LLC and Inc.

kdneo

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Curious how many teams are an LLC and/or Inc. Did you do it for business/tax reasons, or liability or have you not done it? Why or why not?

Thanks
 

PDANK Racing

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I had looked at doing an llc in the past, but felt I wasn't spending enough money to justify it. With the budget of most desert race teams, it probably isn't a bad idea. From what I've heard, race teams would be a hobby business, which means that you can't claim pretax deductions for more than the income of your team. ANyone looking to do this should consult with a tax accountant, for accurate info.

Since then, I started a parts business that covers almost all of my racing costs; travel, trailer/hauler, entry fees, pits, etc. And allows us to depreciate the value of hauler/trailer, and whatever deductions my tax guy figures out.

Liability: I race shortcourse, so personally don't see any need for it. When I start racing desert, will probably have some coverage in case of an accident with a spectator.
 

green787

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You have to make money first, then start a business or the I.R.S. will send you letters of inquiry....
 

RYAN COHEE

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This is a social media site I do Not think you will hear about how people write off racing. Or their "Advertising" to the IRS
 

kdneo

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I was not implying to cheat on your taxes, not a wise move. However I know it is very common in other forms of racing to make an LLC. I know of a nascar team that had 3 haulers, there was a parent company and each hauler was its own LLC. The reason for that was if an accident or something occurred with one hauler it would not take out the rest of the fleet in a legal battle or anything. I know NASCAR is way more money than most off road teams use, but the principal remains the same. We are talking to a sponsor about a good size sponsorship deal and are considering forming an LLC to protect assets.
 

nimrod

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If you’re at the point that this is an issue you’d probably be better off talking to an attorney or tax consultant than hitting up a Desert Racing forum.
Or, I could tell you what to do cause I slept in a holiday inn express a few nights ago and I’m still feeling pretty dang smart.
 

vegasloki

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I was not implying to cheat on your taxes, not a wise move. However I know it is very common in other forms of racing to make an LLC. I know of a nascar team that had 3 haulers, there was a parent company and each hauler was its own LLC. The reason for that was if an accident or something occurred with one hauler it would not take out the rest of the fleet in a legal battle or anything. I know NASCAR is way more money than most off road teams use, but the principal remains the same. We are talking to a sponsor about a good size sponsorship deal and are considering forming an LLC to protect assets.
Having each transporter as a separate LLC would not shield against that type of liability. It's common for companies to run the transportation operation as a stand alone entity but for liability you wouldn't need three of them unless the ownership structure of each vehicle was different. Under current regs you need an appropriate amount of insurance to run those as a private or common carrier and that is what would cover your liability. The reason people do pass throughs like that has more to do with the capital structure and business operation of the team.

As for the OP, if you are asking here you probably don't need one. You'd need to be making some money and there is a yearly cost in maintaining the LLC or S corp. For example our NV LLCs cost about $500/year each. Ours includes the state business license (and tax permit) and yearly member list filing fee. Some states have more taxes and fees on top of that. Then you'll need whatever licenses or taxes that are local to your business. You need to be set up as a complete separate entity from your personal finance. Separate bank accounts, accounting for funds between the company and your LLC/corp, no intermingling funds. There is some work involved and if you aren't trying to run your team like a real business, with a real revenue stream, it's probably not going to be worth it or offer any advantage.
 

Dirtracer 619

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So what would you have to do. If you don't have any type of associated business with your off-road program. And say someone gives you money for entry fee,s gas or to buy a motor or tires ect. Or better yet what if you actually won some cash in a race. Of course it would never be as much as you spent but do you claim it and write off losses like in gambling. By the way we are a sportsman team not pro so we only occasionally get what they refer to as bonuses
Although i have never got one. :(
 
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43mod

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20 years ago we did approx 30k in sponsors and 15k in winnings. We were able to wipe out 95 percent of it w racing costs on our personel taxes. No chance of doing that again because going in circles sucks compared to dez racing
 

Jimmy8

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I won't go into extreme detail but 2 things to think about.

1) Having a racing program as an LLC protects your personal assets to an extent in case of lawsuit, which in desert racing is definitely a possibility.

2) No real corporate sponsor and most small brands are not going to write you a check unless you have your race program operating like a business. Doesn't matter if you are a team, driver, athlete, influencer, freelancer, etc, all incoming money should go thru an LLC first for so many reasons.
 

vegasloki

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So what would you have to do. If you don't have any type of associated business with your off-road program. And say someone gives you money for entry fee,s gas or to buy a motor or tires ect. Or better yet what if you actually won some cash in a race. Of course it would never be as much as you spent but do you claim it and write off losses like in gambling. By the way we are a sportsman team not pro so we only occasionally get what they refer to as bonuses
Although i have never got one. :(
You can write off hobby expenses on your personal income tax to offset anything you win and is given to you on a 1099. You don't need to be a corporation or LLC. You should get an accountant or go to someplace like Legal Zoom where you can get lower cost advice from a network of real pros. The site itself doesn't do it but they refer you.

I won't go into extreme detail but 2 things to think about.

1) Having a racing program as an LLC protects your personal assets to an extent in case of lawsuit, which in desert racing is definitely a possibility.
To expand on this an important thing to remember is it won't shield you from personal responsibility for your own actions. If an employee or contractor causes harm you would likely be covered. If you yourself caused the harm depending on the circumstance you many not be covered under the LLC or corp. When I was a partner in touring companies we not only had a corp but also a buttload of liability insurance. The right insurance is your best protection. See if your state has a homesteading law. Your primary residence up to a point is excluded from judgement except in cases of tax non payment.

The small batch manufacturing operation we are winding down some of the financing and one of our investors wouldn't participate without being in an LLC. The investor's LLC was a member and the investor loaned funds for an expansion. In the case of another loan prior (IIRC it was Prosper) in order for it to be a business loan the operation had to be an LLC or corp. There are business operations advantages to an LLC but your typical hobby race team likely isn't going to benefit.
 

kdneo

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I won't go into extreme detail but 2 things to think about.

1) Having a racing program as an LLC protects your personal assets to an extent in case of lawsuit, which in desert racing is definitely a possibility.

2) No real corporate sponsor and most small brands are not going to write you a check unless you have your race program operating like a business. Doesn't matter if you are a team, driver, athlete, influencer, freelancer, etc, all incoming money should go thru an LLC first for so many reasons.


This is essentially what I was getting at.
 

Kolman

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Consult a CPA and a Lawyer. Too many facts and circumstances to consider before any advice here is relevant to your specific case.

source; I are a cpa. ;)
 
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