.
    Charlie Plesums, Austin Texas
    (Retired early to become a custom furnituremaker)
    Lots of my free advice at www.solowoodworker.com

  8. #38
    Join Date
    Feb 2008
    Location
    East Freeetown, Massachusetts
    Posts
    2,836
    Quote Originally Posted by mike kleinsmith View Post
    Thanks for the input Hutch! Gives me something to think about. I did talk to my CPA....said to keep track and everything and keep it seperate. If I start making good money start and LLC or DBA. If it ends up being more a hobby and make a little coin ...put the cash in a sock!

    LLC and DBA are two entirely different things.

    You can print out Publication 535 from The IRS which explains a LOT about hobby vs business and what deductions are available. You can certainly sell something made in your hobby shop for a profit and take certain deductions. As a Hobby - you can deduct UP TO your sales amount but no more. As a regular business you can deduct more than you sales and offset your "other income" BUT be careful on that one. There are rules that apply. I am sure your CPA is aware of the rules. They are all in the publication 535

    At this time I am classified as hobby, but may turn the table and reclassify as business.

    Hobby and making a little money on the side with certain deductions based on Pub 535 is very very easy and very legal.

  9. #39
    Join Date
    Jun 2007
    Location
    Oceanside, So. Calif. 5 mi. to the ocean
    Posts
    4,944
    I have absolutelyl no desire to start any business. However, I did read every word in this thread. It was very interesting.

    When I started school I knew that when it was over I wanted to be my own boss, own the business, own the building, etc.

    Money was darned tight the first three years; it was a good thing I lived frugally while going to school, had purchased "War Bonds," saved every penny, luxury was spending $0.30 to go to a movie, etc. I had a wonderful wife who would put up with that level of housing, old car, etc. She would also have kicked my butt if I didn't keep excellent records. The point to the preceding sentences is, I knew what I wanted and nothing was going to prevent having it. TOTAL DEDICATION, failure was not an option.

    I went to every class, seminar, etc. on how to manage the business aspects of the business. It is now time to shut up. So I will say,

    Enjoy,
    JimB
    First of all you have to be smarter than the machine.
    VOTING MEMBER

  10. #40
    Join Date
    Feb 2008
    Location
    Grand Rapids, MI
    Posts
    383
    Hi Mike, it's great that you are able to get the dedicated shop underway. The garage I started in was a bit smaller than what you will have, and I was able to do a heck of a lot considering it's size. My garage had a 8.5 foot ceiling, and let me tell you, that extra half a foot was unbelievably important. So I second the sentiments about having a taller ceiling. Anywho, I look forward to hearing of the progress!

    - Hutch

    P.S. It's not uncommon to unintentionally under bid projects. I still do that from time to time. Big projects/jobs are generally the ones that have this happen.
    Last edited by Matt Hutchinson; 04-19-2017 at 08:46 PM.

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