First off, let's assume you are not affiliated with a speeds shop, garage or other automotive business. Then let's assume that you've had a bright idea to go do something race-y with car, and you need some money or other bits. You've decided to solicit sponsorship for this (ad)venture. Let's say that you've done a great job of convincing someone to actually give you something....
... Now what?
How do you accept that money or like?
What about the man? I mean taxes?
Should you accept as an individual or become a corporation?
How do you properly receipt the transaction for the sponsor?
What else?
Thanks!
When I got a small (like $500) sponsorship I just got a check in the mail and didnt tell the man. If you are looking at bigger dollar figures you might want an LLC to be safe.
LLC will take like $100 and an hour or so on your state's commerce dept website - no need to pay a lawyer or similar website.
If you do make an LLC to limit your personal liability, I would suggest making the LLC's expenses (racing stuff) similar to your LLC's revenue (sponsorship monies), that way it will have very little real effect on your personal taxes.
If you do go the LLC route, would be good to look at your insurance provider if you also happen to carry insurance on this car/cars. Just in case.
LLC and never operate at a profit and itemize everything. If you don't already have quickbooks or similar software that you use it's time to stop and reboot.
Duke
UltimaDork
5/6/14 3:20 p.m.
captdownshift wrote:
never operate at a profit
I don't see that being an issue for a while. It sure wouldn't be in my case.
PDoane
New Reader
5/8/14 10:59 a.m.
If you get an agreement in writing, be sure to include an indemnity clause.
Be careful. The IRS characterizes your racing endeavors as a hobby, even if you have an LLC. You need to be acting as a legitimate business in order have a racing business operation. You also have only a few years to show a profit before the IRS is on to you.
All Im saying is that non of this is cut and dry. So be careful, and seeking appropriate counsel/accountants may be necessary at some point.
I run my racing as an LLC. I keep track of all income and expenses (Running a SpecNeon is not as cheap as people think when you actually keep track of expenses). You have to show a profit 3 years out of 5 I believe. Inkind with no cash exchanging hands also counts as income. For example, if you have someone in business that helps you out that you bounce ideas off of, talk to about how to make your race team better, etc., agree on an hourly rate for their time and that is counted towards income. In exchange, they get advertising on the car and you can do networking and introductions for them. Invoice them with their payment (time/$, etc.) and what you did for them so they have records as well. I have my tax accountant make sure I am keeping everything legit and won't raise too many red flags when I do my annual tax filing. So far so good ::knock on wood::
rcutclif wrote:
When I got a small (like $500) sponsorship I just got a check in the mail and didnt tell the man.
I've done the same thing with similar amounts. It's a small fraction of my overall racing expenditure, haha.
In reply to Grinch337:
i've always disbanded the LLC and created a new one every 4 years in order to avoid showing a profit
