Is it too risky to start in electrical contracting

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Learn to keep what you make away from uncle sam. Two good points relating to this: Get a good accountant. I am always amazed at how many contractors say that they end up paying 10% of gross in taxes. With a good accountant you wont pay any income tax. Form an LLC and register it in Montana and you can register your vehicles there. No sales tax, inexpensive registration, no red tape. Its not always how much you make, Its how much you keep.
 

kwired

Electron manager
Location
NE Nebraska
Learn to keep what you make away from uncle sam. Two good points relating to this: Get a good accountant. I am always amazed at how many contractors say that they end up paying 10% of gross in taxes. With a good accountant you wont pay any income tax. Form an LLC and register it in Montana and you can register your vehicles there. No sales tax, inexpensive registration, no red tape. Its not always how much you make, Its how much you keep.
Not going to say there are ways around things, because there often is legal ways around things. But I believe most places require a vehicle to be registered where it is used/housed the majority of the time. Even within a particular State (at least it works that way here) you must register it in the county where it is used/housed the majority of the time. If you are doing this wrong you possibly could get away with it for quite some time, but eventually some conflict may come up and then the problem may be exposed.
 
Not going to say there are ways around things, because there often is legal ways around things. But I believe most places require a vehicle to be registered where it is used/housed the majority of the time. Even within a particular State (at least it works that way here) you must register it in the county where it is used/housed the majority of the time. If you are doing this wrong you possibly could get away with it for quite some time, but eventually some conflict may come up and then the problem may be exposed.


If the vehicle is owned by and registered to a corporation, I dont think a state can say it cant be there. That would be interfering with interstate commerce IMO. Look at tractor trailers, they do it all the time.

One more comment about accountants. A question to ask is what they do with rents. One trick accountants use is to set things up so that you rent the company tools, office space, equipment, vehicles etc. Most of your income will be "rent" and that is a reimbursement so it is not subject to self employment tax.
 

kwired

Electron manager
Location
NE Nebraska
If the vehicle is owned by and registered to a corporation, I dont think a state can say it cant be there. That would be interfering with interstate commerce IMO. Look at tractor trailers, they do it all the time.

One more comment about accountants. A question to ask is what they do with rents. One trick accountants use is to set things up so that you rent the company tools, office space, equipment, vehicles etc. Most of your income will be "rent" and that is a reimbursement so it is not subject to self employment tax.
Tractor trailers are possibly a little different. I know that just within NE, some will register a vehicle in another county, maybe because of lower tax rate in that county, but to do so they must have some justification that the vehicle is regularly used, housed, or meet other criteria in the county where it is being registered.

With the rent, are you saying to not pay yourself a salary or at least a reduced salary and make up for it in reimbursements that are not subject to self employment tax? You would have to be a corporation or LLC to do this, if you are a sole proprietor it is a little hard to reimburse yourself from your own funds.
 

Rewire

Senior Member
If the vehicle is owned by and registered to a corporation, I dont think a state can say it cant be there. That would be interfering with interstate commerce IMO. Look at tractor trailers, they do it all the time.

One more comment about accountants. A question to ask is what they do with rents. One trick accountants use is to set things up so that you rent the company tools, office space, equipment, vehicles etc. Most of your income will be "rent" and that is a reimbursement so it is not subject to self employment tax.

It is a two of three rule with a vehicle , the vehicle registration, your drivers license, your place of residence. You must have two of these the same.

Rent is a subject to capital gains tax which is higher than self employment tax.
 
Tractor trailers are possibly a little different. I know that just within NE, some will register a vehicle in another county, maybe because of lower tax rate in that county, but to do so they must have some justification that the vehicle is regularly used, housed, or meet other criteria in the county where it is being registered.

With the rent, are you saying to not pay yourself a salary or at least a reduced salary and make up for it in reimbursements that are not subject to self employment tax? You would have to be a corporation or LLC to do this, if you are a sole proprietor it is a little hard to reimburse yourself from your own funds.

I wasn't entirely clear but I was assuming and llc or s corp entity for both the Montana registration and rents comments. When I said that I was surprised at how much in taxes many tradespeople pay I also meant to say or was implying that one should form an llc or s corp. There are very few people who are not throwing money away working as a sole proprietor.

Kwired yes thats exactly what I am saying. According to my acct who is a lawyer and a cpa, the irs wants to see at least 10 grand of salary from an llc and the rest can be reimbursements or "rents". Rewire sorry you are probably a damn good electrician but I think my accountant is right here ;)

Regarding tbe vehicles, it must be owned by the llc and the llc must be registeted with the secretary of state in montana. You john Smith or whatever do not own the vehicle - that is the key. It doesnt matter where you live or what state drivers license you have. your state probably doesnt like this but they cant do anything about it. I have montana platea on two trucks, two motorcycles, and a dump trailer. In true code forum fashion I would say cite me your states law that says you cant do this
 

GoldDigger

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Regarding tbe vehicles, it must be owned by the llc and the llc must be registeted with the secretary of state in montana. You john Smith or whatever do not own the vehicle - that is the key. It doesnt matter where you live or what state drivers license you have. your state probably doesnt like this but they cant do anything about it. I have montana platea on two trucks, two motorcycles, and a dump trailer. In true code forum fashion I would say cite me your states law that says you cant do this
In the case of rental vehicles and long haul trucks and trailers, my impression is that if the state where the vehicle is used (not even primarily used) for commercial purposes does not have a reciprocal agreement with the state where the vehicle is licensed, the owner must still pay a portion of the registration fee in each state where it is used.
 

Rewire

Senior Member
I wasn't entirely clear but I was assuming and llc or s corp entity for both the Montana registration and rents comments. When I said that I was surprised at how much in taxes many tradespeople pay I also meant to say or was implying that one should form an llc or s corp. There are very few people who are not throwing money away working as a sole proprietor.

Kwired yes thats exactly what I am saying. According to my acct who is a lawyer and a cpa, the irs wants to see at least 10 grand of salary from an llc and the rest can be reimbursements or "rents". Rewire sorry you are probably a damn good electrician but I think my accountant is right here ;)

Regarding tbe vehicles, it must be owned by the llc and the llc must be registeted with the secretary of state in montana. You john Smith or whatever do not own the vehicle - that is the key. It doesnt matter where you live or what state drivers license you have. your state probably doesnt like this but they cant do anything about it. I have montana platea on two trucks, two motorcycles, and a dump trailer. In true code forum fashion I would say cite me your states law that says you cant do this

you are correct passive income would be taxed less
 

Fulthrotl

~Autocorrect is My Worst Enema.~
It is a two of three rule with a vehicle , the vehicle registration, your drivers license, your place of residence. You must have two of these the same.

vehicle license for non rental vehicles, drivers license, and place of accident
cannot be in three different states.

almost every state has a statute making illegal to involve 3 states in a traffic accident.
if you do, it locks up the system. they have no way to subrogate damages.

i think they just drop the pile of paperwork on you from the roof of the courthouse,
ending your life.
 

kwired

Electron manager
Location
NE Nebraska
In the case of rental vehicles and long haul trucks and trailers, my impression is that if the state where the vehicle is used (not even primarily used) for commercial purposes does not have a reciprocal agreement with the state where the vehicle is licensed, the owner must still pay a portion of the registration fee in each state where it is used.

vehicle license for non rental vehicles, drivers license, and place of accident
cannot be in three different states.

almost every state has a statute making illegal to involve 3 states in a traffic accident.
if you do, it locks up the system. they have no way to subrogate damages.

i think they just drop the pile of paperwork on you from the roof of the courthouse,
ending your life.
So you are in trouble if you are driving someone else's vehicle and are in that situation. Maybe a company vehicle from one state, your drivers license from another, and you have an accident in a third state?
 

Fulthrotl

~Autocorrect is My Worst Enema.~
So you are in trouble if you are driving someone else's vehicle and are in that situation. Maybe a company vehicle from one state, your drivers license from another, and you have an accident in a third state?

according to the CHP officer teaching the traffic school i last attended, yes.

i suspect that it's mainly targeted at non commercial vehicles. especially
in california, where the vehicle license fees are very high, with adjoining
states quite lower.... friend of mine registered all his stuff in arizona, and
a $450 annual tag here was $15 there. that was a while back, and i don't
know if arizona still has those low fees or not.
 

Rewire

Senior Member
vehicle license for non rental vehicles, drivers license, and place of accident
cannot be in three different states.

almost every state has a statute making illegal to involve 3 states in a traffic accident.
if you do, it locks up the system. they have no way to subrogate damages.

i think they just drop the pile of paperwork on you from the roof of the courthouse,
ending your life.

I would like to see a statute on this. When I was in the military and stationed in different states we could keep our drivers license from our home of record state but we had to license our vehicle in the state we were stationed or have it licensed from our home of record state. We always had to have two things the same of the three I mentioned ,license to drive, vehicle registration tag , where we were stationed. I have driven across several states with a license and vehicle that were different states. I was stationed in NY and the car I had was registered in NY when I got transferred to Washington state I drove across country and then had to get a new registration in Washington.
 

kwired

Electron manager
Location
NE Nebraska
I would like to see a statute on this. When I was in the military and stationed in different states we could keep our drivers license from our home of record state but we had to license our vehicle in the state we were stationed or have it licensed from our home of record state. We always had to have two things the same of the three I mentioned ,license to drive, vehicle registration tag , where we were stationed. I have driven across several states with a license and vehicle that were different states. I was stationed in NY and the car I had was registered in NY when I got transferred to Washington state I drove across country and then had to get a new registration in Washington.
If you are military and live off base, things may be different, but if you live on base you are not considered a resident of the state the base is in AFAIK.
 

Rewire

Senior Member
If you are military and live off base, things may be different, but if you live on base you are not considered a resident of the state the base is in AFAIK.

official resident and physical resident are different I received official residency from my home of record so I voted absentee and received my drivers license from their now my physical residence was where I got my mail and slept.
 

kwired

Electron manager
Location
NE Nebraska
official resident and physical resident are different I received official residency from my home of record so I voted absentee and received my drivers license from their now my physical residence was where I got my mail and slept.
My brother in law recently retired from Army. Most places he was stationed for any amount of time during his career he was living in private housing off base and was an official resident of the state where he was located. I really don't know what all his options were but that is just what he did. Now maybe if he wasn't married or was married to someone else he may have lived on base more often:happyyes: He was an officer which maybe made it easier to afford housing, retired as Lt. Col. and as he got older stayed in one place for longer periods. He now is officially retired from military, but still has pretty much his same job as a civilian. Uncle Sam figures why train someone else when someone already trained for the job is willing to do it.
 

vladimirRM

Member
Location
Philippines
Is it too risky to start in electrical contracting

Well, like any other business you need to be knowledgeable with simple accounting (money in and out). Even if your technically competitive considering the market needs, finances still plays an important role when to buy bulk materials, sales and etc.
 

Electric-Light

Senior Member
vehicle license for non rental vehicles, drivers license, and place of accident
cannot be in three different states.

almost every state has a statute making illegal to involve 3 states in a traffic accident.
if you do, it locks up the system. they have no way to subrogate damages.

i think they just drop the pile of paperwork on you from the roof of the courthouse,
ending your life.


What about for a company based in border zone, especially those tiny states? RI company that does business in RI, MA and CT? You'll obviously have employees with drivers license from CT, with vehicle licensed in RI and maybe working in MA when something happens.
 

kwired

Electron manager
Location
NE Nebraska
What about for a company based in border zone, especially those tiny states? RI company that does business in RI, MA and CT? You'll obviously have employees with drivers license from CT, with vehicle licensed in RI and maybe working in MA when something happens.
Out this way an area the size of one of those states is called a county:happyyes:

But that area does have near or even more population than some entire States out here.
 

Fulthrotl

~Autocorrect is My Worst Enema.~
What about for a company based in border zone, especially those tiny states? RI company that does business in RI, MA and CT? You'll obviously have employees with drivers license from CT, with vehicle licensed in RI and maybe working in MA when something happens.

god only knows. all i know is i got stuck in a saturday traffic school,
and the CHP officer teaching the class said so. and i remembered it.

that doesn't happen often, me remembering stuff... sorry, it won't happen again.
 
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