Getting a business license and saving $

[thorsen]

I was wondering if many people in this hobby try to aquire a business license? I'm not sure how complicated it is but I have heard it is simple. Obviously reef keeping isn't cheap and I imagine you could save a lot of money having a business permit. I am looking to purchase a new tank right now and have done been contacting the manufacturer regarding all the details, but now I have to go through a local reef shop to place my order. The local reef shop has done me no service so I really don't care to have to have a middle man who drives the price up.
I occassionally sell corals from my tank and even though my cost is 100 x's higher than any profits I make I don't see why my hobby could qualify as a home business?

[MSU Fan]

Sounds too simple to me - which means there is probably a catch that makes this unattractive that we are not aware of. Just my .02. Tagging along to find out...

[eshook]

Generally home based businesses need to show profit within 3-4 years or the IRS thinks something is going on. That is the first thing to consider. I also think it is difficult to get a license in this hobby, because for almost every case its just that: a hobby. There have been numerous threads with people legitimately wanting a business license for fragging coral, breeding fish, etc. IIRC many of them had troubles getting said license.

Good luck and post if you get your license and what type of discounts you get

[akaatomic]

I know having the business itself can be detrimental. For example, if you incorporate in NJ, you pay a minimum of $1500 annually in state tax. So, even if you only make $10, you'll still owe $1500 when you go to do your taxes. I not sure how it would effect a sole proprietorships.

[schutzstaffel]

It only costs about $15-$25 in most cities to get a business license, all you have to do is contact the county clerk of courts to find out what to do. If you incorporate it will cost ~$500 to have someone do it for you and will have tax consequences and a lot of paperwork. There is no reason to incorporate if you are trying to get the license to save money. Just getting a business license to use while purchasing fish stuff is completely harmless. You don't have to have a tax ID for a sole-proprietorship, therefore the IRS won't even care if you exist unless you turn a profit (which you won't if you are just using it for price benefits). Getting a business license is nothing but beneficial as long as you aren't incorporated and don't intend to use it to make money.

[schutzstaffel]

P.S.---I know this because I have an incorporated company and am using a DBA to purchase stuff and have been since 2001. I have to deal with all of the tax stuff for the corporation and none of it for the sole-proprietorship.

[Holyreefer]

i currently take advantage of this, and it has its goods and bads like everything else. I can get salt for 185 gallons for like 18 bucks where as in the stores it cost an easy 65 for a 50gallon bag. Oceanic that is.

I also get pretty good prices on tanks and equipment, I've ordered from time to time things from vendors, like livestock from ERI International. and have had success.

eshook,
your somewhat right, Its a whole lot easier to get a licencse. The state you live in i'm sure has different rules, i know in Wis it cost like $155.00 bucks one time and 10-20 dollars annually to keep it going.

Also if you don't make enough profit which i believe is $5000 or more they consider it a hobby!

[MSU Fan]

Originally posted by Holyreefer
Also if you don't make enough profit which i believe is $5000 or more they consider it a hobby!

Does this have an effect on the situation - meaning, does this affect your ability to keep the license, change your status, etc?

[schutzstaffel]

Originally posted by MSU Fan
Does this have an effect on the situation - meaning, does this affect your ability to keep the license, change your status, etc?

No, if you make less than the cutoff, then it's considered a "hobby" and you don't have to pay any taxes. You can still renew your license every year, and since you won't be making ANY profit, you won't have any taxes but you can still use the benefit of the business to buy stuff.

[katpurdy]

What about necessary cites? If you order from a supplier in Indonesia, you would need the paperwork to bring it into the country.

[Curlsoc]

And then there's those of us that live in areas with no buisness license. Go figure. You'd think they'd want the money.

[Holyreefer]

no but the supplier will need your information to validate your a business... and then they will start to send you stuff ( airbourne)

[Aqua Keepers]

So, can I use my LLC, that I started to buy Real Estate, to buy reefing stuff?

[redFishblue]

A friend tried to buy some tanks using his LLC which he uses to manage his rental properties.
The wholesellers told him that his business needed to be fish related with a storefront in order for him to order from them. Maybe it would still work with other wholesellers though.

[Savas]

Just some advice from a CPA, the issues discussed are basically confusing federal tax law and state incorporation law. A hobby does not qualify for deducting expenses that show a loss. Federal law does require taxes paid on profit though. Incorporation laws vary by state and can be done for under $500 typically for a corporation - less for a sole proprietorship. I would highly recommend seeking tax assistance if you are trying to set up a tax deferred / sheltered business.

[Savas]

One last thought: many distributors and wholesalers have case minumums and you probably don't want 12 50 gallon tanks at a time. I think the real trick here is finding wholesalers or dealers that will sell is small lots. You will also typically bear the cost of dead livestock when ordering as a wholesaler.

[Ewan]

Ever been audited?

[hyperfocal]

Yeah, the real problem is with the distributors -- they're wise to this and won't just wholesale to anyone with a small business license or LLC. As mentioned above, they want you to have a storefront.

Even if you managed to pull it off, I think you'd be disappointed. You can buy most drygoods cheaper from the 'net fish supersites than you could from a distributor. Sure, you could buy fish and inverts at a discount but do you really want to take whatever they decide to send you (dead or alive) -- "orders" are more often "requests" when dealing with fish.

[Andrew]

If everyone would be their own whole seller, than what would happen to those who own lfs and manage online stores? Many online stores offer a very large discount and I myself would prefer to support my lfs and the online vendors.

[jrockssvt]

Like previously stated I think the biggest issue would be the wholesaler's minimum. Maby If you did group buys on forums such as this then you could order 100 recordea at $4-5 a piece. Then it could be done.

Interesting idea, what if I set up a website where I had "recordea" and you paypal your "$5" and once it reached a "100" the recordea would be shipped around half price. Obviously this would not be worth that at that price, but do you get my idea???

[thorsen]

There are a lot of little LFS that stock very small amounts of items. Certainy on bigger items like custom fish tanks, high end skimmers, or chillers you don't have to order bulk. I don't really care about tax right offs all I just want to get whole sale. Personally I feel like the LFS has snatched enough out of my pocket. I guess every LFS is different though.

[cd77]

I've owned my own businesses for many years. My advice, don't do this. I sell intangible goods, so I don't have to worry about sales tax -- sell tangible goods, and you will have to worry about that which means you'll need a retail license. In my own experience, wholesalers won't even deal with someone without seeing one of these. Manufacturers may if they sell direct.

Secondly, eshook's post was correct. After 3 years of showing no profit, the IRS will shut you down and your business will be considered a "hobby".

If you already have a business, you can throw your tanks into your place of business (home office, whatever) and you _may_ be able to write it off. For instance, you may see nice tanks in a waiting/reception room. I see you're an ENT specialist -- ask your accountant.

Or, better yet, think of a way to make it profitable!!

[Absint Reefer]

I'm 19 and have a vendor licence and a business licence they are not to hard to get a hold of lots of paper work and more taxes not worth just getting wholesale and most places won't sell unless you actually have a storefront because why sell to you who's going to buy $100 of stuff every other month when they can sell to your lfs for $500 a week.

[2crazyreefers]

This issue changes by state regulations depending where you live. Even if you could get a licsence most vendors reqire a storefront and min purchase of 500.00. Also as stated before the IRS might get involved after 3 years. A friend of mine owns a LFS store here in VT. and he is required to send in taxes every month.

[willpierce88]

Hey absint and crazy, how do you guys know so much about a word you can't even spell?