This may sound like a strange question but can someone explain to me what the advantages are to declaring part-time work and operating a legitimate business rather than just receiving money under the table? Other than the obvious legality/illegality of it. I am talking part-time work doing interior work (i.e. painting, installing ceramic tile/hardwood flooring, storage ideas and implementations, making drapes, etc). I have a female friend who does this type of work on the side, mostly for relatives or close friends, and was wondering whether it makes sense for her to have a business name, business cards, deductions, business accounts, etc. Is there anyone else out there who had a similar decision to make and decided to start their own legitimate business?
Regards,
Buzzsaw
“Don’t ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive.” Gil Bailie
Replies
Wow
If anybody is any good at all and has an ounce of ambitiopn, the business WILL grow.
So now is the time to structure for it.
It feeels mighty good to do the right thing in the right way. no bad vibes from knowing that someone elseis paying your fair share of the load - tax wise, and no looking back over your shoulder worrying over it.
One of the most common complaints of those who recieve their money under the table is that when they want to apply for a loan, they find themselves unable to substantiate any income, and if you mention to the bank, " You can see that it is there based on my deposits" you are telling the banker that you are willing to cheat the govt. That leaves the banker wondering why they should trust you when the govt can't trust you...
But if she gets satisfaction out of cheating the rest of us, and scamming the system, and never has enough ambition to want the business to grow, prefering to remain poor, then by all means, she should continue to hide in her hole under the table.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
Here's another that might hit closer to home.
If she is working illegit in an area that requires a license, and some HO decides not to pay hewr, she is out on a limb alone. The courts will laugh her off. If she thinks working only for family and friends keeps that danger away, she is only kidding herself. Family and friends make the worst kind of business relationships.
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
Thats pretty much it .
I had a conversation with a house cleaning lady that told me she was moving out of my rent house which had been a big step up only a year ago give or take a few months. I was in a good mood and went into listening mode. She told me about the house . It was twice the house she was in and made me wonder how she made that happen. So,,.... she just told me .
She gets goverment help with every program, doesnt pay taxes along with no state or SS. She actually works 60 hrs a week 52 weeks a year unless shes sick. Shes a single parent and does better single she said. No wonder. So any wat I asked her how she swung the expensive house ? I knew she had no income she could rightfully support on paper like you said. Simple . Its going to be her Mothers house and she is the sole heir. Never fails to amaze me what I hear from the trenches of the rental business .
I think there are a lot of people who look for a side line secondary business with no record keeping. House cleaning and yard care top the list. Im sure handy man work would pass wood cutting . Every Summer teachers become painters and even builders. Yep, have a cousin that always built 3 houses every summer with out a contractors license until I became inspector. He did around 40 roofs too contracting them out untill I told him the reprecussions of not being legit. Hes quit.
Tim
I am taking an H&R Block tax course.Seems that lots of people work just enough to maximize their EIC. That is a "refundable" tax credit (AKA welfare).She could probably do better if she claimed some of the income.Also I found out that the rules for qualifying children have changed this year. In the past a person could often claim their shackup child, but no longer. Will be great wailing and mashing of teeth next year.
There are quite a lot of advantages. JLC had an article on it a couple of years ago. I don't remember them all, but you should find the article because it was well done.
Some I remember center around the ability to go to court to collect unpaid bills, file liens, and so forth. Others centered around shifting liability from your personal assets to business assets if anyone gets hurt on a job site. That anyone could be an employee, a client, or even a trespasser.
You lose all sorts of legal protections when you operate under the table.
You also shortchange your social security benefits, and cheat your employees out of retirement benefits and insurance protection.
"You also shortchange your social security benefits"How could I have forgotten that one!?There are a lot of gardeners, laawn care p[eople, housekeepers etc around here who prefer to get paid under the table in cash.
And there are a lot of the older ones who whine, bitch and moan that after all the years they worked, they hardly get a thing from SS, conceniently ignoring the fact that they barely paid in a dime all those years.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I have a sister-in-law who was being paid under the table. One day, she was complaining about how the government did nothing for her. I couldn't help but laugh in her face. What a whining parasite she was.
That says it all, short and sweet, Sweetie!
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Not only for basic SS benefits but in the case of disability you have to have a certain number of "quarters" within the time of becoming disabled to be eligible. You could have accrued a pile of benefits and not be able to get anything till you reach the minimum age.
Wayne,
Can you elaborate what JLC is? This is a one person operation. No employees, etc. I'd like to read the article and thanks for the sane response and for not preaching at me.Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Journal of Light Construction
Thank You...Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Soultrain,
Could you possibly find out which back issue that article was in. On their website I can purchase back issues and wouldn't know which one to purchase. Any help would be appreciated.Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Sorry, I don't know which issue that would be...
Can you remember anything about the title of the article? Anything that you can tell me I can try to search for it on their website. It looks like an interesting journal. Do you recommend it?Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
You'll have to ask WayneL5, I've never seen the article - I don't even subscribe, I just knew that JLC was Journal of Light Construction.
Try this from JLC website:
February 2005 Legal: Why Operate Legally?
Hey buzz, I wasn't preaching. I was laying out an even handed on the one hand this or on the other hand that.Either she is ambitious and here are the rewards - or she ain't and can suck slime with other bottom dwellers. For some people, it helps to have it laid out straight to see it clearly. I don't see many grey areas in life. You asked a question straight out and I responded in kind - straight out !
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Yes, that article from the February 2005 issue is the one I remember.
I just ordered that issue and the latest issue. Looks like a great magazine to subscribe to.Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Thanks for the link. I'm going to see if I can purchase it. It also sounds like a good magazine to subscribe to...Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
I have the on-line subscription. It's not quite like thumbing thru a paper magazine but the search feature is fantastic. I've been reading the mag for almost 20 years now and I can remember old articles and usually can find them fairly easily. Naturaly, that's how I found the article you were interested in.
What is the gist of the magazine. I assume that it is for someone in the construction business. Is it also good for people who aren't in the business and are more weekend warriors? People who enjoy working around their own homes and want to learn as much about construction, etc as they can? Are there also how-to articles?Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Buzz:Check your local public library; if they carry it, go and "test drive" the mag. I've found that it's worth the money to subscribe and besides, it is tax deductable.
Rookie
I already ordered two back subscriptions anyway but will check out the library.Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
I'd say it's for people in the business. Not too much how to stuff. More accounts of "here's what we did. They have alot of regular features on design, legal and industry update kinds of things that are helpful for folks in the business.
I'd say you'll know if you like it after reading a couple of back issues. As others have said, check out the local library too.
Thanks much. It sounds interesting. I have often thought about leaving my computer job for the construction business so this would be interesting reading maybe as a precursor to someday following my passion...Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Just a short "There I was" about the benefits of seperating yourself from your business.
I built my very first whole house as a contractor in 1979. I was legal and licenced but as a private individual. It was all finished and looking so pretty one Saturday when the owner came out for his final inspection. He was happy and told me to stop by his office on Monday and he give me the final check. The amount due was $40,000 and he was building this from his personal funds and no outside financing was involved. The following day being a nice fall Sunday he went out to play golf and dropped dead about halfway through the course.
Believe it or not there was nobody writing me a check that Monday, nor any Monday in the near future. He had made a large bank the executor of his estate and they held all accounts. His wife even had to submit requests for living expenses.
That last check was not all profit, half was owed to suppliers. They were very understanding but had rules they needed to follow and while the sheriff never came knocking on my door I did get all the 'legal' letters and had some sleepless nights wondering where I was going to find $20,000.
With the first extra $200 I did incorperate and all future jobs where under the corprate name should something like that ever happen again.
Saving a real long story I did recover and did well but it took a lot of 16 hr days. I recieved that $40,000, 3 years after the owners death. The courts were so kind as to say I was entitled to 6% interest after the bank had made an offer 1 year into the probate of $25,000 to purchase the lien.
For nice restful nights and normal blood pressure I'd say anyone not 'legal and apart' is just asking for trouble. I was legal and got in a bind that could have cost me my house and much more had I not had some very understanding creditors. The paperwork is initialy a bit overwhelming but once you get used to it it not much more than monthly bill paying.
Rather interesting story and glad you were finally recouped in the end. Thanks for posting that story...Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Buzzsaw, the other guys have already done the scare stories. I'll focus on the positives: writeoffs.
Business people currently have a very generous amount of things they can write off that income earners can't.
blue
blue,
thanks for not getting on your pulpit. i had a feeling after i asked the question that i would probably get what i already read from the others. thanks for not preaching. i just want to be able to justify to this person that it makes sense for her to do so. i think the best thing would be to get a book on starting a business and give it to her as a christmas present. i'll have to check a book store..Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Buzzsaw ,
I want to add a few tidbits to the already good information that has been offered up . Suppose a large job is landed , and for instance much fabric will be needed for drapery . Many suppliers will not sell to people who are not in business , we are in Oregon but most of the fabric we use comes from mills in the Eastern U.S. The same may be true with tile or other supplies , typically discounts are given to business's far greater than an individual . Also you may want to establish accounts with monthly billing , which can keep your money working for you by not having to lay out cash on the barrel head as you go .So if you want to buy at the wholesale levels a business account is generally required . Just because you go legit does not mean you will be paying taxes . You can write off tools and equipment vehicle mileage allowance as well as the costs related to doing business , insurance , rent or a portion of it and all materials purchased . Even being legit has opportunities to juggle things and can actually be to your advantage . When not legit here in Oregon you lose your right to file a lien if you don't get paid . That alone is usually not paramount , but a certain amount of credibility comes along with that Yellow page listing or your card on the wall at the tile supplier or whatever.Many good referrals can come from other business's , and imo they may be more likely to do so when they know you are for real . Unfortunately being legit has no direct bearing on an individuals ability , but shows your intent to run a business is there .
best of luck dusty
Dusty,
Great post! This is the type of information I was looking for. Thank you for responding to it in the spirit that the question was posted, rather than in a confrontational manner. I thoroughly appreciate the time you took to respond.Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
Buzzsaw ,
Your welcome . The posts you felt were confrontational may not really have been . It is so hard to tell if the poster was smiling or being sarcastic or in what tone the reply is made . To some , any one who is not legit may seem to pose a threat or something . To suggest that part timer amateurs are cutting in to ones income is perhaps true for some . I can only speak for myself and a few other journeymen trades people that I personally know but , I have about a 25 year track record and the referrals to keep me busy, even after I die . Once established and credible I no longer bid against nor was concerned about any part time amateurs digging in to my territory so to speak . Typically the amateurs lack credibility and references to walk into a lets say cabinet job and spit out " your kitchen cabinets will run you $ 28 thousand dollars lady " they lack the experience and business savvy to pull it off , not to mention they may not be able to send them to go look at a job of that magnitude . On the other side of the coin , some of us feel all those part time amateurs should bite the bullet and share the burden of legit overhead costs associated with being legal then they may not cut their prices so low and make ours look so high . Perhaps like uninsured motorists added premium to our policies , some may feel this too applies to added costs for us that are legal . Make a business plan and get some direction and keep tweaking the plan till you get it right .
good luck dusty
Thanks Dusty,
I appreciate the information and will pass it along.
Regards,
Buzzsaw
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
In many states there is no license required for general remodeling, etc. But as others have pointed out there are other aspects of being "legit".
I stumbled on a "cram for the exam" company that has a site that provides some excellent info and links to the legal requirements in many states.
http://WWW.examprep.org