Thank you, very helpful words !
Business launch planning: specifically, how long can I take a loss on taxes?
- Thread starter Jorah
- Start date
Help Support Soapmaking Forum:
What things?Hello
While I don't have any <serious> plans to make soaping a business, I have entertained the thought because my quest started out of necessity but it totally baffled me that so many soap makers tout their products to be natural when they still contain all the things I need to avoid. So, when I filed my taxes 2 years ago I asked my tax guy and he said, "to keep it simple, about 2 years". In Florida you can claim expenses on your taxes as losses, as long as you don't turn into an overnight sensation and actually make profit. It's assuming you spend and spend and spend, but only make pocket change in the beginning. So, my hobby expenses would subtract from employment income (from my day job), and he said I wouldn't need to itemize my expenses in those first 2 years, just give him a total. For the record, I use H&R Block, because my last divorce was dirty and my ex-husband told me he claimed stuff that he didn't and since our names were both still on that tax mess I ended up paying a chunk of fines and returnsSo now I pay a professional because if my name gets tangled up in anything like that again, I don't want to say "I did my own taxes"
And your "tax" guy is wrong. You can't claim hobby expenses, only hobby income...the IRS is very clear about this: "If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are miscellaneous itemized deductions and can no longer be deducted.". If you are going to claim expenses, then you need to file a Schedule C and it's no longer a 'hobby'
Good to know!
As for "things", that could be thread in itself! I think the first thing I remember having a reaction to was metals which meant no jewelry for a girl who wanted to sparkle and shine. I can tolerate stainless steel longer than any other metal but if I wear a chain, ring or earrings constantly then even that will cause rashes, even when i make sure to rinse any soap thoroughly and dry my skin, and never apply lotion when wearing jewelry. Then it was dyes and chemicals ~ I remember the first time I got caught in a perfume cloud at the mall ~ I was sick with allergic reactions for days, including rashes, lots of steroids and benadryl. Make-up is huge no-no ~ when I wear any kind of foundation on my face it literally changes color as the day goes on, usually ending up as an obvious shade of light orange. So to the best of my knowledge I have to avoid oxides and perfume fragrances for sure. Most micas are synthetic, so I have to avoid them. I know which EOs I can use in my oils but even some EOs can be a problem, like Lemongrass which is sad because I LOVE Lemongrass. Anything in the mint or pepper family I have to keep to a minimum. I can't wear heavily dye clothing (I learned that lesson working at a denim stone washing facility) so dyes of any kind are out. I have reactions to adhesives (band aids), latex, even neosprorin. Contact starts with a red rash that gets bumpy, then the bumps turn to blisters ~ one dr told me my reactions almost look like I was burned with acid ~ so that has been my life
I walk around with a bottle of benedyl to stop any reactions as they start. Ironically, as a kid, I was never allergic to poison ivy which baffled the drs but my mom was quick to notice it's a natural plant so maybe I needed natural products, not artificial or synthetic. And there started my natural journey ~ fast forward 40+ years and it's still trial and error. The eczema and psoriasis came later. Something that has worked for years may even become a trigger. It's frustrating for sure, but I know my soaps need to be just oils & butter, no fragrance, no colors, dyes, nothing "chemical", so no "artisan" soaps, at least for the most part. My skin does not like glycerin soap either. Any true natural soaps I found that met my needs were running $8‐$10/bar and I went through 3 sellers who each had one bar in their collections that I could use, but they ended up discontinuing that bar. I offered to buy the recipes so I could make it myself, explaining my situation, but that was a no-go. I even offered to buy a whole loaf, but they were each busy keeping up with their supply & demand so no time for "special requests". That's when I decided to jump in and do it myself and it has been an intimidating and humbling experience for sure!Hi Shelley,As for "things", that could be thread in itself! I think the first thing I remember having a reaction to was metals which meant no jewelry for a girl who wanted to sparkle and shine. I can tolerate stainless steel longer than any other metal but if I wear a chain, ring or earrings constantly then even that will cause rashes, even when i make sure to rinse any soap thoroughly and dry my skin, and never apply lotion when wearing jewelry. Then it was dyes and chemicals ~ I remember the first time I got caught in a perfume cloud at the mall ~ I was sick with allergic reactions for days, including rashes, lots of steroids and benadryl. Make-up is huge no-no ~ when I wear any kind of foundation on my face it literally changes color as the day goes on, usually ending up as an obvious shade of light orange. So to the best of my knowledge I have to avoid oxides and perfume fragrances for sure. Most micas are synthetic, so I have to avoid them. I know which EOs I can use in my oils but even some EOs can be a problem, like Lemongrass which is sad because I LOVE Lemongrass. Anything in the mint or pepper family I have to keep to a minimum. I can't wear heavily dye clothing (I learned that lesson working at a denim stone washing facility) so dyes of any kind are out. I have reactions to adhesives (band aids), latex, even neosprorin. Contact starts with a red rash that gets bumpy, then the bumps turn to blisters ~ one dr told me my reactions almost look like I was burned with acid ~ so that has been my life
Sorry, not on the matter of soaps, but just for my personal interest, do you have food allergies ? We are an "allergy prone" family, and my son cannot tolerate gluten, lactose nor eggs. We are therefore gluten/lactose/egg free, and I find my overall health a lot better, with less allergies. How is it for you ?
Okay. When I said "what things", I was referring to your statement of "it totally baffled me that so many soap makers tout their products to be natural when they still contain all the things I need to avoid." and looking at the above and other things you said, I think a few things need to be cleared up.
An 'artisan' refers to someone in a skilled trade that involves making things by hand. Thus an 'artisan soap' is a soap that is made by hand. Someone else might prefer to use 'handcrafted' or even 'homemade'...it's all the same, it is soap made by hand.
All soap...whether handcrafted (even in large volume) or commercial made contains glycerin...it's a natural part of the saponification process, but I'm going to make an assumption that are you referring to what is known as 'Melt & Pour' soap. It does contain higher amounts of Glycerin along with Propylene Glycol which allows you to take it from a solid to a liquid back to a solid.
So now we get to define 'chemical' and 'natural'. Sodium Hydroxide is a 'chemical', but the thing is...you cannot make soap without it. Oxygen (O) and Water (H2O) are also 'chemicals', but try to live life without either. In fact, your body is made up on chemicals...oxygen, carbon, hydrogen, nitrogen, calcium, phosphorus, potassium, sulfur, sodium, chlorine and magnesium.
When it comes to 'natural'...Ricinus, White Snakeroot, Hemlock, Spotted Cowbane, Larkspur are completely 'natural' as they are all plants, but every single one is also a poison. There are two reasons to use synthetic Micas...one is that natural mica is B O R I N G. The majority of 'natural' mica is dull yellow, grey or light brown and while I 'embrace the brown' because of the vanillin/vanilla content in FOs, I like pretty colors. There is also the cost of processing natural mica to make it skin safe. As with the above mentioned plants, just because something comes from understand, doesn't mean that it is safe to use. And as you noted yourself you have issues with certain EOs (natural) and Oxides (natural).
So...chemicals aren't necessarily 'bad' and what is natural isn't always 'good'.
Oh goodness, I'll never be too busy to be here!!! You guys supported me through all my trials and tribulations. Cheered me on through failure (after failure after failure
), and helped get me comfortable with the fact that "soap is gonna soap" and to be cool-headed and resilient.And puleeze.... its not like I'm soap perfection over here. I'm definitely going to be here with more horrors and mysteries that need sleuthing.
So many times after a confusing flub, you guys helped me feel like Dory... "just keep soaping, just keep soaping, just keep soaping, soaping, soaping.. what do we do, we just keep soaping"
I have to say though... I never ever would've had the gumption to go for it if it wasn't for the huge knowledge base here, the stories of others, the generosity of knowledge and people's time. Reading about people's experiences is what helped me determine what I wanted — and what I didn't — out of this venture. I definitely did NOT want another full time job. I did NOT want to do the farmers market tour, I admire the heck out of youall that do. But I did want to bring my idea out on the stage and see how people reacted (they like it! yay! Actually, cue panic music because I'm totally out of inventory and have to soap like mad).
And I'm making mistakes, and I'll make plenty more. And I'm ok with it, because, thanks to y'all, I'll just keep soaping, just keep soaping
I apologize for that confusing statement ~ in my head it made sense
The part that baffled me is that perfumes and colorants tend to be high on the list of things people are sensitive to, but soapmakers load up their recipes with those ingredients. I know, technically speaking, almost all soap ingredients are natural and lye is chemical and that should translate as "good for you" when it's all mixed together properly, that just isn't the case for me. It has to be super simple, super basic, I guess would be a better way to say it? Almost all the extra additives to make it look pretty or smell good are in the "Nope" category for me.
As for glycerin ~ I keep forgetting about the varieties. What I remember was my dad saying to try his soap and it just said glycerin on it and it was a kind of transparent orange. When that one didn't work he gave me a clear one, no color, but they both made my skin feel raw after a shower, even turning red and blotchy. I never used any clear soap or anything labeled as glycerin after that
My dad even asked if I was rubbing myself raw, I said no just lathering my hands and rubbing it all over and rinsing off, no wash cloth, no scrubby mitt, just soap on my hands 
"Glycerine soap" can mean one of several different things to different people. The key take-away for folks with reactive/sensitive skin is that it almost always contains ingredients that aren't found in traditional handcrafted soap, such as synthetic detergents, emulsifiers, colors, fragrances, and the like.I apologize for that confusing statement ~ in my head it made sense
I know, technically speaking, almost all soap ingredients are natural and lye is chemical and that should translate as "good for you" when it's all mixed together properly, that just isn't the case for me. It has to be super simple, super basic, I guess would be a better way to say it? Almost all the extra additives to make it look pretty or smell good are in the "Nope" category for me.
As for glycerin ~ I keep forgetting about the varieties. What I remember was my dad saying to try his soap and it just said glycerin on it and it was a kind of transparent orange. When that one didn't work he gave me a clear one, no color, but they both made my skin feel raw after a shower, even turning red and blotchy. I never used any clear soap or anything labeled as glycerin after that
Non expert here… I keep finding misleading or confusing info on how many years you can claim a loss on a business. Some websites say you can claim losses for three out of five years. But this IRS fact sheet https://www.irs.gov/pub/irs-news/fs-08-23.pdf says that for an activity to be assumed to be for profit it must show a profit in three of the last five years, which means you would only get to claim a loss two years in a row and then must have three consecutive profitable years.
I’m guessing it’s more complicated than this.
I’m guessing it’s more complicated than this.
No worries...you are new this and there is a learning curve given all brainwashing (aka advertising/marketing).I apologize for that confusing statement ~ in my head it made sense
I use Olive, Coconut, Palm and Castor Oils and Shea and Cocoa Butter in my Regular Soap. In my GMS (goat milk soap) I use the same oils, but only Shea Butter and goat milk from the health food section or farm. And in both recipes I use Kaolin Clay and Sodium Lactate. I have recently started adding a little Sorbitol for my male customers as they seem to like more bubbles (go figure). I add the Clay as it is supposed to add 'slip' to the soap so it doesn't drag across your skin and because it might (there is much discussion on this) anchor scent (make it last longer). The SL is a liquid salt and it can harden the soap to make it easier to unmold sooner. Sorbitol is a carbohydrate of sugar and sugar is well known to produce more bubbles. All three of these ingredients are considered to be 'natural', but as previously noted, not everything that is 'natural' is good for you.
And the reason why soap makers "load up" on colorants and scents...it's what sells. And you're in business to sell, not make soap that doesn't sell. Folks who want an uncolored/unscented soap a few and far between and so many soap makers don't waste their time.
Now there are other additives that some soap makers add to their soap that some folks might consider to be chemical or unnatural, but if you have hard water or high humidity, then Citric Acid or EDTA (Ethylenediaminetetraacetic Acid or Edetic Acid). We can advise our customer on how to take care of their purchases, but we can't be there to make sure they do. So if they fail to follow directions or heed warnings. One of folks almost go sued with a customer fed her child "Marshmallow Soap" DISPITE numerous warnings on the label that it was soap, NOT food. I almost sold a soap containing walnut shells to a customer with severe nut allergies DISPITE the big bold red letters that said CONTAINS WALNUT SHELLS.
You had mention earlier trying to buy a recipe or get a custom soap, that you weren't successful is not surprising. It would be stupid of me as a soap maker to sell my recipe to you so you could make your own soap and cost me a lot of business. And yes it would be a lot of business because once you make soap for yourself, you'll be making soap for family and friends and then you'll want to go into business (it IS a good recipe) and those numbers add up after awhile. As for custom soaps, I rarely do custom orders. Not because I don't have the time, but mostly because I don't want to fool around with smaller batches of soap and most people aren't going to want 18 bars of the same soap for $100. And something that sucks but we have zero control over...discontinued colorants or scents, supply chain issues, and prices.
We secured our LLC almost immediately upon choosing our company name. I think we paid in the region of $50-100. This is not something you need need an attorney for (save the money). We filled out the paperwork, submitted it along with payment and we were done. That was simply one thing out of the way. This is not a big deal.
But do not get complacent and think a LLC protects you, because it just does necessarily do so. Only exceptional insurance and good GMP, and labeling protects you.
It is definitely not a big deal to create one. But in many states, it is a huge deal to pay the ongoing costs of maintaining one, and will cost more than it is ever worth.
In California, you can create the LLC online in about 5 minutes using the Secretary of State's online forms. There is zero need to hire an attorney or even send in any paper forms, and the last I checked, their fee to file this was less than $200.
However, the LLC has to file annual income tax returns (separate from your individual returns), must file quarterly sales tax reports/returns, and must pay an annual minimum tax of $800. The LLC must do all of those things even if it made ZERO income. If an out-of-state LLC sells even one bar of soap in California, it must register to do business in California and pay the $800 minimum tax, and file the annual income tax and sales tax returns. If you think CA won't come after your out-of-state LLC for that $800, think again - they absolutely will and do, all day, every day.
For small crafters selling in California, those ongoing expenses are a complete waste. In at least 80% of cases, the LLC does not really protect the members' assets like people think it does. But it will still eat up a minimum of $800 of your profit each year, not including what you may pay for help to get all those returns filed.
Of course, not all states are like California. But many have varying degrees of ongoing bureaucratic headaches and costs associated with having an LLC. In every state, in order to maintain liability protections, the LLC must have completely separate financial accounts that are never commingled with any personal funds or accounts. Otherwise, all legal protections from the LLC go out the window, and you will be personally liable if sued.
Last edited:
What, exactly, is “exceptional” insurance? We purchased our policy through a company that insures soapmaking. Not sure if it is “exceptional” or not but we have a millions dollars of coverage. Of course, proper labeling is important (base your label on the requirement for the country in which you produce).
I realize that this is an older thread, but I think it's important enough to bump it and I noted that @melinda48 didn't get her question answered.
Having a 'millions dollars of coverage' doesn't mean squat if it doesn't cover what you need it to cover, and even then, you might not be as covered as you think you are because sh** doesn't just run downhill when it comes to Product Liability, it also runs uphill as well. But let's start at the bottom of the hill...the customer. Folks can be pretty stupid...it's why my blow dryer has a warning that says to not use it in the bath or shower. It's also why I quit using Walnut Shells because even with a warning in big, bold, red capital letters, someone with severe nut allergies almost bought my soap and would have sued me. It wouldn't have mattered that I would have prevailed, it would still cost me time and money. It's why I have recently started adding "For external use only" on all my products. And oh yeah...there were a couple of people at my son's wedding who thought those pretty little hearts I made in rust and navy were chocolates as opposed to soap and took a bite out of them. I could have been in real trouble if I didn't know the eaters personally because there were no labels on the box other that the names of the couple and the date. So anyhoo...you have to consider how stupid your customers can be, cover your butt as much as possible with your labels, website, brochures, business cards, etc.
The next step up the ladder is you. So you follow all rules and regulations for Good Manufacturing Practices/Processes, all the rules for labeling, you weigh your soaps on a quarterly basis to make sure the weights are good, you follow FIFO and pull expired products out of inventory...you should be covered...right? Yes, no, maybe so. In my day job I'm a Senior Staff Accountant for a CPA firm...I have all sorts of 'checks and balances' in place to lessen the odds of making mistakes. Note I said 'lessen', not completely eliminate them because we are only human and humans make mistakes; it's why CPAs carry E&O (errors and omissions) Insurance.
The next step up is your supplier...and this is a double-edge sword because while your supplier is responsible for their products...so are you. You need to be able to back up that you have done your due diligence and that your supplier's products are what they say they are because folks have been held financially liable for not making sure that their supplier followed all the rules too. It's why I recommend purchasing ingredients for reputable supplies, for reading labels, for doing the research...not just your ingredients, but your equipment, general supplies, packaging, etc.
Having a 'millions dollars of coverage' doesn't mean squat if it doesn't cover what you need it to cover, and even then, you might not be as covered as you think you are because sh** doesn't just run downhill when it comes to Product Liability, it also runs uphill as well. But let's start at the bottom of the hill...the customer. Folks can be pretty stupid...it's why my blow dryer has a warning that says to not use it in the bath or shower. It's also why I quit using Walnut Shells because even with a warning in big, bold, red capital letters, someone with severe nut allergies almost bought my soap and would have sued me. It wouldn't have mattered that I would have prevailed, it would still cost me time and money. It's why I have recently started adding "For external use only" on all my products. And oh yeah...there were a couple of people at my son's wedding who thought those pretty little hearts I made in rust and navy were chocolates as opposed to soap and took a bite out of them. I could have been in real trouble if I didn't know the eaters personally because there were no labels on the box other that the names of the couple and the date. So anyhoo...you have to consider how stupid your customers can be, cover your butt as much as possible with your labels, website, brochures, business cards, etc.
The next step up the ladder is you. So you follow all rules and regulations for Good Manufacturing Practices/Processes, all the rules for labeling, you weigh your soaps on a quarterly basis to make sure the weights are good, you follow FIFO and pull expired products out of inventory...you should be covered...right? Yes, no, maybe so. In my day job I'm a Senior Staff Accountant for a CPA firm...I have all sorts of 'checks and balances' in place to lessen the odds of making mistakes. Note I said 'lessen', not completely eliminate them because we are only human and humans make mistakes; it's why CPAs carry E&O (errors and omissions) Insurance.
The next step up is your supplier...and this is a double-edge sword because while your supplier is responsible for their products...so are you. You need to be able to back up that you have done your due diligence and that your supplier's products are what they say they are because folks have been held financially liable for not making sure that their supplier followed all the rules too. It's why I recommend purchasing ingredients for reputable supplies, for reading labels, for doing the research...not just your ingredients, but your equipment, general supplies, packaging, etc.
Last edited:
I'll add here the new regulations coming online in the US this January for b&b products like lip balm and lotion, and any soap that's not just for cleansing (cosmetic claims like shaving soap or moisturizing or exfoliating...). Proof of substantiation of safety will be required beginning January. It *looks* like documentation such as pdf's and links to studies will suffice, but the FDA hasn't said precisely.
From what I am reading on MoCRA, I don't think that it's going to effect anyone here unless they have an average gross annual sales of certain cosmetic products for the previous three years in excess of $1 million. A lot of the stuff is stuff that already exists...like if you make ANY claims about your soap (and/or ingredients) other than it will get you clean, then you are subject to the FDA. Shaving Soap has always been a cosmetic. Moisturizing Soap as always been a cosmetic. Exfoliating Soap as always been a cosmetic. Lip Balms, lip butter, lotion bars, lotions, scrubs, shampoo, conditioner, beard oil...cosmetics.
Safety substantiation applies to everyone who makes cosmetics, no matter the sales figures.
Registration and GMP only apply to those above the $ cutoff.
The Soap Guild have good information .. a quick quiz to show what is needed per what you make, and a list of what the small business exempts from (and what it does not)
Mocra Quiz
https://www.soapguild.org/tools-and-resources/mocra/quiz/new/
Handcrafted Soap and Cosmetic Guild
https://www.soapguild.org/tools-and-resources/resource-center/291/mocra-small-business-exemption/
Such helpful links @paradisi, thank you!
First of all...anyone who makes any kind a PCP (personal care product) for sale to the public, whether it regulated by the FDA (cosmetic and drug products) or by the CPSC (true soap), should be following good manufacturing processes and guidelines and keeping records. However, as you yourself have pointed out with regard to 'safety substantiation'...it applies to folks who are making COSMETICS. If someone is just making [true] soap, it doesn't. BUTT...as I just said, anyone who makes any kind of personal care product should be following good manufacturing processes and guidelines and keeping records.
As for the second line...I just said that so what exactly is your point? Again, the majority of folks here will be exempt as they will be considered a "small business"; they will NOT have to register the facility or products with the FDA, NOR will they have to follow the increased regulations that will be coming out.
The ONLY thing that I see that is going to change anything for me and other "small business" is the need to identify any Fragrance Allergens in my Ingredients labels and that's not something that we even have to worry about for a couple of more years because as is typical with the US government, their mouth is writing checks their body can't cash. Even though the MoCRA takes effect 01/01/2024...the FDA hasn't created a list yet and they aren't even required to provide a PROPOSED list until 06/19/2024 and then they have until 01/19/2025 to come up with a Final List. And then folks have until 01/19/2026 to update their labels...which is probably get stretched out until 2027...or 2028...or 2029. In fact, in the SG article it says: The requirement to identify fragrance allergens in your cosmetic ingredient declarations is still several years out. Given that I have lost (discontinued) almost a dozen fragrances over the last several years, I'll probably be retired from my day job (less than five years away) before I have to worry about it.
Similar threads
