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Linux Business

How Would You Start A Business? 16

Cosine Jeremiah asks: "I'm interested in starting my own business, but I'm not sure where to start concerning legal and tax issues. Sure, I suppose I could go ask a lawyer, but I want to know what to expect before I have to put down any money. And I'm not sure I can trust just any lawyer I accidently end up with to give me the whole truth, such as what all of my options are and all of the pros and cons of each. Should I create a corporation? What kind of corporations are good options? Or should I make the business an at-risk venture? And which special tax forms do I need for each? Right now I don't really know the difference. Surely there are many people out there that have gone through this and can share their experiences, and just as surely there are many more people than me wondering about this stuff?"
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How Would You Start A Business?

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  • by vbrtrmn ( 62760 )
    You may want to consider an 'S' Corp or an LLC, there's a decent article [] at []

    you are not what you own
  • Frankly, it doesn't sound as if you're anywhere near ready to start your own (successful) business yet. The kind of information you're asking is so very basic that before you should do anything else you should go down to your neighborhood bookstore (B&N, Borders, whatever) and buy some books on the subject. That will start you in the right direction. And if you can't afford to do this, you can't afford your own business.

    But, to summarize what you'll read, the single most important thing is planning ahead of time. I'm not talking about where your office will be or which accountant/lawyer to use, I'm talking about a full fledged business plan, including what service/product(s) you plan to offer/sell, how you plan on marketing it, how much you plan on charging, whether the market will bear the cost/competition, etc.

    Remember- most new businesses fail not from lack of product, or bad products/services, but from lack of adequate planning, preparation, and research.

    You will also need a good bit of cash reserves (setting aside any cash needed for the business). That is, assuming you're planning on going at it full time. A good rule of thumb would be to have enough cash for 6 months to a year just for yourself. My accountant recommended more, luckily my business was profitable in 3 months, you might not be so lucky, then again you may do better. Don't forget to figure in the cost of insurance and the various licenses/bonds you'll need.

    After you've got your plan- shoot, the right accountant can help with the business plan (for a fee)- find yourself a good accountant. Explain to him what you want to do, and he'll help you out. These guys are professionals, and you can talk to them with complete candor and frankness since what you discuss will be kept between you. He'll be able to point you to the right place (SBA, Lawyers, banks, etc.) as well as deal with all the necessary tax forms, etc.

    Again, and I can't stress this enough, PLAN PLAN PLAN. The old adage of measuring twice and cutting once really applies here.

  • I went and paid an Accountant/Business Advisor to help me out with this. I paid her $150 for a one hour conversation where she basically pitched her $500 incorporation package.

    I decided to go it alone, and I'm pretty much happy with it. There can be _alot_ of paperwork though. I'll share with you my biggest (only?) pitfall.

    Getting a bank account. If you live in a city/county that requires occupational licensing, START NOW. I have like $4000 in checks made out to my business that I can't cash. To get the bank account, I need a County License, to get a County License, I need a City License, to get a city License I need (1) A floorplan of my aparment showing where I plan to work. (2) A notorized letter from my landlord saying its ok for me to operate a business there.

    So its doable, this paperwork is just hard to keep track of if you are already working like 40-50 hours a week.
  • Most cities and towns have an "economic development department". These guys are paid to provide information and assist new businesses.

    Trot down to City Hall and ask for "economic development" and you'll probably get more information than you need.

    As to incorporation and so on, if you need advice there you should talk to an accountant that you trust.

    And don't forget to talk to an insurance agent about liability and such. Easy to forget and you might regret it if you don't.
  • Incorporation is useful in terms of shielding shareholders from damages (in particular, if you need a loan to pursue soemthing it is useful to be incorporated so that the bank can't come after you if the business fails) ---> If there is any significant degree of risk, and if you have a very small business, most banks will require you to sign a "personal guarantee" before they will lend your corporation any money. This means that you give up the "limited liability" aspect of the incorporation insofar as the bank loan is concerned. Therefore, if it's a very small business and if the only reason for incorporation is to limit your liability for a bank loan you might be wasting your time and money by incorporating without gaining anything.
  • depending on how large a venture you are planning, you should ask your accountant about forming a subchapter "s" corporation. it can save you a substantial amount of money in taxes. you will have to do more paperwork than a sole propriatorship would, but there is also some liability benefits. you can also change your corp status to a "c" corp if you grow into a large business. subchapter "s" corps passthrough all profits to their shareholders at the end of the year and you only pay taxes at the personal rate of the shareholders. also none of the profits are subject to social security or medicare taxes. (pay yourself a low salary) hope this info is helpful
  • I would strongly suggest that you incorporate if only to seperate yourself from your business. Thus, if your business is sued, or declares bankruptcy, your business may die, but your personal finances would remain untouchable. It is important that you follow certain rules to truly keep the identities seperate, so I would strongly advise you to consult with an accountant.

    The easiest way to incorporate is to use the Company Corporation located in Delaware. Delaware has laws which make it very easy to incorporate (the state makes a great deal of money from incorporations.) Where it would cost several thousand dollars to have an attorney incorporate for you, it will only be a matter of a couple hundred if you use the Company Corporation. Check them out at []

  • There are a number of books on starting a company. Most will point out things that you would not have thought of on your own. Then write out a plan, try to figure out where it could go wrong. Then talk to an accountant or laywer.

    You might want to check out SCORE, its a group of retired executives who mentor people starting up new companies. My grandfather worked for them for years. Here is a link to one of their branches SCORE Delaware [] (It was the first one that poped up when I did a search).
  • You might also want to look at the web site of the Small Business Administration []. (I'm assuming your in the USA, if not your country may have something similar)

    In a 30 second look at their page I found a lot of good stuff. Including how to write a Business plan and counseling on various issues etc. Looks like a great resource.

    Oh and good luck with your venture!
  • I think not.

    You said it, not me...

    What the fuck do you think this is, a business advice site?

    No, it'a a news and discussion site, which tends to focus on issues that are important to intelligent, technically-oriented people. Hence, "News for nerds, stuff that matters." When young nerds grow up, being able to pay the bills becomes important. You'll find this out in a few years.


    Tho' your promise count for nothing

  • I think it rather depends upon what area you're going to be working in. Given that you chose to ask the question here, I'd guess your venture would be something computer-oriented.

    In that case, I wouldn't bother forming a corporation at all. You can always incorporate later, but for now there's probably lots of paperwork you don't want to get into. Incorporation is useful in terms of shielding shareholders from damages (in particular, if you need a loan to pursue soemthing it is useful to be incorporated so that the bank can't come after you if the business fails) but in computing where the "bar to entry" is so low there really isn't much point incorporating until you start dealing with significant money -- at which point you should keep a lawyer on retainer anyway.
  • ...(No, make that a lousy to great resource, depending on the quality of the person in charge of the program) is the Internal Revenue Service. Call the toll-free help number or your local office and get hold of the Taxpayer Education office or whoever is responsible for the Small Business Tax Workshops in your area. Find out when and where and go.

    At their best, these workshops can be a gold mine and bring in guest speakers to cover topics far beyond just taxes. At their worst, though, they can be just a short meeting where some publications get handed out and that's about it. Either way, it won't be a waste of your time.

    Of course, the easiest way to find one is to go here, [] click on your state, and dig a link or two deeper to get the schedule for workshops in your area. Even if there's not a current schedule, there will be a contact name and phone number you can call.

    A good page of general-purpose links for anyone starting a small business is here []

    A good place to start finding out about taxes, complete with a freebie from the Small Business Administration, is here. []

  • Yes you want a lawyer. As others have said an accountant is more important to you. Find a good accountant, and they can help you find a lawyer. So how do you find a good accountant? Go to your neighborhood businesses and ask them who they use. Don't ask one or two. Talk to many of the businesses you deal with every week. Not only will you get a few strong recommendations to start with, you will also hear from these businesses some answers to your other questions, and quite a number of new questions to ask yourself. This is a good thing. Starting a dialog with local businesses is also the best, first marketting step. They will probably be your first customers after all.

    Yes you want to incorporate. People sue at the drop of a hat. While your insurance will handle most legal cases, you can't take a chance of losing your personal possessions. Did you you notice insurance in the previous sentence? Have you explored that whole barrel of monkeys yet? You will get sued; over stupid things no rational human would consider. It really sucks not being able to eat your Thanksgiving dinner because you're so nervous about losing everything to some ass with a lawyer on retainer.(The jury sent him packing in a humorous and embarrassing manner. I had a good Christmas.)

    Based on the tone of your question I assume your thinking of starting a relatively small business. A sub-s corp is probably what you need(in America). Your accountant will help with this.

    Most importantly: the basic nature of the questions you're asking means you are not ready to start a business. Do your homework. Jumping into ownership is big magic, so don't be bad at it. You'll find that ownership saddles you with a hundred little decisions a day. A friend who recently started a lan management business just told me he understands what I meant when I said "The business of my business keeps me from running my business."

    Good luck. Stick with it, its a wild ride.

  • You're much more likely to want/need an accountant than a lawyer, but that comes later (i.e., after you have some income). You will need a lawyer if:

    • Your enterprise is likely to lead to physical or financial risk to yourself, your investors, your clients, or others.
    • You will be soliciting large amounts of investment capital
    • You will be soliciting investment capital from strangers
    • You will be engaging in non-pro-forma partnerships with larger organizations (that is, negotiating terms specific to your relationship)

    Otherwise you can definitely do the paperwork on your own. Just pick up a book or two from Nolo [] and you're on your way.

  • by Matts ( 1628 ) on Wednesday March 14, 2001 @11:57PM (#362631) Homepage
    Go see an accountant instead. They know the ins and outs probably better than a lawyer will anyway, and will most likely be able to give you a free consultation before you sign them up.

    But make no mistake about it - starting a business costs money. There are various ways to get that money (don't even think of VC's right now), such as government initiatives. You local government may also have a small business bureau of some sort - go and speak to them - that's why they are there.
  • by Christopher Thomas ( 11717 ) on Thursday March 15, 2001 @08:43AM (#362632)
    Check the government section of the phone book for small business support services. There will usually be a department or institution that will give you an information package on the legal and administrative hoops involved.

Today is a good day for information-gathering. Read someone else's mail file.