Limited Liability Corporation

I have started to fish in tournaments during the last two years. I’ve managed to cash a couple small checks, but nothing large enough to worry about being taxed. I have heard of people forming an LLC to gain some tax advantages, such as writing off expenses, (entry fees, gas, equipment, boats, and so on.) I was wondering if anybody has any information on the advantages and disadvantages of doing this and also what steps would I take to do this. Thanks.

Anyone who tells you they legally write their boat off ‘cuz they fish a few tournaments is filling you full of it.

Contact a CPA familiar with this type of situation. There are no free rides. You can’t legally write off your boat because you fish a couple tournament or guide a few days each year. It is possible to turn guiding and tournament fishing into a job and legally deduct many expenses but believe me… it will be A JOB before you get anywhere near that point.

No matter what anyone else tells you here, unless you’re looking for tax troubles, contact a CPA and get the straight scoop.

Good point James. There has been a lot written about this subject, in many publications. It will come down to whether what you are doing it as a hobby or a job. As James said, talk to a CPA, you will find that making it a job is not as easy as keeping track of your expenses versus winnings.

I agree with James and Scott. My CPA was able to write off some expenses from the tourneys I fished last summer, but it was very minimal. It’s complicated, just like every other stinkin’ tax law.

There is a tax category called “Hooby/Loss” that is the best place to play when you are just starting the tournament thing. Basically keep all your receipts from all your tournaments..Entry fees, gas, lodging, bait, food, etc. If you don’t win any money, the receipts can go in the garbage. If you happen to win some money and the tournament organization makes you fill out a 1099 form for your winnings, you can claim your expenses too. The trick is that you can only claim expenses UP TO the amount you won. Basically it helps you cancel out the taxes you might owe from your winnings by showing the expenses you incurred.
Someone else jump in if I’m out of line here.

That is exactly right Crossin.

I read a very good article last year written by a CPA on this exact subject and she gave some things to consider it you are looking to make a business out of fishing.

Fish an entire Professional trail with a Championship.

Keep track of ALL your expenses and winnings.

Keep a guide log if you are a guide

Show a profit occaisionally

Keep track of how many days per year you travel.

The burdon of proof is on YOU to show that you are doing this as a business and you better have the proof to back it up. Otherwise you better stick to the “hobby” category.

CrawlerKing….
I checked into this in a lot of different places and I heard as many different stories as CPA’s I talked to. I would suggest trying to find someone that is extremely familiar with this kind of tax accounting your average everyday tax accountant is probably not going to have all the ins and outs. I was flabberghasted at how many different and conflicting things I heard from the 5+ CPAs I talked to.
I did come to the conclusion that creating an S-corp was not something worth doing unless you consistently make way more than your expenditures.
John

Thanks for providing the information. Sounds like I’ll just have to take the big tax hit when I finish high in the money!!!