I am getting a lot of feedback on this subject. So I'm going to elaborate on this subject.
Treating Your Racing As A Business
A racing team is a business. Just like any conventional business, it should provide a service for customers and make money. Sure there are a few differences from a conventional business, but the overall principal is the same. With that said, racers need to treat their racing efforts as a verifiable business.
If you haven't already, go get an actual business entity filed for your racing team. It doesn't cost that much and will pay much larger dividends in the end.
I have a Limited Liability Company (LLC). This is generally the best way to go. An LLC is a hybrid corp. that provides the protection of a true Corporation (INC), but also involves a lot less paperwork than an INC. The LLC also involves the ease of adding owners/partners to your business, with a lot less paperwork than a true Partnership (LLP).
My LLC costs me about $400 to get filed and setup through my attorney. You can also check out www.legalzoom.com for more information. They are much cheaper to get setup too.
The advantage of setting up your racing efforts as an actual business entity are huge.
1. It makes your racing efforts look like a legitimate profitable business to sponsors.
2. The more professional and "Business Like" your proposal looks, the better chance your proposal will be looked at first.
3. It makes your racing efforts look much bigger, and they will know your serious.
4. But, the main problem that individual racers run into. Is that most companies will not want to sponsor an indiviual racer, personally.
The problem lies in that when XYZ Corp gets audited by the IRS at the end of the year, they will see that $15,000 went to Joe Schmoe.
This immediately rasies Red Flags. And the IRS will want to know exactly who Joe Schmoe is, and what service he provided.
If you have your racing efforts setup as a legal business it will look much better to your sponsor prospects, and up your chance of closing the deal.
It also looks much better come tax time when, XYZ Corp gets audited again by the IRS. This time it says that $15,000 from marketing went to Acme Marketing. This will not raise the Red Flags.
Also, sponsors usually don't want to write a company check out to a personal individual checking account.
The benefits of having your racing efforts setup and operated as a legal business are numerous when dealing with sponsors.
Put in major thought when considering your business's name. This says many things about your business, but can also work against you.
I do not encourage the use of the racer's name in the title for multiple reasons. Also try not to include any sort of "Racing" or "Motorsports" in the title.
Remember, you will have to say the name of your company when calling potential sponsors. By having these in the title a lot of companies will assume it's for racing, and cut you off right there and say their not interested.
Instead try using a completely neutral title such as, Acme Marketing, and I believe you will have much more success.
Next, go out and get a business checking account at your local bank. This will make your business look even more professional, and only costs a few bucks.
Other things that will help your business would be to create a company logo, website, letterhead, envelopes, etc. If you have a website be sure to setup a seperate business email address that incorporates your website address into it. Also, your going to need a seperate business phone line or cell phone.
For everthing to get setup as a real legal business, it will cost about $1000 to $1,500.
By now you may be thinking, "Holy crap! This is a lot of money that I could be spending on my race car." But remember, business are an investment. There isn't a lot of start up business's out there that the owner didn't invest thousands into, long before making a profit!
If you are serious about creating a career in motorsports racing, it is essential that you look at it and operate it as an actual business.
If you apply these principals to your racing efforts, you will surpass 75% of your fellow racers (competitors), in the ability to raise the necessary sponsorship dollars.