Setting up racing business.
First off thanks for the ad.
I am trying to start a FOR PROFIT career in racing. I plan to be the driver initially, but if all works out, I would rather pay a wheel man to bring home the money, and make the business more appealing to sponsorship and endorsements.
I have been doing a lot of research lately, and I am having a difficult time coming up with information. So I have a few questions.
Considering it takes time and money to build a car, acquire spare parts, have things scheduled. When would be a good time to start actually tracking expenses?
Say for the most part, if I wanted to make sure I made it to one of the later rounds of 2015 in the sanctioning body I plan to compete in, I need to spend about $25K in making sure that the car I USED to use as a fun street/track car, can meet all of the rules and regulations, as well as be competitive. Now this cost is lower than some. I am a welder and fabricator by trade, so a lot of the work can be done in house. (I own MIG and TIG welders, as well as a lot of other race car fabrication equipment) .
Do I set up a sole prop, or LLC? How do I fund my bank accounts, to show that the business or "race car" needed the equipment or parts?
Put some money from my full time job in there?
What if even after I spend the money to try to make the final rounds of the season I cannot hit the deadline? I end up not attending a single race? Do my expenses for this year no longer count?
Say I started building the car over the winter with the intentions to compete? However, I have not set up any sort of business avenue to do so. Do those expenses not count? Should I set the plan in motion now, just to be safe?
I know it's very hard to turn a profit in the first few years, but I also have full intentions of running this as a business, not a hobby. I have bought equipment, parts, fabricated things for my car, talked to local shops about support over a season etc. etc.
Bottom line, I want to win money.
A little about me: I am in my late 20's cars and racing have been my whole life, I have built a few cars, but being younger I was never serious about racing competitively, or for money. I have devoted my whole life to cars, I have worked my way into a very nice skilled trades career with the intentions of starting my own business related to cars. The avenue I would like to pursue is racing.
I have no kids, or family, I am debt free, and i have no assets currently. I have been working hard at maintaining ultimate flexibility in life so i can pursue these interests.
With that being said, if I am using funds from my full time career to start this venture, what paths should I take to re-assure the IRS that this is a full fledged business effort? From the reading above it's clear that I fall in a very aggressive tax bracket. (very close to the 28% bracket) with no dependents, and not many tax breaks.
I know there are a lot of questions here, but i thank you in advance for any helpful information!!