Starting a Woodturning Business

Pete Jordan

Member
Messages
455
Location
Mason Michigan
I would like to start a woodturning business but do not know where to start. I have 2 people who will sell my work but I don't know the business part of it. Do I need to see an accountant first or what is the first step. Any help will be greatly appreciated. Feel free to post or PM me.

thanks,

Pete
 

Jeff Horton

Member
Messages
4,272
Location
The Heart of Dixie
For a living or a hobby? Big money, pocket change? That has a lot to do with it. Assuming were not talking many thousands of dollars you wouldn't need an accountant to start off I don't think.
 

Greg Cook

Member
Messages
2,882
Location
Tokiwadai, Japan
Like Jeff said, depends on your scale. If you intend to write off your "shop" area, and tools as business expenses, you might want to talk to an accountant to get you started. Normal business can be kept track of with something like Quick Books. Be sure to keep good records and check on taxes, licences you will need too.
 

Vaughn McMillan

Administrator
Staff member
Messages
34,335
Location
ABQ NM
Although I have no real plans to make my sole living at it, I have a "woodturning business". I made it official last year, since the shows I wanted to sell my work at required that I have a Seller's Permit. In California, that meant registering a business name, getting a tax ID number (for sales tax), and then getting the Seller's Permit. I still haven't completed this year's taxes, but I don't intend to itemize equipment depreciation like a serious business would. I still need to finish studying the rules, but as I understand things, I shouldn't have any difficulty showing losses and treating the whole woodturning thing as a hobby on my personal taxes. I also need to file separate paperwork to pay the sales tax on my show sales. Yet another thing I still need to fully research, and soon.

As for getting you started, look at the web site for your state's Secretary of State. I found a lot of info on this site, and perhaps your state has something similar.
 
Messages
1,407
Location
Villa Park, CA
Although I have no real plans to make my sole living at it, I have a "woodturning business". I made it official last year, since the shows I wanted to sell my work at required that I have a Seller's Permit. In California, that meant registering a business name, getting a tax ID number (for sales tax), and then getting the Seller's Permit. I still haven't completed this year's taxes, but I don't intend to itemize equipment depreciation like a serious business would. I still need to finish studying the rules, but as I understand things, I shouldn't have any difficulty showing losses and treating the whole woodturning thing as a hobby on my personal taxes. I also need to file separate paperwork to pay the sales tax on my show sales. Yet another thing I still need to fully research, and soon.

As for getting you started, look at the web site for your state's Secretary of State. I found a lot of info on this site, and perhaps your state has something similar.
I think for the feds, if you treat your work as a hobby, you get to deduct expenses up to the amount of income from the hobby. In other words, you can't deduct your expenses from other income, like a salary or retirement income, only from income from your hobby. If you treat it as a business, you can deduct expenses in excess of income but you need to be careful because the feds will question whether it's a hobby or a business. Making a profit in two years out of five is considered proof of being a business for the feds.

Mike
 

Chuck Thoits

Member
Messages
4,047
Location
NH
Peter for me I have 3 businesses that I run under 2 registered with the state one one that will soon be. They all have insurance on them. But for the IRS they are all filed as me. They are all registered as my name , doing business as. Or A DBA
Depending on the size of your business you may want to go with an LLC.
But an accountant can explain all that.
Here is another question for all.. How do you put a price on your product?
I have things coming out of my shop that if I where to a shop rate on They would scare me let alone a shopper in my booth:eek:
Methods i have tried.
Shop rate; (for me I have put 65 bucks per hour) hours spent working on a project in the shop plus materials.
Materials X2; what ever the materials cost times tow thats what the price is.(really hard when the turning stock is free.)
Just plane wing it; well it took 4 hours but it looks like it's worth 50 bucks but that seems high so, well put 35 on it and well see what happens.
 

Frank Fusco

Member
Messages
12,466
Location
Mountain Home, Arkansas
I think for the feds, if you treat your work as a hobby, you get to deduct expenses up to the amount of income from the hobby. In other words, you can't deduct your expenses from other income, like a salary or retirement income, only from income from your hobby. If you treat it as a business, you can deduct expenses in excess of income but you need to be careful because the feds will question whether it's a hobby or a business. Making a profit in two years out of five is considered proof of being a business for the feds.

Mike

My method is simple. I have two wall-hanging plastic pockets. All receipts for shop expenses go in one. Income items in the other. I file quarterly estimate for tax due, always zero as in $0.00. At the end of the year I give the mess to my tax preparer and she totals appropriately. My office expenses are also calculated for my writing.
Have to disagree a bit with Mike. Feds do want a show of a genuine effort to make a profit. Not likely a requirement to make a profit would hold up in the courts. I could expound but that would get political.
 
Messages
1,407
Location
Villa Park, CA
Have to disagree a bit with Mike. Feds do want a show of a genuine effort to make a profit. Not likely a requirement to make a profit would hold up in the courts. I could expound but that would get political.
You're right, Frank. I forgot to include that. The two years profit out of five is accepted as proof without any other evidence. But as you point out, it's possible to demonstrate a genuine effort to make a profit. It's just more effort with the feds.

Mike
 

Ron Sardo

Member
Messages
292
Location
Drums, PA
You're right, Frank. I forgot to include that. The two years profit out of five is accepted as proof without any other evidence. But as you point out, it's possible to demonstrate a genuine effort to make a profit. It's just more effort with the feds.

Mike


Actually
Congress decided that writers, photographers, artists and the like should have an easier standard, two out of seven years of net profit.

And there are ways around this, such as proof of advertising or belonging to a business group such as the Chamber of Commerce or trade organization.

BTW Congress never said how big your net profit must be.....
 

Lee DeRaud

Member
Messages
435
Location
33.8736N, 117.7627W
I think for the feds, if you treat your work as a hobby, you get to deduct expenses up to the amount of income from the hobby.
True, but that goes on Schedule A as "miscellaneous deductions", subject to the 2% AGI exclusion. Takes a lot of bowls/pens/whatever to make that useful, or else a very low amount of "real" income.

(Typical IRS: the rules push you really hard in one direction, then pile on a ton of paperwork if you want to go that way.)
 

Paul Downes

Member
Messages
960
Location
Westphalia, Michigan
SCORE

Mike, I have been in the process of launching a business for a couple of years now........:D. In reality I just had to retire at the young age of 48 and am looking to get serious about a wwing business. I would recommend that you look up SCORE in the yellow pages ang set up an appointment with one of their reps. SCORE is an organization of retired business people who volonteer (pls excuse my spellin) to help people get their business going. It's worth the attempt, It's free and it might help. I'm going to set an appointment tommorrow.
 

Bill Grumbine

Member
Messages
252
Location
Kutztown PA
Pete, I'm coming to the discussion a little late here, but if you start a business turning wood, the first thing that will happen is that you will have less time to turn wood. You will be spending a lot more time doing the business of business. I do everything except the books, and I still have to keep track of at least some of that paperwork or suffer the wrath of SWMBO, who does the books for me.

A small business on the side where you are just making some money off your hobby is not too hard to handle, but if you really get into it, there is a lot more to it. Making bowls and hollow forms for the local gift shop is easy enough, and if they sell, then you have some more money to fuel the habit. But to get into it seriously, now you have to start turning things other people want you to turn. Burls will sit on the floor by the lathe for months because you are turning balusters. Customers will need to be found, cultivated, cared for, and so on. Money will be eaten up in things like insurance, at least some sort of advertising, etc.

I could go on and on, but I may be talking in a direction that does not interest you. If you have any specific questions, I would be glad to try and answer them for you.
 

Paul M Cohen

Member
Messages
59
Location
Beaverton, Oregon
Thanks for the help! I don't know if I will ever show a profit but it should keep me out of trouble.

Get a book called "It's how much you keep that counts" by Ronald R. Mueller it explains the ins and outs of small home based businesses. There are a lot of things you can do to demonstrate your intent to make a profit. If you have another (W2) job you can adjust your W2 to get an additional $500-1,500 a month in your pocket to help finance you new business.

The important thing is to keep meticulous records, and do things to show you are trying to make a profit. A website, credit card acceptance, business cards, selling at crafts shows, putting your URL in your profiles...
 
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