Business startup

[MADMAX22]

Well I finally applied for my state business license (doing a LLC), mainly to get my tax id number and then to eventually setup a website to maybe make a little money on the side. Ofcourse now Im all worried about the taxes and stuff lol, gotta do some more research as I didnt research enough recently. I helped with my parents shop for 15 years but didnt do most of the paperwork.

? for you guys, did you incorporate your old inventory into your new business when you started it or just start fresh and have youe old inventory for a buffer per say.

Whats the best record keeping program that you guys have found that works good for small personal business?

Any pointers or big no no's for the type of thing that I am going to be doing? I know there are about 1.2million different ones but anyways....

Oh and one last thing, so if you still sell some stuff on ebay do you use your business name and such or would that be against ebay polisy if so would all the ebay sales be totally seperate from the business adventure.

[MADMAX22]

Another thing, you guys that have websites, who did you go thru to get your domain name and setup your website?-

[Denise]

Max, if you think this place runs well, then contact Johanna for your website. That is what she does when she is not taking care of all us computer neophytes in leatherland.

[Daggrim]

Mmax,

I have the same setup with my LLC. Just one thing...I got a state tax # from WI, and sold there at some faires. Well, everafter, they send me , quarterly, an estimated mount of sales tax I owe! They fabricate this out of thin air.

I now dutifully send them a sales tax report for zero dollars every quarter, and they're happy. They will not change their method, so i just adapted. So, if you get a letter from some state declaring that they want their gigathousands of dollars, don't panic. All it may take is a current sales tax form.

Daggrim

[Go2Tex]

Another thing, you guys that have websites, who did you go thru to get your domain name and setup your website?-

Aahh, misery loves company. heheh. The tax thing is the absolute most frustrating, mind boggling aspect of running my business. My record keeping is very simple. 2 files. Income and outgo. You know which one is the biggest. At the end of the year, I go nuts trying to sort it all into the appropriate "accounts" or catagories for which I can never understand the reasoning. It all comes out of the same pot at some point anyhow, so why all the different catagories? Does it make a tinkers damn whether it was office supplies or friggin postage? NOOOOO! So why all the hoopla about it?

Cost of Goods Sold. Oh do I love this one! Looks real simple on the face of it, but then there's that other line for "other expenses" that you just add to COGS amount anyway, so...????

The more I researched, the more confusing it got. Turns out, nobody does it the same way and the CPA says to me, the IRS doesn't really care where you put it. OH great! Well, that was worth the $350 bucks I just paid ya.

The inventory..... Do I count every tack, screw, nail and measure how much glue and thread I have left?

CPA says: "just estimate." Well, what about scrap leather? I have tons of it. Nope. I estimate that if I can't roll it up, it's in the scrap box and for tax purposes, it doesn't exist. I don't count belly leather as usable, even though I do use it for some things. I don't know how else to do it. I did discover while doing this year's inventory that the cost of all Weaver's hardware has gone up enormously in the last year. I also discovered that I have waaaay over-bought. Buying in bulk to save a few cents can come back to bite you in costs of your time to carry that inventory that you must count every year. One nice thing about it though, it's a hedge against inflation. I have dees and such that have gone up 60% since I bought them. So, as long as we have run-away inflation, buying in bulk makes sense.

All that stuff I had when I started the business.... I just added in the big things, tools, etc. and took the one time write off. All the other stuff, the leather and supplies, it was a mess. Some I did, and some I didn't. I'm sure I didn't do it exactly right, but it's impossible to figure out now, and after a few years the numbers seem to average out the error. It's all about the COGS and since everyone does it differently anyhow, who knows what's correct? The ratio is all the IRS looks at anyhow. They compare your ratios to other businesses like yours and if you are way out of the norm, you might get audited.

As for Ebay sales, I'm not sure I get the question or why it would be an issue what name you sell under on Ebay. Separate or not, the IRS wants it's cut.

I include the Ebay sales related to my business in my business taxes. Also the fees. The CPA put those under Part V, Other Expenses, along with Licenses and Permits, show entries, delivery and freight, accounting and tools.

Again, I understand why a business needs that information for it's own use, but what difference does it make to the IRS which account you use for a particular expense?

Here is one to be aware of, if you work out of your home and take the business use of home deduction. If you someday sell your home, you will have to pay capital gains on the proceeds as the sale of business property!

[Daggrim]

Yup...Cost of Goods Sold. Now that's the wackiest way of figuring out what I'd call the Cost of Materials. I've studied it until I'm crosseyed, and I get a grasp on it, only to have it vaporize during the night. I beg my wife to explain it to me. Again. Now she just rolls her eyes, and tells me it doesn't matter. So we spend a few bucks to have the tax person make her magic.

Guess i'm just a primitive, because , as Arthur C. Clarke once said, "A technology advanced far enough is indistinguishable from magic". Life'd be no fun if you "got" it. I said that.

Dag

[MADMAX22]

Thanks a bunch for the info and tips guys.

Ahhh what did I get into lol ..... Na just kidding, I have some idea its just been a while. Im sure Ill be fully grey haired buy the end of the year.

So much for that free time thing.

[K-Man]

There's been some previous discussions on the aspects of becoming a business, and how to go about that, or at least things to consider. You might try a search here on the forum.

The LLC, IMO, is a smart move. Depending on what you're doing, a simple sole-proprietor set up will work. But for businesses that are making a product that has some amount of liability tied to it, an LLC is the wiser choice. When I started a basic leathercraft business, I did the sole proprietor; when I started making holsters, I changed it to an LLC. Depending on the set up of that LLC in the state you're in, it most likely will look very much like a sole proprietor business. There's also tax advantages to being an LLC. And at the point you reach a certain income level, you can change your tax status to an S-Corp, which will bring you greater tax advantage. More paperwork/accounting, but it puts you in a better position. Yes, I have an accountant who does the work for us. I would not even want to be the one putting the numbers together. I provide her the information, and she puts it in the proper place. She offers suggestions on occasion, such as, "Kevin, you need to pay attention to this aspect. You're not putting enough money here (or there)."

With respect to the website, it's critical in today's business environment. You'll be dead in the water without one. Keep it current, keep it fresh, and keep it as simple to navigate as possible. Don't make a potential customer go through 14 windows/clicks of the mouse to find out what color options are available. Our site is hosted by Go-Daddy. Have been with them for about 4 years now, and have never had a problem. I pay about $250/year for the hosting and quite a few other accessories. I have another person do the updates to our site. I determine the content, text, etc., and provide that information to him. He makes the changes and uploads the new data.

Hope this information helps.

Edited January 21, 2009 by K-Man

[MADMAX22]

Thanks Kevin, all info is helpful and if anything reminds me to take note of something when I am searching around to find more info.

[tashabear]

Ifyou're looking for webhosting options, I can highly recommend Startlogic. Their rates are reasonable, their tech support is outstanding, and they have marketing people available to help you build the site. You can even register your domain through them. I've had a couple of domains with them and been nothing but happy.

[Shorts]

Anyone used 1and1.com? I've seen their 2 page spread in magazines and looked at their site. A friend of mine who knows computer stuff better than I said their plans looks reasonable enough if the service is up to par.

[GregGaub]

I figured I'd put in my 2 cents for web hosting. Check out www.bluehost.com. The rates are REALLY good, the features are astounding, and they have great support. The best part is, they keep adding features and increasing limits. The storage space is now totally unlimited! The bandwidth is crazy high as well. I've got an affiliate thing set up with them here if you like what you see and want to thank me for suggesting them, but I'm ok if you don't use that link. I honestly can't recommend them more. Seriously.. for $6.95/mo (2 years in advance for a total of $166.80), you get:

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and that's just the teaser list. the complete list is multiple page long.

Anyway... I've been real happy with them, so I suggest them to anyone looking for a web host. Most other hosts I see charge twice as much for half as much service.

[Bree]

There's been some previous discussions on the aspects of becoming a business, and how to go about that, or at least things to consider. You might try a search here on the forum.

The LLC, IMO, is a smart move. Depending on what you're doing, a simple sole-proprietor set up will work. But for businesses that are making a product that has some amount of liability tied to it, an LLC is the wiser choice. When I started a basic leathercraft business, I did the sole proprietor; when I started making holsters, I changed it to an LLC. Depending on the set up of that LLC in the state you're in, it most likely will look very much like a sole proprietor business. There's also tax advantages to being an LLC. And at the point you reach a certain income level, you can change your tax status to an S-Corp, which will bring you greater tax advantage. More paperwork/accounting, but it puts you in a better position. Yes, I have an accountant who does the work for us. I would not even want to be the one putting the numbers together. I provide her the information, and she puts it in the proper place. She offers suggestions on occasion, such as, "Kevin, you need to pay attention to this aspect. You're not putting enough money here (or there)."

With respect to the website, it's critical in today's business environment. You'll be dead in the water without one. Keep it current, keep it fresh, and keep it as simple to navigate as possible. Don't make a potential customer go through 14 windows/clicks of the mouse to find out what color options are available. Our site is hosted by Go-Daddy. Have been with them for about 4 years now, and have never had a problem. I pay about $250/year for the hosting and quite a few other accessories. I have another person do the updates to our site. I determine the content, text, etc., and provide that information to him. He makes the changes and uploads the new data.

Hope this information helps.

This is excellent advice. Kevin is 100% correct when he draws the distinction between the Sole Proprietorship (SP) and the LLC or other forms of incorporation. The SP is easy to administer. It is the simplest and most direct form of operating a business. But all your personal assets are on the line. A judgement against your business is a judgement against you personally.

The instant that you start creating a product or performing a service where there is some significant chance of a liability judgement against you, start looking to change the form of your business. LLC (Limited Liability Company) is a great way to go for small businesspeople. It allows you to in effect select your method of taxation and form of organization. In NY you can elect to be treated as an SP, partnership or corporation. It is very flexible. The key benefit is protection of personal assets from liabilities incurred by the business.

Each state is different so you need to check your own state. Some states have special taxes or fees which basically charge you for the right to operate without liability. Still that protection is very valuable.

Websites are another story. Kevin is also correct in his advice... current, fresh, simple. I'll just add one thing. Avoid allowing a developer to turn your business website into his/her programming art showcase. This is all too common and hard for the business owner to stop in advance since you don't know it's happening until it is complete. After all most of us are experts in leatherworking and not web programming.

The way to avoid this problem is to be crystal clear in communicating exactly what you want out of your website. Communicate that this is a business website whose sole function is to achieve your business purposes. Lay out precisely what those purposes are. Make it clear that you don't care about the latest state of the art programming (unless you really do). You want a reliable, stable, and solid site that works for your customers.

Let the developer know who your customers are. If they are technologically well-informed and advanced then you can be more advanced. If they are still using IE4 or other old browsers, then your site will have to be quite rudimentary as far as the latest and greatest goes.

The key thing is to remember that you are in control. Exercise that control. Know what you want and don't settle for less. Business is business and not an exercise in Photoshop art or demonstrating the latest programming technique.