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Thread: Starting a loss making business - is this the right thing to do?

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  1. #1
    Join Date
    Nov 2010
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    56

    Default Starting a loss making business - is this the right thing to do?

    Hi All,

    I've been making jewellery more or less all my life, and have spent the last 5 years doing evening classes in various silversmithing techniques, and building up my home workshop.

    I view this as a hobby. I work in IT full time, and tbh, quite enjoy it.

    I've sold a few pieces of work when people have approached me, but I've never looked out opportunities to sell my jewellery.

    However, I've got to the point where I feel I now have a "style" and a clear idea of the sort of stuff I like to make, and I'd like to take it further, and try and get my work into a shop or two, and set up a website.

    I've done some reading, and it appears that if I'm going to have an online shop, then I need to set up as a sole trader, and run it as a proper business. This seems exciting, rather than daunting to me, but I'm wondering if it's really the right thing to do?

    The thing is, even if my jewellery would sell like hotcakes (unlikely!) I am not going to be able to devote enough time to this to make large volumes of work, so any profit that I make is always going to be minimal, and likely reinvested back into tools, development of new designs, etc. I'm sure I'll end up spending more than I make, which I'm happy to do - I feel like I spend a fortune at cooksons at the moment, and I don't sell anything!

    What I'm really looking for is a self-funding hobby, rather than a business. So is it right to start it as a business? I'm been reading about crackdowns on online trading, so don't want to risk incurring any fines for not registering, but I can't help but think that this isn't really a business.

    I would appreciate any advice!

    Fay
    Last edited by fay144; 13-03-2012 at 11:59 AM.

  2. #2
    Join Date
    Feb 2011
    Location
    West Berkshire
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    660

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    Hi Fay - If I were you, I would keep the day job (is part time an option?) to fund your jewellery making. It has always been tough out there but this year has been worse for a lot of artist/craftsmen that I know/speak to. Sales have dropped through the floor except for those lucky few who have commissions outstanding. New business seems hard to find. I know things will pick up again but in the meantime don't give up your job just yet.
    Good luck!

    Theresa

  3. #3
    Join Date
    Nov 2010
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    56

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    Thanks for the reply Theresa.

    I definitely won't be giving up the day job, as there is just no way I could make as much money in jewellery. I wouldn't really want to anyway, as I do enjoy it.

    I guess my question is really that given that I'm always going to be doing this on an evenings and weekends basis, do I need to set up as a sole trader, fill in self assessment tax forms, etc? Or would it be legal not to bother, even if I have an online shop, etc, if I'm not actually going to be making any profit?

    On one hand, I don't want to skimp on paying my taxes, even if it is only a tiny amount each year. On the other hand, I don't want to end up spending as much time administering a 'business' as I do making jewellery!

  4. #4
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    Jul 2009
    Location
    Romsey
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    Tax returns is the correct way to go, I'm afraid - so self-effacement forms year in, year out are the order of the day. It's not down to whether you make a profit (Or losses, which are tax deductible), it is whether or not there is income.

  5. #5
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    Nov 2010
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    Quote Originally Posted by ps_bond View Post
    Tax returns is the correct way to go, I'm afraid - so self-effacement forms year in, year out are the order of the day. It's not down to whether you make a profit (Or losses, which are tax deductible), it is whether or not there is income.
    Thanks for the reply, that's what I suspected.

    It just seemed potentially dodgy - e.g. my understanding from what I've read is that if I spent a grand on a rolling mill, and then only sold 3 pendants in a year, then I could end up with a tax rebate on the amount I pay through my day job, since I'll make a loss in my business. That just seems wide open to abuse!

  6. #6
    Join Date
    Jul 2009
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    Romsey
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    Making losses in startup isn't a problem - but I think if you persistently made large losses, with no downward trend, that might trigger an investigation. Dialogue with the tax office is good thing - despite the image they end up with, they're frequently very helpful.

    On the flipside, if you pay higher-rate tax, when you make a profit you suddenly you have to pay 40% of that over, so it's swings & roundabouts.

  7. #7
    Join Date
    Nov 2010
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    Oh, forgot to say, I do appreciate that "getting my work into a shop or two" isn't as easy as I made it sound! I realise that these must be pretty tough times for this sort of business, and this is an ultimate goal, rather than an assumption.

  8. #8
    Join Date
    Jun 2011
    Location
    Rhondda, United Kingdom
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    I'm looking at making this kind of decision too, as a stay at home mum I have no specific income so pay no tax, and any money I make from selling jewellery goes right back into tools etc. I'm going on a free Business in Focus course next week to find out more about it. Should be interesting...


    Melanie

    http://www.spinysharklythings.com

  9. #9
    Join Date
    Jul 2010
    Location
    The Netherlands
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    I hope you find some good information Melanie, please do share what you learn. My accountant has emailed me this week to say that he has found me an extra 12,000 euros over the next 2 years...to do with my business loan I think...

    Very happy bunny..
    Les
    Poor old Les

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