Sounds like I've fallen into a B2B sales position. I'll be building a territory. It'll be straight commission pay as a 1099 employee/independent contractor.
What do I need to know, particularly about taxes?
Quarterly or yearly filing? Deductions/deductible expenses? Record keeping? All the other things I'm not thinking of.
I'm on the wife's insurance, so no need to worry about that.
Put back money for taxes with every check, ideally in a separate bank account. You don't want to be caught with your pants down at tax time owning $$$ having spent the money on car parts. Pay every quarter or else you get penalized.
Not sure about deductions for sales stuff. Keep track of all business mileage, that should be a writeoff. Get an accountant for the first year to handle your taxes.
And remember:
That jump is worth meeting with an accountant to keep you out of trouble. OBTW, the accountant's fees are tax deductable.
#1 Don't co-mingle accounts. Get one bank account for your new business (because that is what it is) . Use a credit card from that account for all your business expenses. Keep everything business out of family accounts. Be very careful about putting family expenses on the business account.
#2 Learn to keep records. A log book for mileage is important. Also receipts for expenses, even if just credit card documents.
#3 You almost always have to pay into IRS quarterly.
#5 You will have considerable deductions if your records are concise. Some deductions are a bit sketchy, and not worth stirring an audit. But, certain clothing, training classes, office equipment, etc. are legit.
Really, really believe #1 is very important.
A 100% commission 1099 'job' sounds like success will be nearly impossible. Simply put, why would your "employer" care if you succeed? They're not giving you anything, you're not costing them anything. Typically, 100% commission roles are lousy jobs with high turnover (or extremely senior situations like selling jet aircraft). I'm hope your case is the exception and you can do very well.
Can you get a base of half your expected earnings as a W-2 employee so they have some skin in the game?
Yes, taxes, etc. are a lot more than you'd expect.
Purple Frog (Forum Supporter) said:That jump is worth meeting with an accountant to keep you out of trouble. OBTW, the accountant's fees are tax deductable.
#1 Don't co-mingle accounts. Get one bank account for your new business (because that is what it is) . Use a credit card from that account for all your business expenses. Keep everything business out of family accounts. Be very careful about putting family expenses on the business account.
#2 Learn to keep records. A log book for mileage is important. Also receipts for expenses, even if just credit card documents.
#3 You almost always have to pay into IRS quarterly.
#5 You will have considerable deductions if your records are concise. Some deductions are a bit sketchy, and not worth stirring an audit. But, certain clothing, training classes, office equipment, etc. are legit.
Really, really believe #1 is very important.
This. Read it again. Then carve it into a stone tablet and mount it on the wall in your office.
Yea I'm really really annoyed my CPA friend went and got a job with the IRS and now refuses to talk taxes at all. I understand his liability and wanting to keep his job, but dammit it was nice having someone a text, call, or beer away for questions.
#1 Don't co-mingle accounts. Get one bank account for your new business (because that is what it is) . Use a credit card from that account for all your business expenses. Keep everything business out of family accounts. Be very careful about putting family expenses on the business account.
This is the part that has thrown me off in the past. When I had my LLC, I was forced to shutdown before I had to really worry about it (yay for collapsing supply chain).
So let me write this out, then correct or inform me as to how what I'm thinking is wrong.
Go open a new account at a different bank than my personal, throw like $100 in it to start for tolls/parking/printing. Month one, I see $3000 cause it's an easy number. $1000 for taxes, $500 for tolls etc, leaves $1500. Can I just transfer that to my personal account and then pay bills/fix house/whatever, or do I have to go through some official type of draw on the account to show it as me getting paid? E36 M3, should that even be a business account instead of a personal account, in which case I'd probably need to set up another LLC?
Guess I need to find an accountant that'll let me throw questions at them.
I'm not afraid of much, but the IRS scares the living E36 M3 out of me and I want to remain unknown to them entirely or on their good side. Which leads me to really over think things that I don't know how to phrase to Google.
Download and read IRS Publication 334, Tax Guide for Small Business. The answers to most of your questions are in there. If you don't understand it then you're definitely going to want to find an accountant.
It's worth noting that from the IRS's perspective if you're getting paid as a consultant under 1099 then they expect you to have multiple clients. Otherwise they're going to assume that your employer is trying to avoid the obligations of paying you as a direct employee.
B2B selling what? Most businesses have relationships with the current suppliers and it's tough to get them to switch. What makes your product different/better? Price will never trump a relationship.
It doesn't have to be a different bank, just a different account. Your bank or credit union will assist you.
OBTW, many accountants will give you one free initial visit. In my case I keep good detailed records all year, so I just hand over a few spreadsheets to my accountant at the year of the year. It makes it easy on her and saves me lots of money. My accountant bill each year is insignificant, and ease of mind.
If you are one of those people that walk into the accountant on April 14 with a big cardboard box full of receipts it will cost a lot more.
Steve_Jones said:B2B selling what? Most businesses have relationships with the current suppliers and it's tough to get them to switch. What makes your product different/better? Price will never trump a relationship.
Without getting to into it, let's call it supplements sold to retail chains/independent stores. What makes our product better is that it actually goes through the lab processes and analysis to comply with state and federal law, unlike a majority of the companies in this particular ballooning niche industry. They also work as advertised, unlike a majority of the brands currently on the market.
In the last 6 months, they've done almost $2 million in sales in Minnesota and Illinois, double that across Japan, now they're looking to expand into Texas and PA, then further. Japan has produced talks with Mega Corps, no idea how that will work outside of that country though.
If you have/had a LLC you can likely run off the same one.
Meet with a tax preparer now, before starting. They will guide you. Your friend (IRS guy) might informally recommend someone.
This first visit is likely free. From there, dont worry about the cost. A good account/tax preparer knows they save/gain you more dollars in deductions you'd miss than the price of their fee.
Deduct things like
Home use of office.
Vehicle and vehicle maint equipment. Yes a car lift or floor jack can be deducted/ depreciated. Etc.
Sounds like all the pump reps that I used to work with. They joked they were always 30 days from being out of business.
The background is they had a manufacturer's rep general agreement that stated that either party can terminate the representative agreement giving the other party 30 days.
If you are a manufacturer's rep you can pick up other lines and sell/promote multiple products to your customers. Some were stocking reps with a lot of inventory and others just picked up a 5%~6% commission based upon overall sales in the territory.
Either way they were always looking for other lines to grow the business.
What keeps you from peddling other products?
This sounds scammy... $6M in revenue in the last six months and it is commission only? Is it an MLM?
In any case, I'll echo what everyone has said above. For my 1099 gig, I take either 12% or 22% off of every check and throw it in a savings account for tax time. I only do annual taxes. Most of the time that savings account ends up being a gift to myself, because of deductions from the real job.
You asked about taking money from your business account. Your business structure matters.
If you are a sole proprietor, you and the business are technically the same thing. You still want a separate account to keep things straight, but every time you transfer money it's basically a draw from your own money. There won't be a distinction when you pay your taxes.
If your business is a corporation, then you and your business are separate legal entities. Money the business pays you would be an expense, and you would be an employee of the business. You will also file 2 separate tax returns.
The 2nd option sounds harder, but it's very easy.
The best arrangement is usually to set it up that you are a W-2 employee of the business, have the business pay you a base line salary and deduct the expenses, then build your personal life budget off the base line salary. Leave the money you can in the business.
At the end of the year, as owner of the business you can take a draw from the business earnings. This is different than the salary you receive regularly as a W-2 employee. (You are functioning as a different legal entity. Owner vs employee)
Your accountant can help you.
RevRico said:Steve_Jones said:B2B selling what? Most businesses have relationships with the current suppliers and it's tough to get them to switch. What makes your product different/better? Price will never trump a relationship.
Without getting to into it, let's call it supplements sold to retail chains/independent stores. What makes our product better is that it actually goes through the lab processes and analysis to comply with state and federal law, unlike a majority of the companies in this particular ballooning niche industry. They also work as advertised, unlike a majority of the brands currently on the market.
In the last 6 months, they've done almost $2 million in sales in Minnesota and Illinois, double that across Japan, now they're looking to expand into Texas and PA, then further. Japan has produced talks with Mega Corps, no idea how that will work outside of that country though.
That is what makes it better for the end user, but the end user is not your customer. If you came into my business and wanted me to switch to you, what would be the reason I should? I already have it on the shelf and people are buying it.
I'm not saying it just to give you a hard time. A 100% comission B2B sales job is a MLM/Scam 95% of the time. You start using words like "niche industry" and "lab testing" and you are up to 99%. Have you met anyone that is making money selling it to a business? Not "going to" or "building a team" but with product on a counter somewhere?
slefain said:Put back money for taxes with every check, ideally in a separate bank account. You don't want to be caught with your pants down at tax time owning $$$ having spent the money on car parts. Pay every quarter or else you get penalized.
Not sure about deductions for sales stuff. Keep track of all business mileage, that should be a writeoff. Get an accountant for the first year to handle your taxes.
And remember:
Yes, it's critically important to not forget that.
In reply to RevRico :
$1m in sales per a state over 6 months is abysmal. If PROFIT was $1m per a state over 6 months and you received 10% commission on profit margin and were one of 4 reps in the state, you'd make $50k a year, before expenses, and taxes.
This is a MLM scam, run long and far away.
(And we haven't even gotten into who's doing the product warehousing, distribution, customer billing, returns, customer service. If you're doing any of it, you're doing something that entails a salary as that time taken is opportunity cost that negativity impacts your ability to make commissioned sales. Who's standing behind you to fulfill orders and satisfy clients?)
Please tell me this isn't Herbalife.
OK, if this is an Multi Level Marketing scenario (MLM), I'll put you in touch with my ex wife. She's an MLM expert. She spent 20+ years doing them. Lots of them. She knows everything there is to know about them.
She never made any money doing it, but she knows everything there is to know about MLM's.
(Note: I mean she never made ANY money. As in, never filed a single tax return, or put a single dollar into our bank account in 20+ years doing it)
Not an MLM. I've known proprietor for 12 years, we've been in business together before, it worked out positively for both of us. Not like I just signed up on a mailing list.
He deals directly with manufacturer, who manufactures on contract to him(and others), then sells to retail outlets. He needs a face for retail outlets out here, I live out here. So I get to be that face, for better or worse. Cheaper and easier than the salesmen in Chicago and Saint Paul coming all the way out here to deal with people.
My main "job" would be putting our product in the hands of distributors in the region. If that also picks up independent shops instead of just places with 10+ locations so be it. These are places already selling a variety of things in this general niche.
There are currently 120+/- stores within an hour drive of my house selling similar products, 45 independent the rest are made up from 13 different chains of stores. Most of them are just selling the E36 M3 they found on a first Google search, or whoever came to them with the cheapest price, I know this because I've already been to most of them looking. I've heard the complaints from their customers, I've seen their margins, and frankly I can beat both.
"Well why don't you just open a brick and mortar yourself?" Because the overhead on that is berkeleying expensive. If Billy Bob already has a brick and mortar, and already has similar products on his shelves, let Billy Bob deal with those headaches, and just add my products to the monthly order.
Just moving a working system into a new region.
I use words like niche industry because that's exactly what it is. You'll never be buying these things at grocery stores or Wal-Mart, you have to go to a specialty store. Sorry if my SEO habits break through a bit. But this particular product is a ballooning niche. It's a smallish market, that continues growing year after year. I don't know what else you would call that other than a growing niche, I don't speak wall street, I speak blogger/internet sales because that is what my sales background is.
It is commission based because it is high volume low profit. What's in it for the company? $2 per item sold to store. What's in it for me? $1 per item sold to store. Not a lot of money, but repeated sales are the name of the retail game. There are 2 owners, and currently 4 sales people, 2 stateside 2 in Japan. Me and Texas would be numbers 5 and 6.
When your product only sells (to stores) for $7, pulling a million out of a state in the first 6 months is pretty good. I shouldn't even say "out of a state", it's Chicago metro area and Twin Cities metro area. That's a lot of individual units moving.
What's to stop me from selling other products or brands? I have zero interest in doing so. Really I don't even want to do this. Could I? Probably, if I really wanted to, and took the time to vet the competition to find someone that isn't either a Wall Street vajajay or a snake oil salesman riding a trend. But I wouldn't, because I'd rather help someone who has taken care of me in the past than make some stranger rich. My downfall, putting personal feelings in the way of business. But I truly hate sales, I'm not a people person, I'm a stay at home away from people person.
Steve_Jones said:RevRico said:Steve_Jones said:B2B selling what? Most businesses have relationships with the current suppliers and it's tough to get them to switch. What makes your product different/better? Price will never trump a relationship.
Without getting to into it, let's call it supplements sold to retail chains/independent stores. What makes our product better is that it actually goes through the lab processes and analysis to comply with state and federal law, unlike a majority of the companies in this particular ballooning niche industry. They also work as advertised, unlike a majority of the brands currently on the market.
In the last 6 months, they've done almost $2 million in sales in Minnesota and Illinois, double that across Japan, now they're looking to expand into Texas and PA, then further. Japan has produced talks with Mega Corps, no idea how that will work outside of that country though.
That is what makes it better for the end user, but the end user is not your customer. If you came into my business and wanted me to switch to you, what would be the reason I should? I already have it on the shelf and people are buying it.
I'm not saying it just to give you a hard time. A 100% comission B2B sales job is a MLM/Scam 95% of the time. You start using words like "niche industry" and "lab testing" and you are up to 99%. Have you met anyone that is making money selling it to a business? Not "going to" or "building a team" but with product on a counter somewhere?
Yes, I have, I've met them personally and spoken with them on the phone recently. I use the words I do because they're the words I know. My sales experience is telemarketing, retail, and online, where such lingo is used most commonly. I mention lab testing because this is a grey market product and NEEDS to be federally compliant, and compliant in states with different from federal regulations, which many many other brands are not. As crackdowns on snake oil salesman and scammers continue, it helps to be on the right side of law and regulation, and to be proactive instead reactive.
dculberson said:Please tell me this isn't Herbalife.
We ended up in Orlando when an herbalife convention was going on at the hotel we were in. My 15 year old was curious about it since most people were talking about "all the money and opportunity" so I walked him in the parking lot to show him all the cars that had driven there from PA, MD,NY, etc. and most were pretty beat up, so I asked "why would people with money drive a beater down vs just fly?"
I then said in the next 48 hours see if you can buy whatever product they were selling without having to sign up for anything, as in, you just want a box of X, you don't want to resell, join, distribute, you just want to buy the product. No one had anything for sale, and there were at least 200 of them there....
RevRico said:Really I don't even want to do this. But I truly hate sales, I'm not a people person, I'm a stay at home away from people person.
Not sure you are a fit for this new job. Just saying. YMMV
Sounds like Delta 8. That seems to be the newest niche thing.
I wouldn't overthink it for now and do a bunch of setup for a LLC, etc. For the first year have them just 1099 you under your SS# and you can file as a sole prop. You'll get a 1099 in Jan. saying they paid you $x and that gets put under additional income on your tax form, you might owe some when you file, you might be covered already and just not get a refund from the current withholdings. If it starts taking off next year, then create a LLC in June for a July 1 start date, change the 1099 to that name, and talk to an accountant at that point.
$1/item. So you will need to sell however many items to make a comfortable living after expenses. I wouldn't quit my day job just yet.
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