Sponsorship

[rosco]

I’ve heard for years that advertising can be a write off for companies but I’m not very familiar with the legal aspects.

Can someone point me in the right direction so that I may approach some local businesses and us that fact in my pitch?

If I need to move this to another area of the forum just let me know.

Thanks so much!

[cjsracing]

It's pretty simple any advertising a business does is an expense for that business.

Revenue minus expenses = net income


Note: If you pitch it to a company as "a write-off" you will probably be turned down because any business owner is going to know that already.

[over4T]

While, yes, advertising is a legitimate business expense and it is deductible be very careful if it's your business name on the car. I was a building contractor for many years and "sponsored" my own racing and my "advertising" costs for the operation were a nice deduction on my taxes.
IRS likes to think Joe Racer just has a hobby but when I was audited one time and took in my records, including a long list of customers that were gotten from race tracks and fans, they agreed and I had no further problems with them. . Good thing 'cuz I sure didn't make any profit from the actual racing and the deductions covered a chunk of the costs.

[cjsracing]

While, yes, advertising is a legitimate business expense and it is deductible be very careful if it's your business name on the car. I was a building contractor for many years and "sponsored" my own racing and my "advertising" costs for the operation were a nice deduction on my taxes.
IRS likes to think Joe Racer just has a hobby but when I was audited one time and took in my records, including a long list of customers that were gotten from race tracks and fans, they agreed and I had no further problems with them. . Good thing 'cuz I sure didn't make any profit from the actual racing and the deductions covered a chunk of the costs.

Agree, but that's why you set racing up as a stand alone business that has its own tax return (an LLC Partnership or and LLC S-Corp)

[MasterSbilt_Racer]

Agree, but that's why you set racing up as a stand alone business that has its own tax return (an LLC Partnership or and LLC S-Corp)

That's not easy either, because that business has to be profitable, at times, or at least appear like you are building to it.

[over4T]

MBR, You are correct. Last I checked it was like no profit in 3 years it wasn't a legitimate business and you were screwed. Maybe a really sharp CPA could find a way around that but I've done my own tax stuff my whole life and it cost me nothing.

You, generally, can deduct any purse money you got by just writing in that amount in expenses and zero the $ out. The last times I had a profit in racing was back in the late '60s when I was running the flathead coupes & sedans. Now a days purse $ covers about 25-30% of our costs in a good season.

Suspect that 99% of the Saturday night racers in the country are in the same boat.... or worse.

[fastford]

you also need to know if the potential sponsor,s insurance vendor allows them to sponsor a race car , mine does not allow it because of liability issues , i cant put my company name on a race car , i guess they figure if your company name is on a car that runs over some one in the pits , they could possibly be liable.....

[over4T]

Fastford, Yup, there's that too. Our litigious society these days days does that.

I never was much for chasing sponsors with the 80-100 hour weeks I worked for 40+years and the countless hours spent in the shop on top of that. I still love this , often frustrating, sport. Only sponsorships we've had in recent years are an off road shop that builds my rear ends for cheap, metal supplier that cuts me a deal on tubing and a fuel distributor that gives me a discount and we're grateful for them. They get a decal on the cars.

Time to get out to the barn to try to finish up the new car for this season. The old car is going into it's 14th season and it's still winning and will be the backup. If we win every show we run (unlikely), we might pay for half of it. Racer optimism.

[rosco]

if I’m not the business owner and have a company owned by someone else who indeed does turn a profit then that company should be able to write off the expense, provided their insurance allows. Correct?

[over4T]

Yes they should.

[cjsracing]

That's not easy either, because that business has to be profitable, at times, or at least appear like you are building to it.

ehhh, I'm a CPA and I have plenty of "legitimate" business clients that I can make show little/no taxable income every year under IRS rules.

Not to mention I used to work for a company that is traded on the NYSE that has never (in 10 year2 of existence) had a profit. In fact they average $12 million per year in loses over those 10 years.

[MasterSbilt_Racer]

ehhh, I'm a CPA and I have plenty of "legitimate" business clients that I can make show little/no taxable income every year under IRS rules.

Not to mention I used to work for a company that is traded on the NYSE that has never (in 10 year2 of existence) had a profit. In fact they average $12 million per year in loses over those 10 years.

I've had multiple racers who got burned and one CPA tell me you better just treat racing as a hobby and not make it a money-losing "business".

As far as public entities, they can lose money every year until they run out of willing bondholders.

[racer2e]

Why not just not claim all of your expenses one year out of every 3. That way you show a profit.

[fastford]

here is how my accountant explained it to me several years back , if you sponsor a car , then it is basically a write off in advertisement for sponsor,s main business , if you claim your racing operation as a separate entity , if you do not claim a profit with in so many years , then it becomes a hobby and you pay taxes on the money you spend on it , this happened to me with horses several years ago .....

[strong08]

Talking about taxes and such. When filling out a 1099 at the race tracks, I hate having to put my social security number on it especially when I visit several places a year. Is there any around this. Instead having my race team as a entity, I was wondering if a person could just incorporate their selves so they could have a FEIN #.