View Full Version : I've decided to build a shop, now what?


JimmySeymour
01-02-2003, 07:25 AM
After taking 8 years off from knifemaking to join the military, I am now a civilian again and what to start another knife shop as soon as possible. I have a decent job and was thinking about just getting a loan to purchase my tools and equipment, so i could start building right away. Would this be the best course of action. And what do i need to do legally, such a tax i.d. numbers, etc.. so i don't go to jail. I'll be starting completely over from scratch. and any advice would be appreciated.

Don Cowles
01-02-2003, 09:28 AM
I can only tell you what I have done, and that it has worked for me.

I had to bite the bullet on the purchase of a belt grinder (I already had a drill press), because I believed that I could not make knives fast enough to make any money without one. Every other piece of equipment in my shop (and there is quite a bit: lathes, milling machine, 4 drill presses, heat treat furnace, etc.) was purchased with revenue from knife sales.

This will only work if you are not taking money out of the business. I could not have done it without a day job. Unless you have a huge order backlog starting out, I would advise against borrowing money for equipment.

mike koller
01-02-2003, 09:31 PM
Check your local codes, some places have restrictions on what type business you may run from your home.

A tax counsultant or accountant can give you the most information as far as what can be classified as deductions. But remember if you make large purchases the deductions will more then likely be didvided over a period of years (sorry, can't remember the exact $$ amounts).

Keep receipts for everything that you buy for your shop, creating a seperate banking account makes it easier and can eliminate some liabilites.

I think Jerry Fisk has a book/booklet covering some of this... maybe he will stop by.

One more thing... If you can, plan for a seperate (metered) power supply to your shop or keep your bills from the last year so you can show the increase and also provide proof for "Uncle Sam".:smokin

Chuck Burrows
01-03-2003, 02:44 PM
But remember if you make large purchases the deductions will more then likely be divided over a period of years (sorry, can't remember the exact $$ amounts).
This is called depreciation and section 179 is the area known as Accelerated Depreciation. The limit for section 179 is $24,000.00 in any one tax year. See the following link for more info.
http://www.npb.us/XcNewsPlus.asp?cmd=view&articleid=10

Mike's suggestion for keeping all receipts (for 7-10 years depending on type per IRS regs) and having a business account is spot on. In the 17 years I've worked as a bookkeeper not doing this caused more problems than any one thing. His suggestion about consulting an expert is also good. They can help you get things set up and then when you feel comfortable keeping your own books retain them for year end tax stuff.

As an aside the idea that getting something like Quickbooks or any other computer bookkeeping software will turn someone into a bookkeeper overnight has kept me fed for many years. I've worked with several CPA's who have used me as fixer for those folks who bought that idea. If you really want to do it yourself or just want to have the knowledge (in my considered opinion any one who runs a business should know the basics of accounting) you will find that most local adult education programs offer a basic bookkeeping course and there are several online schools as well.

The IRS regs concerning having a 'dedicated' shop or office are complicated to say the least although they have eased somewhat under the present administration bu t check them out thoroughly as tax consultants consider this a red flag area for IRS auditors. You also have to make a profit to take it.

Chuck