Lend me your ears: Thoughts on a side business.

2

Comments

  • dromunds
    dromunds Posts: 9,969
    I could be wrong, but I think you are engaged in a business although it may be considered d/b/a, whether its a hobby or not. I believe the IRS considers all income taxable. If you were audited, I believe they would look at all your bank deposits and consider that total the presumptive income. The fact that one is engaged in a hobby does not make it a non-income generator in the eyes of the IRS. I realize some things are done informally in the real world, but I think all this talk about hobby versus business may be technically incorrect from the IRS viewpoint. Not trying to stir any pots here, just saying if someone is making a profit the IRS wants that income reported, as far as I understand it.
  • Joey_V
    Joey_V Posts: 8,505
    edited February 2017
    dromunds wrote: »
    I could be wrong, but I think you are engaged in a business although it may be considered d/b/a, whether its a hobby or not. I believe the IRS considers all income taxable. If you were audited, I believe they would look at all your bank deposits and consider that total the presumptive income. The fact that one is engaged in a hobby does not make it a non-income generator in the eyes of the IRS. I realize some things are done informally in the real world, but I think all this talk about hobby versus business may be technically incorrect from the IRS viewpoint. Not trying to stir any pots here, just saying if someone is making a profit the IRS wants that income reported, as far as I understand it.

    The IRS wants to get its money one way or another. They are definitely not the people you want to mess with.

    The more and more I think about it, it is not easy to do. Probably best to just lay low and keep it as a hobby.

    Another problem I see is how to generate sufficient revenue. It's not easy without a significant internet presence. Locals can only generate so much business, before likely running out of room or market. There's a reason audiogon exists - and it's because it's not easy to sell niche products locally without tapping into a much larger market.
    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • Joey_V
    Joey_V Posts: 8,505
    edited February 2017
    A prime example of a successful hobby turned into business is Ivan's Legend Audio on audioaficionado. He runs a business out of his home, he's a dealer like Skip, but his presence is massive on the internet as he runs a large forum as the ring master. With that, he can churn through gear and sell it to locals and out of state as well.

    He's a good example of what happens when you run a successful hobby/business. But that's not easy to do or accomplish. You need massive capital, public relations, and cajones to even take the risk of that magnitude.

    He's successful and I admire that. It's not easy. I won't hate on him because he TRULY spends like Charlie Sheen on a coke binge. I say good for him. I wish I could be that successful.
    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • Joey_V
    Joey_V Posts: 8,505
    mrloren wrote: »
    Upstatemax wrote: »
    Glad you're keeping it a hobby. As soon as it becomes a business, it becomes a whole new animal...

    Turning a hobby into a business is not a good idea. I did this with my PC repair hobby back in the 90's. turned out to be a mass headache in the end.

    I can see that now.
    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • mrbiron
    mrbiron Posts: 5,711
    Joey_V wrote: »
    You're on my hit list @tonyb

    Finally!....a Roommate!
    T-dawg, the "list" isn't a bad place to be. In fact, i feel closer to J-bone with each passing day. He even diagnoses the random "does this look infected to you?" dilemmas.

    Welcome aboard. You need to supply your own TP as i'm not wasting my 3ply on the likes of you. B)
    Where’s the KABOOM?!?! There’s supposed to be an Earth shattering KABOOM!!!
  • RE: van's Legend Audio. His hobby IS his business.

    Dromunds has some pretty good input.
    If/when the IRS comes after you, you would, of course, have to show up with some lawyers. GOOD lawyers, no Traffic Law Center boys here.

    And you better throw in a couple or 3 or 4 fiduciary experts who know the tax laws frontwards and backwards and can turn them upside down as need be.

    And the IRS will still get you. Plain and simple.
    Because the law is what they say it is. Plain and simple.

    On the extremely remote chance that your team wins, can you imagine what that will have cost you ?
    Lawyers fees aren't tax deductible.
    And now the IRS is PO'd at you. Guess who is going to get audited every year for the next 10 years ?

    Worth it ? IMO, no way.
    Remember the MBBL Rule of Thumb: Get what you can with what you got, and enjoy what you get.
    Enjoy your profession, enjoy your hobby. My advice would be to not mix the two because both would suffer.

    ...... being as I took 8 hours to think of this post, at $600 an hour, plus cokes and a run for Panteras Pizza while I was doing it, I'm declaring this as a deduction under "Medical" for ..... $15,000.
    I may need your testimony down the road, Joey, in the event the IRS doesn't agree with my way of thinking. o:)

    Sal Palooza
  • Joey_V
    Joey_V Posts: 8,505
    Blue-

    Ill back you up...

    But lets not mess with the irs
    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • tonyb
    tonyb Posts: 32,902
    mrbiron wrote: »
    Joey_V wrote: »
    You're on my hit list @tonyb

    Finally!....a Roommate!
    T-dawg, the "list" isn't a bad place to be. In fact, i feel closer to J-bone with each passing day. He even diagnoses the random "does this look infected to you?" dilemmas.

    Welcome aboard. You need to supply your own TP as i'm not wasting my 3ply on the likes of you. B)

    Wait...what ?? lol
    I made someone's "list" ? Does that mean after years of being on Cathy's "list", hit list no less, I'm off and on a new one ? Change is good....I like it.

    Joey,
    Hopefully it's become obvious to you that to deduct what you want to be able to deduct requires you to generate a boat load of income. In order to generate that income needed, requires time, which you don't have.....end of story.

    Seems to me, from someone on the outside looking in, that instead of worrying about deductions, adding a few letters after your professional name would grant you more income to offset any deductions on audio gear you may gain going the self employed route.
    HT SYSTEM-
    Sony 850c 4k
    Pioneer elite vhx 21
    Sony 4k BRP
    SVS SB-2000
    Polk Sig. 20's
    Polk FX500 surrounds

    Cables-
    Acoustic zen Satori speaker cables
    Acoustic zen Matrix 2 IC's
    Wireworld eclipse 7 ic's
    Audio metallurgy ga-o digital cable

    Kitchen

    Sonos zp90
    Grant Fidelity tube dac
    B&k 1420
    lsi 9's
  • But lets not mess with the irs

    Well, NOW you tell me !

    P.S. The IRS really don't know how to take a joke. No kidding ! :'(
    Sal Palooza
  • jeremymarcinko
    jeremymarcinko Posts: 3,785
    edited February 2017
    Even then you are only going to be able to deduct the depreciation of the inventory. The cost of equipment is not an expense it's inventory.
    Oh, Listen here mister. We got no way of understandin' this world. But we got as much sense of this bird flyin in the sky. Now there is a lot that bird don't know, but it don't change the fact that the world is happening to him all the same. What I am tryin to say is, is that the course of your life, well its changing, and you don't even see it- Forest Bondurant
  • tonyb
    tonyb Posts: 32,902
    Even then you are only going to be able to deduct the depreciation of the inventory.

    Depreciation happens pretty quickly in audio gear....even more so the higher up the food chain you go.
    HT SYSTEM-
    Sony 850c 4k
    Pioneer elite vhx 21
    Sony 4k BRP
    SVS SB-2000
    Polk Sig. 20's
    Polk FX500 surrounds

    Cables-
    Acoustic zen Satori speaker cables
    Acoustic zen Matrix 2 IC's
    Wireworld eclipse 7 ic's
    Audio metallurgy ga-o digital cable

    Kitchen

    Sonos zp90
    Grant Fidelity tube dac
    B&k 1420
    lsi 9's
  • Now if you are using a portion of your home you can expense that according to the preset schedule.
    Oh, Listen here mister. We got no way of understandin' this world. But we got as much sense of this bird flyin in the sky. Now there is a lot that bird don't know, but it don't change the fact that the world is happening to him all the same. What I am tryin to say is, is that the course of your life, well its changing, and you don't even see it- Forest Bondurant
  • Ricardo
    Ricardo Posts: 10,636
    DSkip wrote: »

    What I do know is that if/when someone buys the RTA-15tl from me, they'll be getting it at cost and probably be getting the most highly modified versions available. Those are the one pair I'm truly seeing out until the end to see what they are capable of. I've got $200 in them with several more bills going into them soon. They are my one bucket list speaker and I bought them purely for my own pleasure - something I hardly get to do anymore as a dealer.

    No need to reinvent the wheel here.
    1) Decato's crossover mods.You probably have seen that thread.
    2) Larry's rings.

    You will love them.
    _________________________________________________
    ***\\\\\........................... My Audio Journey ............................./////***

    2008 & 2010 Football Pool WINNER
    SOPA
    Thank God for different opinions. Imagine the world if we all wanted the same woman
  • tonyb wrote: »
    Even then you are only going to be able to deduct the depreciation of the inventory.

    Depreciation happens pretty quickly in audio gear....even more so the higher up the food chain you go.

    So if the profit margins increases as a result of the new valuation then more taxes will be paid on the income generated.
    Oh, Listen here mister. We got no way of understandin' this world. But we got as much sense of this bird flyin in the sky. Now there is a lot that bird don't know, but it don't change the fact that the world is happening to him all the same. What I am tryin to say is, is that the course of your life, well its changing, and you don't even see it- Forest Bondurant
  • Joey_V
    Joey_V Posts: 8,505
    edited February 2017
    Yep2 wrote: »
    @Joey_V I would just take sometime doing a cost analysis on a legit business.
    It could be done over time, allowing alot of research beforehand.
    Just slowly put all the pieces together.

    CPA is recommended once your ready to go.
    It would also make it easier in the future should a different business/merchandise venture arise.

    I have spoken to a couple friends about this business idea, including a financier.

    The consensus is that it's not going to make me rich, it's probably just going to cause me headaches for a small profit margin and some tax benefits here and there.

    In the end, the profit margin is too slim for any real potential.

    A 10% gain on used goods is not like magnolia selling a set of BW speakers for a 40% profit. And while magnolia has a massive overhead, a lot of the overhead is neutralized by sheer size of customer orders and the relative efficiency of their store model (I.e. A store within a store... Exposed to an existing high traffic area).

    Bottom line, it's rough and tough.
    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • Joey_V
    Joey_V Posts: 8,505
    I'm glad the thread re-railed after that de-rail btw.

    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • Joey_V
    Joey_V Posts: 8,505
    edited February 2017
    I have other business thoughts that would probably be better off than this hobby/side business anyway. We will see when the time comes.

    This audio thing could be my worst idea yet.
    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • Joey_V
    Joey_V Posts: 8,505
    edited February 2017
    Yep2 wrote: »
    Joey_V wrote: »
    Yep2 wrote: »
    @Joey_V I would just take sometime doing a cost analysis on a legit business.
    It could be done over time, allowing alot of research beforehand.
    Just slowly put all the pieces together.

    CPA is recommended once your ready to go.
    It would also make it easier in the future should a different business/merchandise venture arise.

    I have spoken to a couple friends about this business idea, including a financier.

    The consensus is that it's not going to make me rich, it's probably just going to cause me headaches for a small profit margin and some tax benefits here and there.

    In the end, the profit margin is too slim for any real potential.

    A 10% gain on used goods is not like magnolia selling a set of BW speakers for a 40% profit. And while magnolia has a massive overhead, a lot of the overhead is neutralized by sheer size of customer orders and the relative efficiency of their store model (I.e. A store within a store... Exposed to an existing high traffic area).

    Bottom line, it's rough and tough.

    Every business started somewhere.


    I agree. But I think there are better models than bringing used products which have high cost (though it'd be cool to just play with and try out gear) and have little market pull, especially locally.

    I think a better business would be to be an audio consultant to give a less retail-biased approach... Would work towards friends and acquaintances locally.

    Again, small peanuts.

    Better money is in being a middleman, like whoever thought about the Audiogon idea is a genius. Zero inventory, minimal liability wrapped in a perpetual organism of a business.

    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • mrloren
    mrloren Posts: 2,454
    Joey_V wrote: »
    I have other business thoughts that would probably be better off than this hobby/side business anyway. We will see when the time comes.

    This audio thing could be my worst idea yet.

    Try home based computer repair...
    When I was a kid my parents told me to turn it down. Now I'm an adult and my kids tell me to turn it down.
    Family Room:LG QNED80 75", Onkyo RZ50 Emotiva XPA3 GEN3 Oppo BDP-93,Sony UBP-X800BM. Main: Polk LsiM 705Center: Polk LSiM 704CFront High/Rear High In-Ceiling Polk 80F/X RT Surrounds: Polk S15 Sub: HSU VTF3-MK5
    Bed Room; Marantz SR5010, BDP-S270Main: Polk Signature S20Center: Polk Signature S35Rear: Polk R15 Sub: SVS SB2000
    Working Warehouse; Yamaha A-S301, Sony DVP-NS3100ES for disc Plok TSX550T SVS PB2000 Mini tower PC with 400GB of music
  • mrloren
    mrloren Posts: 2,454
    Yeah I was lucky my dad was a CPA, I had one year in 99 that I grossed over $100k but in the end my net was less than $15k I had to pay income tax on that. Everything said and done I was lucky to walk away without owing anything and still had my job at Sony. Hobby to business can be done, it's not easy.
    When I was a kid my parents told me to turn it down. Now I'm an adult and my kids tell me to turn it down.
    Family Room:LG QNED80 75", Onkyo RZ50 Emotiva XPA3 GEN3 Oppo BDP-93,Sony UBP-X800BM. Main: Polk LsiM 705Center: Polk LSiM 704CFront High/Rear High In-Ceiling Polk 80F/X RT Surrounds: Polk S15 Sub: HSU VTF3-MK5
    Bed Room; Marantz SR5010, BDP-S270Main: Polk Signature S20Center: Polk Signature S35Rear: Polk R15 Sub: SVS SB2000
    Working Warehouse; Yamaha A-S301, Sony DVP-NS3100ES for disc Plok TSX550T SVS PB2000 Mini tower PC with 400GB of music
  • mrloren
    mrloren Posts: 2,454
    Yeah I was lucky my dad was a CPA, I had one year in 99 that I grossed over $100k but in the end my net was less than $15k I had to pay income tax on that. Everything said and done I was lucky to walk away without owing anything and still had my job at Sony. Hobby to business can be done, it's not easy.
    When I was a kid my parents told me to turn it down. Now I'm an adult and my kids tell me to turn it down.
    Family Room:LG QNED80 75", Onkyo RZ50 Emotiva XPA3 GEN3 Oppo BDP-93,Sony UBP-X800BM. Main: Polk LsiM 705Center: Polk LSiM 704CFront High/Rear High In-Ceiling Polk 80F/X RT Surrounds: Polk S15 Sub: HSU VTF3-MK5
    Bed Room; Marantz SR5010, BDP-S270Main: Polk Signature S20Center: Polk Signature S35Rear: Polk R15 Sub: SVS SB2000
    Working Warehouse; Yamaha A-S301, Sony DVP-NS3100ES for disc Plok TSX550T SVS PB2000 Mini tower PC with 400GB of music
  • tonyb
    tonyb Posts: 32,902
    DSkip wrote: »
    tonyb wrote: »
    Even then you are only going to be able to deduct the depreciation of the inventory.

    Depreciation happens pretty quickly in audio gear....even more so the higher up the food chain you go.

    However, if you are buying them under used market value as it is, the depreciation has already hit and it will take longer for the market price to drop to your investment.

    True Skip, but that also limits your profit potential. While buying stuff used after depreciation has hit, you can't turn around and sell it again at a 30% mark up.

    A good example would be used car dealers. Buy a used car from a dealer and your paying more than that car is worth. After all, they need to make a profit to stay in business. Buy it on the street and you saved thousands of dollars. I could not in theory buy a used car on the street and sell it for the same price a used car dealer would ask for it.

    People buy used cars from dealers every day though, but that has to do more so with financing options and warranty. Used gear in audio usually has none of those options thus the luster is removed with only the fact of saving thousands over new as the only attraction. If your buying used quality gear though, a warranty won't matter in my view. Opinions on that may change if your spending 50k on audio gear as some of Joey's clients may well be.
    HT SYSTEM-
    Sony 850c 4k
    Pioneer elite vhx 21
    Sony 4k BRP
    SVS SB-2000
    Polk Sig. 20's
    Polk FX500 surrounds

    Cables-
    Acoustic zen Satori speaker cables
    Acoustic zen Matrix 2 IC's
    Wireworld eclipse 7 ic's
    Audio metallurgy ga-o digital cable

    Kitchen

    Sonos zp90
    Grant Fidelity tube dac
    B&k 1420
    lsi 9's
  • WLDock
    WLDock Posts: 3,073
    edited February 2017
    Joey_V wrote: »
    A prime example of a successful hobby turned into business is Ivan's Legend Audio on audioaficionado. He runs a business out of his home, he's a dealer like Skip, but his presence is massive on the internet as he runs a large forum as the ring master. With that, he can churn through gear and sell it to locals and out of state as well.
    He's a good example of what happens when you run a successful hobby/business. But that's not easy to do or accomplish. You need massive capital, public relations, and cajones to even take the risk of that magnitude.
    He's successful and I admire that. It's not easy. I won't hate on him because he TRULY spends like Charlie Sheen on a coke binge. I say good for him. I wish I could be that successful.
    I think you are fortunate to have THREE very capable systems that per your own words you generally saved for and payed cash. Also, you have sold gear and made a profit. Most don't have several systems of that magnitude. Some buy stuff on credit and pay over time, and most loose money when selling gear. Further, some of us, have yet to obtain Hi End gear...or have to choose between 2 ch or HT. I might finally take on the 2 channel chase myself now that I hit 50 yrs old....I always said its a game for older more stable folks. Well....I'm older, but not stable, and still struggle to support hobbies. Family takes priority...so its best to focus on staying current and up to date at one and settle for what you have regarding all others.

    So, In a way, you are already ahead of the game!

    IMO, in terms of a hobby....there is little to gain. Unless, you love it so much that you want to spend more time doing it as a main profession. Or, possibly, doing it after retirement, etc.

    When I was younger, I used to be more into cycling, tuning Euro sport compact cars, and car audio. Some of the best business I ran across to support those hobbies were owned by passionate people that started small.

    I think you might find this piece from an old 2007 Detroit Metro Times article a good read.

    http://www.metrotimes.com/detroit/ear-entry/Content?oid=2187002

    The article is titled EAR ENTRY and the first sentence reads: It's all about the chase.
    They interview several passionate audiophiles at the '07 Audiokarma Fest . Some, turned their passion into a business. Some of these stores were the first HI-END audio shops that I ever set foot in back home in the Metro-Detroit area. Almas Hi-Fi and Audio Dimensions in Royal Oak. Also, I never been to this spot but David Kasab of David Michael Audio sold gear out of a house for years. He now has a building, and offers some really hi end stuff: http://www.davidmichaelaudio.com/

    Always follow your passion! However, it sounds like maybe for now you should keep doing what you are doing Joey. Keep selling to friends and keep rolling gear in and out of the three systems. Your audio life is good!
    2.2 Office Setup | LG 29UB55 21:9 UltraWide | HP Probook 630 G8 | Dell Latitude | Cabasse Stream Amp 100 | Boston Acoustics VS 240 | AUDIORAX Desk Stands | Mirage Omni S8 sub1 | Mirage Omni S8 Sub2
  • Joey_V
    Joey_V Posts: 8,505
    WLDock wrote: »
    I think you are fortunate to have THREE very capable systems that per your own words you generally saved for and payed cash. Also, you have sold gear and made a profit. Most don't have several systems of that magnitude. Some buy stuff on credit and pay over time, and most loose money when selling gear. Further, some of us, have yet to obtain Hi End gear...or have to choose between 2 ch or HT. I might finally take on the 2 channel chase myself now that I hit 50 yrs old....I always said its a game for older more stable folks. Well....I'm older, but not stable, and still struggle to support hobbies. Family takes priority...so its best to focus on staying current and up to date at one and settle for what you have regarding all others.

    So, In a way, you are already ahead of the game!

    Always follow your passion! However, it sounds like maybe for now you should keep doing what you are doing Joey. Keep selling to friends and keep rolling gear in and out of the three systems. Your audio life is good!

    One of the best posts I read, you are correct, I think I will keep it a hobby and not have it interfere with the rest.

    Thanks my friend
    Magico, JL, Emm, ARC Ref 10 line, ARC Ref 10 phono, VPI, Lyra, Boulder, AQ Wel, SRA Scuttle Rack, Bluesound
  • Joey_V wrote: »
    Yep2 wrote: »
    Joey_V wrote: »
    Yep2 wrote: »
    @Joey_V I would just take sometime doing a cost analysis on a legit business.
    It could be done over time, allowing alot of research beforehand.
    Just slowly put all the pieces together.

    CPA is recommended once your ready to go.
    It would also make it easier in the future should a different business/merchandise venture arise.

    I have spoken to a couple friends about this business idea, including a financier.

    The consensus is that it's not going to make me rich, it's probably just going to cause me headaches for a small profit margin and some tax benefits here and there.

    In the end, the profit margin is too slim for any real potential.

    A 10% gain on used goods is not like magnolia selling a set of BW speakers for a 40% profit. And while magnolia has a massive overhead, a lot of the overhead is neutralized by sheer size of customer orders and the relative efficiency of their store model (I.e. A store within a store... Exposed to an existing high traffic area).

    Bottom line, it's rough and tough.

    Every business started somewhere.


    I agree. But I think there are better models than bringing used products which have high cost (though it'd be cool to just play with and try out gear) and have little market pull, especially locally.

    I think a better business would be to be an audio consultant to give a less retail-biased approach... Would work towards friends and acquaintances locally.

    Again, small peanuts.

    Better money is in being a middleman, like whoever thought about the Audiogon idea is a genius. Zero inventory, minimal liability wrapped in a perpetual organism of a business.

    You are right, man. Process of doing business is the difficult one. Nobody reached the tops in one day, I mean, that such big giants, like Nike, BMW, Apple and others were working a lot for making such firm, like they are now. Many of the founders of such firms began working in the garages, at homes for realizing their ideas. This one more time proves, that if the person has the business ideas, patience and wish to work, he will be successful.