Setting up a race team LLC

[jeff healy]

Has anyone set up an LLC or something to gain tax write offs for all your race supplies and fuel etc.? Do you have any advise as to the best way to go about it? Seems like a good idea and maybe I'm the only one not doing this already but wondered if there were any pitfalls or anything to doing this!

[JimWilson29]

couple of ways to do it. buy this book and then talk to an CPA - http://www.speedwaymotors.com/Book-The-New-Racers-Tax-Guide,2800.html

[gsnyder828]

The major pitfall is the IRS :shock: ... but it can be done legally and legitimately.

There's a book out there - I think it's called "The New Racer's Tax Guide" - that runs through the IRS rules and considerations of running a motorsports race team and the differences of "hobby" vs. "professional" in the eyes of the IRS. You can write off "hobby" expenses (to a degree) without starting an LLC.

I would definately make sure your accountant is comfortable with what you're doing and is informed on the relevant regulations.

[jeff healy]

Thanks guys! Just went and purchased the book so now I guess I'm going to have to remember how to read :) I hope they include how to write off the purchase of this book too :) lol

[T Baggins]

Another option is to set up a business that sells products or services at the racetrack, or to racers... so that you can legitimately write off your expenses to and from the track, as well as the racing as "marketing" or "sponsorship".

EVERYTHING I do professionally is 1099 income. I'm a contractor to another company or sole-proprietor in each of my endeavors, so ALL of my expenses for ALL of my business lines are legitimate and deductible.

Otherwise you may be limited just to schedule C losses, which typically can't exceed the income generated (contingency, etc...)

[jeff healy]

That was kind of what I was thinking as far as selling something etc. I suppose the IRS won't accept me if I tell them I was selling my body!?!? :)

[Throttleroller277]

That was kind of what I was thinking as far as selling something etc. I suppose the IRS won't accept me if I tell them I was selling my body!?!? :)

Depends on how it is "worded"... 8)

again.... someone help this guy out, along with Dennis and Pete, as to who my main sponsor is.....

[JimWilson29]

http://www.mra-racing.org/index.cfm?action=results_2011&page=riderDETAIL&mra_number=277

[Fastt Racing]

:lol:

[jeff healy]

Atta boy Brownie :) If you would have had a chance to race at all this season we would have known when the announcers said it over the loudspeaker :) I guess I will need to talk to you about the wording as I'm sure my accountant does not have much knowledge or experience setting this type of business up :)

[Throttleroller277]

Oh they still said them... you just weren't paying attention..

[jeff healy]

Also possible :) Ive been known to sit and smoke and stare off into space once in a while!!

[Throttleroller277]

Also possible :) Ive been known to sit and smoke and stare off into space once in a while!!

Like now... when you should be working!? :shock:

[jeff healy]

Im home sick with racing fever!! leaving for Miller in 3 hrs!! But yeah I'm sitting at work just trying to make the time go by so I can get out of here! It's really hard work :)

[jadeblue1]

very quickly - if you want to do this to write off "racing expenses",the cheapest way to do it is as a sole proprietor. An LLC is a limited liability corporation. The IRS gives you a FEIN number then, and you are definitely on the Fed's radar after that. Also, starting an LLC implies that you intend to turn a profit. There are fees involved for just being a corporation (example, I pay $800 to the state of CA every year for the "inc." at the end of my business name.) Filing taxes with your CPA will also cost you about $400 just in the forms you need to fill out as well. There are a lot of hidden paper work costs involved, and you need to keep very good records.

However, you can do this as a "sole proprietor" business, you don't need to incorporate, you could write off Schedule C stuff, and at the end of 5 years if you haven't turned a profit, your state taxes board will say "hey, you're not really a business, this is a hobby" and you'll have to do something different on your tax returns for the following year. The good part about that - you can use quickbooks to track your expenses & kick out your tax forms yourself, and get just about as many write offs if you would as an LLC.

**on last thing about LLC's - they are the most unstable of the corporate structures, and most scam companies tend to use that form to because it's easier to empty the "shell" and move it - so the people they ripped off can't get them, and the IRS can't collect on taxes, so the Fed's do tend to keep a closer eye on them. **

I did a sole proprietor write off for 5 years, and then was able to attach it to a legitimate trackside business(because I run a race series). However, if you don't already sell something trackside or have something motorcycle related (like own a dealership) it's kind of a waste of time and $$ to try to start one up just to get the write off.

just remember, the gov't is as broke as we are, and there were a lot of changes in the tax code this year - specifically aimed at businesses. if you are going to write off a hobby as a business, be sure to keep good records & file your taxes appropriately & ON TIME !! or they will hit you & hit you good. My return was 2 days late this year because biz returns are due March 15, and even though I sent my return in electronically on the 15th, it took 2 days to be accepted. I got a bill from the IRS for $190 and the state of CA for $90 as a late fee one month , so just be aware that they really watch businesses and the fees are higher.
hope this helps & good luck :D

[JimWilson29]

In Colorado, an LLC is a pass through tax entity and can be filed as if it were a sole proprietorship on a Schedule C.

[rforsythe]

^^ +1. LLC is not the same as "inc" corporation. It's not even a corporation technically, it stands for Limited Liability Company. You can file one in Colorado for around $50 (maybe a few bucks higher, I can't remember offhand), it's done online through the Secretary of State website here: http://www.sos.state.co.us/biz/FileDoc.do. You used to need to send them your full articles and what have you, but anymore they just want to know what you're naming it and who the owner(s) are.

[Clarkie]

very quickly - if you want to do this to write off "racing expenses",the cheapest way to do it is as a sole proprietor. An LLC is a limited liability corporation. The IRS gives you a FEIN number then, and you are definitely on the Fed's radar after that. Also, starting an LLC implies that you intend to turn a profit. There are fees involved for just being a corporation (example, I pay $800 to the state of CA every year for the "inc." at the end of my business name.) Filing taxes with your CPA will also cost you about $400 just in the forms you need to fill out as well. There are a lot of hidden paper work costs involved, and you need to keep very good records.

However, you can do this as a "sole proprietor" business, you don't need to incorporate, you could write off Schedule C stuff, and at the end of 5 years if you haven't turned a profit, your state taxes board will say "hey, you're not really a business, this is a hobby" and you'll have to do something different on your tax returns for the following year. The good part about that - you can use quickbooks to track your expenses & kick out your tax forms yourself, and get just about as many write offs if you would as an LLC.

This is exactly what I did, worked well. All you have to do is show an 'intent' to make a profit with your 'expected' winnings from prizemoney, contingency and bonuses. Even if they arent realistic for your level of riding if you can show the money was offered to you on performanced based results, it is above board.

[jeff healy]

Thanks again guys! I got the book I ordered today so will have to do some reading and see what I can figure out! Ive got a very helpful CPA so hopefully he can steer me a little too I just like to have some ideas before I go talk to him for how ever much an hour! LOL

[graphite675]

couple of ways to do it. buy this book and then talk to an CPA - http://www.speedwaymotors.com/Book-The-New-Racers-Tax-Guide,2800.html

I was just looking into this book and from what I could tell the publish date is 1994? Do you think the info is still valid? I imagine tax laws have changed quite a bit since then.

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