# Going from business back to hobby



## slim (Aug 11, 2008)

For a couple years I have been running a clothing line in California and did all the proper things like Incorporation, permits, trademarking, and accountant, etc.... 
All this added up but my partner and I do not sell enough to pay for all our expenses. The state tax alone is $800 bucks a year!
That's a lot of T-shirts to sell. We want to slow down and just make it a hobby. 
What is the minimum things we need to run it like a small business/hobby? 
Our LLC owns the trademark for our logo but we still want to use it. Do any of you know what steps to take for that?

Thanks!
Stan


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## pata (Nov 4, 2011)

sounds like you blew up for a bit? $800 in permits n stuff is insane! 
you had a store or sold online?


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## nikko (Nov 14, 2011)

Also were you working out of a rented space or are you guys doing everything from home? Most of the time I have heard was that its usually bet to work out of your home as there is no rental lease you would need to pay. Also given that you are using your home, your mortgage (partial depending on the sq ft of usage to run a home business) and utilities are tax deductible under your home business.


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## slim (Aug 11, 2008)

We work from home. It was always just an hobby but we did do the LLC and stuff. The $800 bucks is just the state tax for California. It killed us! We do have a web site and was even selling wholesale to a shop but we could not make much on the wholesale end because of the end of the year bills. Really discouraging!


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## nikko (Nov 14, 2011)

So just to clarify is the $800 Tax bill is what you had to pay regardless of how big or little your sales were? 

The reason I am asking is because I too am in the process of starting my own line as well. I am in VA where was also have to pay taxes (how much i still have to find out) Do you by any chance print your own shirts? or do you outsource certain parts of your business? Also do you keep your stock ready to ship or do you create your shirts per order?


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## slim (Aug 11, 2008)

Yes, as an LLC for California we pay $800 bucks a year regardless if we sold one thing or thousands. There is sales tax also but we did not have to pay since we where at a loss. We did however had to pay an accountant and that was around $600 bucks! 
We design the graphics ourselves but outsource everything else. 
Our designs are silk screened so we have to have a printer make a batch, usually 72 shirts at a time and have them ready for shipping.
I want to keep things going but need to figure out how.




nikko said:


> So just to clarify is the $800 Tax bill is what you had to pay regardless of how big or little your sales were?
> 
> The reason I am asking is because I too am in the process of starting my own line as well. I am in VA where was also have to pay taxes (how much i still have to find out) Do you by any chance print your own shirts? or do you outsource certain parts of your business? Also do you keep your stock ready to ship or do you create your shirts per order?


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## binki (Jul 16, 2006)

Disclaimer: I am not an attorney nor am I offering legal or accounting advise. But I have been down this road so take it as is, without any warranty that it is correct. Do see a CPA and a Trademark Attorney. 

The trademark is good for 3 years of non-use. You will need to have the LLC sell it to you personally to keep and you still need to use it in commerce but you will have 3 years to do so. I don't know if you can do that as a hobby. Since you are in the PRC contact www.handelonthelaw.com and look for a trademark attorney there to get an answer to that question. 

All you need to do to run it as a hobby is to not make a profit 3 out of 5 years and the IRS will leave you alone.


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## slim (Aug 11, 2008)

Thanks so much for that info. My partner is looking into it. My goal is to at least avoid the $800 a year fee. I'm wondering if the s-corp can do that and if so, what advantages I have to changing our status to that would be.




binki said:


> Disclaimer: I am not an attorney nor am I offering legal or accounting advise. But I have been down this road so take it as is, without any warranty that it is correct. Do see a CPA and a Trademark Attorney.
> 
> The trademark is good for 3 years of non-use. You will need to have the LLC sell it to you personally to keep and you still need to use it in commerce but you will have 3 years to do so. I don't know if you can do that as a hobby. Since you are in the PRC contact www.handelonthelaw.com and look for a trademark attorney there to get an answer to that question.
> 
> All you need to do to run it as a hobby is to not make a profit 3 out of 5 years and the IRS will leave you alone.


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## binki (Jul 16, 2006)

Become a sol prop or dba and you don't have to pay the $800 franchise fee. corps and llc's do.


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## nikko (Nov 14, 2011)

What are the differences to being a SOL Prop / DBA vs an LLC?


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## Nancy G (Mar 14, 2010)

Sorry to hear. With so many states in trouble, they are going to go after every $ they can! I have been told to not even 'volunteer' in Ca, as a 'job', as they'll hound you saying you owe them something!


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## barkone (Feb 5, 2007)

$800 dollars in axes regardless of your profit. that really sucks for a t shirt line. no wonder you want to give up.


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## slim (Aug 11, 2008)

barkone said:


> $800 dollars in axes regardless of your profit. that really sucks for a t shirt line. no wonder you want to give up.


I know. At first we wanted to do the LLC to protect us for liability reasons but that's a huge price to pay for a starter/part time business. I guess we can drop the LLC and avoid the $800 dollars and take a chance but that's scary. Although I don't think we could be sued out of house and home for running a t-shirt business, you never know, right.


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## soCALkid (Aug 16, 2011)

Cut your costs, print yourself, find the cheapest shirts to sell and SELL THEM. I can't tell you how many clothing lines I've been in contact with over the past 7 years and all of them quit too soon. I print my own shirts, but I sell them for a 4-10$ profit (depending on the design) too many people want to make the most amount of money as they can on every t-shirt. Lower the prices, make a decent profit, keep customers coming back. I'd rather make money than be stubborn and lose money. I run my clothing line on the side of my manufacturing company, which means I only dedicate Saturday and Sunday to my clothing line, yet I still can do small car shows, trade shows, clothing shows and still make a good extra profit. It's all about DOING it, dedicate yourself, if you really want to make money, you'll find a way. I pay the same LLC tax, I have NO employees, I do everything myself on the side, OR I hire a friend (usually one in need of some extra cash) to run my booth at small shows and I pay them accordingly. @ Slim, message me if you have any questions, I'll be glad to help any way I can.


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## slim (Aug 11, 2008)

Thanks SoCal Kid! What kind of printing do you do? I can not imagine investing in a screen printing set up since all our designs are screened.


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## 321go (Aug 13, 2011)

WOW, i cant believe you guys in the US have to pay all that crap! in the uk all we have is 20% income tax on any profit made, and we get the 20% vat back on any business expense like equipment and things. And its very easy to fiddle your numbers so you pay minimal tax. 
Or if you print from home you can go anarchy and not pay any tax.


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