Sam took our advice at the onset of his business and started it on the side while maintaining a steady income from his job. After assessing the viability of his idea, the only step he needed to take was to acquire a business license from the WA Department of Revenue. Then, he could work towards making his first sale. (Because Sam will purchase raw materials to make his product, he will want to acquire a reseller’s certificate with his license.) 

With an active business license, all expenses related to running the business become tax-deductible on Sam’s federal taxes. This means it’s important to track these expenses somehow, but it might not yet be time to invest in bookkeeping software or services, or organize all kinds of bank accounts and PO boxes, until Sam is confident the business has legs. 

Sam’s first sale will be taxable at the state level, because WA has a “gross receipts tax.” This means a business can lose money and still owe taxes! He’s sure to file his sales at the Department of Revenue at the frequency dictated to him when he acquired his business license.  

It is common for a business to lose money in its first year—or longer—but a business that loses money year after year after year will start to look like a hobby in the eyes of the IRS, and it wouldn’t be good news for Sam if an auditor retroactively disallowed tax deductions from prior years.  

Our advice is to plan your business to make money right out of the gates. Business planning can become complicated very quickly. As with most things, we recommend starting simply and adding complexity as needed. Check out our Back of the Napkin business plan, or order Stephen’s business planning book I Quit My Job To Help You Quit Yours. 

After a smart business launch, word of mouth spread, and orders started rolling in from Sam’s website, Etsy, and phone calls from his Nana. Sam found he was getting so busy crafting jewelry, he was neglecting the administrative side of the business and struggling to balance his personal life. 

That’s when he called VIBE. Sam was nervous about adding another overhead expense to his business but knew he needed professional help organizing his books—he’d read the small print when starting his business and knew he was responsible for keeping accurate records. 

After a free discovery call with VIBE, he had a new perspective: Our professional bookkeepers could complete the work in less time than he was taking, plus we got it right the first time, avoiding later cleanup. On top of that, with time freed up, Sam realized he could generate more revenue to offset the cost—and then some, by hiring VIBE for our Bookkeeping Services. 

More important than all of that, VIBE’s regular financial reporting gave Sam insights into his business he’d been missing: His cost of materials had been steadily climbing, but he hadn’t adjusted his prices since launching the business. He also learned how to pick expenses out of his profit & loss that were legitimate business deductions but that he might be paying for anyway, such as his cell phone. And he learned how to plan for his federal taxes and make estimated payments. 

This was also the stage at which Sam formed a Limited Liability Company (LLC) to operate his business under. With that WA legal entity, separate business bank accounts, and a few other administrative steps, Sam was able to protect his personal assets from risk in the business. Risk takes many forms, but simply making money can put a business owner and risk of lawsuit in our litigious society. 

Sam has successfully trained multiple employees to help with production S-Corp services.

There is always a next step in life. VIBE is never here to tell you where to go. We want to remove the blocks from your path—and maybe shine your shoes before you get on your way.