Starting A Scuba LLC - A question for established scuba LLC business owners

[Diver_Phil]

I am a new diver. I just this year began diving and love it! I have my first Open Water Certification (NAUI) and plan on continuing my education to receive further certification (PADI) for: NITROX, Advanced Open Water, Deep Diver, Drysuit, Emergency Response ... and eventually Divemaster... No I am not only seeking to collect cards, I am a working professional and plan on eventually becomming a instructor. I am not in a rush to become an instructor, I am actually still trying to decide if I want to go professional as a divemaster within the next 2 years or not.

My idea is if I were to establish my own LLC as a professional dive buddy , would I be able to have further dive training written off as expenses? I already know that there are a lot of other expenses that would be tax deductible... I was just wondering if any already established scuba business owners have ever been able to write off any educational training expenses?

This would be an outstanding way to allow myself to slowly mature as a diver, while providing a service to others at a lowered self expense.

All responses are welcome..

P.S.: Of course I will later seek professional CPA advice, but I would like to make more of a educated decision before I pull the trigger and hire a CPA & establish a LLC.

Thanks,

Phil

 

[chrpai]

Ignoring SCUBA, the IRS requires that you have an expectation of generating profit in order to be able to write off expenses. If you can't show profitability, they are going to call foul and come after you. See:

Business or Hobby? Answer Has Implications for Deductions

Also be sure to understand what a disregarded entity is.

Source: Just a smuck with a single member Texas LLC.

 

[Wookie]

Ignoring SCUBA, the IRS requires that you have an expectation of generating profit in order to be able to write off expenses. If you can't show profitability, they are going to call foul and come after you.

Or at least generating income. And they will come after you, because they come after most of the tax dodgers. I don't know what it costs to create an LLC in Germany, but in Texas, after consulting with your accountant, he'll tell you to consult with a tax attorney, and then you'll spend $1500 bucks on having your articles written, filings completed, annual meeting minutes recorded, etc. Seems like a huge amount of work and expense to cheat the feds out of a few bucks. When you consult your accountant, ask if a sole proprietership won't solve the same issue. I had one for years that never showed a profit, but did show significant income. Not as a "dive buddy", however.

Now, if you wanted to protect yourself from some perceived liability for being an instabuddy (are you that bad a diver? ), perhaps a LLC is right for you. LLC's by their very nature exist to shield your personal assets from your business assets in the event you screw up or don't screw up and get sued. I don't know why you chose to ask about a liability limiting corporation when you're trying to avoid paying taxes.

And yes, to answer your final question, I write off training expenses all the time. It's a whole quickbooks category I keep track of. It includes training expenses for vessel operations, advanced diving certifications, hotel expenses if those training activities take place somewhere else, etc. Actually, I don't keep track of it at all. I have 2 bookkeepers who do that for me.

 

[chrpai]

I missed the Germany part. Is the OP a US citizen?

FWIW, It only cost me about $400 to set up my LLC in TX. The SOS filing fee was around $300 and Legal Zoom charged $100 for everything else you describe. As a single member LLC / disregarded entity none of this was done for tax purposes. It was done for liability shielding purposes as it was advised to me that this is just as important as E&O insurance. It also enabled me to get a code signing certificate in my business name.

TX does require an annual report and franchise tax but since I only do about $50k a year on the side this is a quick and simple "I'm still operating and I don't owe you anything" exercise. You are not required to file annual meeting minutes. I have almost no business expenses and take very few deductions since it's simply not worth the hassle to me.

I guess my point is not all businesses are complicated or expensive to setup and run. Obviously running a liveaboard is.

 

[Wookie]

Yup, you set it up yourself. I had about 4 days to get it done, so I hired an Austin lawyer to do it for me so everything would be exactly right at closing..... And I agree. An LLC is used for liability shielding, not evading taxes. There are way easier ways to avoid paying taxes.

 

[Diver_Phil]

I am a Florida US resident who is a FED employee overseas. (Afghanistan & Germany) I will be returning in the US with 2.5 years in which I plan to already be a divemaster working towards instructor. Where I live in Germany, there is a LDS looking for a divemaster to help out..(Business income). Thank you for pointing out the business or hobby...I have 5 years to show a profit. I just found on the IRS website the answer to my question.. Tax Topics - Topic 513 Educational Expenses (and TY Wookie). According to that article, all my future certifications will be deductible. I am not doing this to explicitly defraud the goverment. I am preparing a valid business model which will progress from being a professional dive buddy, which may not be very profittable, to divemaster and then instructor in the future with the sole intention on owning my own LDS when I retire from Miltary & Government service. The choice of an LLC is because I have every intention on being a profitable business. I have to start somewhere..crawl, hobble, walk, run. Next step is to contact the CPA. Thank you all for your comments...

---------- Post added September 19th, 2013 at 04:01 PM ----------

Also be sure to understand what a disregarded entity is.

Source: Just a smuck with a single member Texas LLC.

Thanks for the INFO...