Howdy Ags!

So I've been working for myself for just a few weeks shy of a year, when oil prices were in the hole last year I lost my job, and with only oil field experience besides the welding and fabrication experience I got growing up. Long story short, it's been a rough year at times but my wife (c/o '15) (I'll adhere to rule 1 if I get some sound advice here) and I have come out of it, not wanting to run for the hills, but build a family business. I have been enrolled in college since last may, but still manage to work full time as well at the shop.

So here is my dilemma, we have decided that we want to go in on working for myself, my dad is a retired welder so he has a 60 X 80 shop stocked with everything you need, and he is ok with me starting in his shop. The wife wants us to be ready to buy a house in two years, which means I have to legitimize my payroll system to help us get financing. She works as well.

For all you business guys, what would be the best route to attempt to run my payroll that's not going to slam me in taxes or cost a ton to get it done? I'm looking to be able to pay myself a modest at best salary. I just need to be able to walk into a bank and prove I'm providing steady income.

Also, im the primary financial provider in our home, I'm not incorporated and have not formed an llc yet either. I'm looking for the best route to legitimize my welding and fab business and if someone could offer a step by step plan of attack, it'd be appreciated.

Some of my work. https://imgur.com/gallery/3rdVD

Form an LLC.
Take the S Corp election.
Separate you from the business financially. Separate checking, cards etc.
Use QuickBooks or Xero or something to do the accounting.
Find a local CPA that can handle the payroll hassle for you including filing reports, etc. payroll is a pain with a lot of risk if you get it wrong.
Pay yourself a salary of about half of the company's profit before calculating your pay.

All of the above is a good start. Feel free to email me if you want to chat about it. I work with small businesses in College Station some of which are where you are. Jason @ the Beasley group. Com.

Good luck.

If you go the LLC route, you first have to elect to be taxed as a corporation, then do the S election. Be mindfull of the deadlines for doing both. Just be sure that the attorney who drafts your LLC paperwork does not make provisions for special allocations (if a multi-member LLC such as you and your wife or someone else). That happens alot since most multi-member LLC's are taxed as partnerships and they use boilerplate language in the documents, but it cannot be with an S corporation.

I have no advice and know next to nothing about welding, but I just wanted to tell you that I thought those pieces in the gallery looked very nice.

liberty - i dont think thats the case anymore. a 2553 covers as an election to be taxed as a corp so the double filing is no longer required (fyi - Reg. Sec. 301.7701-3(c)(1)(v)(C))

OP - you're getting some solid advice above, especially as it relates to entity formation, governance, and payroll issues. i'd add these 2 things:

1. if you have an idea of who the lender will be for the mortgage, talk to them. documentation of self employment income can be a bear, and likely they'll want 2 years or more of records.

2. get someone to handle the payroll tax withholding and reporting for you. adp or some other service or your cpa. dont screw this up. the deposit and filing requirements are hyper complex and easy to screw up, and the penalties are a *****.

good luck.

Do you just mean "books" by "payroll"? Are you going to be hiring people at this stage?

diehard03 said:

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Do you just mean "books" by "payroll"? Are you going to be hiring people at this stage?

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I'm the only one getting a check. I'm trying to continue working for myself, but do it in a way that a bank accepts for a mortgage. I don't want to get screwed on my taxes either so I am trying to weigh out my options?

Quote:

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I'm the only one getting a check. I'm trying to continue working for myself, but do it in a way that a bank accepts for a mortgage. I don't want to get screwed on my taxes either so I am trying to weigh out my options?

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Cool. I'd spend some time looking at the advice above and researching why you might want those structures. Then you'll understand what you have to do to maintain their protections.

I don't know that I'd worry about the payroll stuff because it sounds like people think you are taking on employees. (actual payroll)

Since you are selling a physical product, I imagine you'll have to setup accepting sales tax and disseminating that out.

If you are a sole proprietor and file the taxes for your business on Schedule C and you have no employees there is no "payroll". The money you are paying to yourself is owner draw (equity) and does not impact the profit-and-loss from your business.

Regardless of the form of entity, I would strongly recommend that you keep a good set of books for the business. For a small business, QuickBooks is a great tool for doing that. There are other programs but I don't know them well enough to recommend. Keep all of the business income and expenses segregated from your personal income and expenses. Have a separate credit card and bank account for your business. Do not comingle personal and nusiness transactions in the same accounts.

Keep adequate records. File all appropriate tax returns.

Assuming you are reporting your business properly on your tax return, your business will be "legitimate" in the lender's eyes. You may ask the Real Estate board for more specific information on what they will need to process a mortgage for a small business owner. They usually need enough history to establish a track record of income from the business (not sure how many years that will be).

As someone who's been self employed for 5+ years, just be prepared because the lenders will drill you. The process isn't fun.

If you can't fork over W2s that show a nice stable employment history, then the underwriter/lender gets cranky, and you'll have to jump through a Lot of hoops. You will be under the microscope much more than the average person even if you make more and are putting down more than the average person.

It's definitely do able but it will be harder. I have an LLC, but not treated as an scorp, and did not have W2 to show. Have I of had that maybe it would have been marginally better.

My friends who are all self employed gave me the same warning. When I got preapproved near instantly I thought think would be smooth sailing but they just wait until later in the process to interrogate you lol