buying equipment in anticipation of starting biz?

[RockCreek]

I would like to start my soapmaking business next year. However right now I am outgrowing my current soapmaking equipment and would like to purchase the equipment I will eventually use for that business sooner rather than later.

My understanding is that you can write off up to $5000 in business start up costs for the first year. I also believe that some of those items, like molds for instance, must be depreciated over several years.

Can I purchase future business equipment on my credit card this year for example and deduct it from my taxes next year after my business becomes incorporated? If so, will this look suspicious from a taxman point of view? Thanks ahead of time for input!

 

[Paintguru]

I had this question too and was told to just start the business to make life easier. Just because you've started the business doesn't mean you have to start selling on day 1. I'm taking this year to build up inventory and get my equipment before I start selling. Yes I will be in the deep red for this year, but most of the expenses are one time things so next year will hopefully get me closer to even. As always, I would just consult with an accountant to see what you can do.

 

[Relle]

I would like to start my soapmaking business next year. However right now I am outgrowing my current soapmaking equipment and would like to purchase the equipment I will eventually use for that business sooner rather than later.
QUOTE]

First Post - In other words, I hope to master the basics before moving on to more advanced techniques and recipes with an eye toward starting a business one day, perhaps years from now if that's what it takes.


I think you are putting the cart before the horse as you said you have been only making soap for a little over 3 months. Why don't you wait until you become more proficient at what you are doing and then you can determine what equipment you will need at a later date( save yourself some money), in case you change your mind and don't want to make soap. It's early days, going full steam ahead might not be the way to go.

 

[dagmar88]

I know nothing about USA taxes; but over here, you have a specific time frame for buying business equipment and it's not a lot. You take any longer to start up and you won't get those taxes back.

:razz: Just out of experience, it might take you a lot longer to get to the point where you're comfortable selling than you think.

 

[Lindy]

Knowing you are starting your business in a year is smart because you can start your planning. The first thing I'm going to recommend is to write a business plan, this is going to be your road-map to success. Think about what you want this business to become and then outline the steps it is going to take to get there. Do a market study ~ how much competition do you have? What do they do well? Where is there room for you to improve what they are already doing, by that I mean, find your niche.

As for equipment general accounting principles are that you write off anything under $500 and over $500 you are going to write off 30% the first year and then a smaller portion each year after that. Get a good accounting program and run everything through it including a portion of your utilities and rent/mortgage. Even though you are not going to start selling for a year you can go through the business start-up steps in that year so you are ready to go once you have the expertise you are looking at acquiring.

Good for you for planning ahead.....

 

[RockCreek]

Lindy wrote:

As for equipment general accounting principles are that you write off anything under $500 and over $500 you are going to write off 30% the first year and then a smaller portion each year after that.

I can't imagine any type of soapmaking equipment that would cost over $500! Maybe that show's my lack of imagination.

 

[Lindy]

Oh there is, I tend to buy a couple of smaller things after Christmas. This year it will be an awning for my soap gypsy caravan.... LOL Okay not exactly soap equipment but close....

If you want to drool go over to www.soapequipment.com....

 

[dixiedragon]

Lindy wrote:

I can't imagine any type of soapmaking equipment that would cost over $500! Maybe that show's my lack of imagination.

I know some pro soapers with top-of-the-line equipment - including a super stick blender that coast around $300, if I recall.

Brambleberry has an $850 bathbomb maker.

 

[shunt2011]

I agree with Lindy....there are some pretty expensive drool worthy soapmaking items out there...more than $500 dollars worth. I want a gypsy caravan....My husband call me an effin gypsy all the time...lol

 

[Lindy]

I bought a motorhome (Okay I bought 2 and sold one because I bought it with my heart instead of my head) and plan on hitting some larger shows this year.....