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hizgeorgiapeach -> RE: A business question (OK GOP you shine here) (6/26/2008 6:58:58 AM)
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Going LLC has both it's up and down sides, Farbangle. What the specific pros are, and cons for that matter, depend on the state you choose to use for setting up the legal basis of the company. While Limited Liability Corps and S-Corps also carry certain tax advantages and the protection of personal property if a lawsuit should ever arise - they can be tricky to navigate, and they are Not Always the best option to persue. You don't necessarily have to live in the same state that you're planning to Legally base an LLC out of - though on a personal level I feel that it's a good route, since you have more access to those who can offer assistance concerning local tax and business laws. Filing to form an LLC or S-Corp is also neither Cheap or Easy. The paperwork is often confusing, though it Can technically be completed and filed without the use of a lawyer in order to minimize costs. Lawyers' fees for filing said paperwork vary greatly from location to location, and even from one office/firm to the next, even though it's the various clerks in the office who do the actual research and filling out rather than the lawyers themselves. And if you choose to file in a state other than your state of residence - you'd need a lawyer familiar with the Other state's laws and regulations, which entails the expense of travel to locate one.
This is one of those small business areas that I've been spending a lot of time doing research on, while I weigh my various options and the relative advantages and disadvantages of remaining a sole proprietorship.
Housesub, I definately agree with Julie and Erin about writing a Business Plan. Sitting down to write out a business plan will accomplish several things - most of which were mentioned by Julie and Erin, but one which I consider equally important they didn't mention. It will force you, as an individual, to Honestly assess yourself, your abilities, and your goals - and decide whether it's something that you truely want. Some folks, when they realize how much effort is involved in having their own business, decide it's just not worth it to them. Either the time investment seems to much to them, or the financial returns aren't large enough from the start to continue being attractive.
Which is another thing you'll need to consider during this whole process - whether it's in the short term, while writing up your business plan, or the long term. How much do you Realistically expect to make from this business? Are you expecting it to be a suppliment to your "normal" income? If so, then profit margins are not going to be As great a concern, especially when you first get started and profits are frequently slim to non-existant. If you're expecting the business to be your sole source of income - plan for the fact (yes Fact) that it frequently takes anywhere from 2 to 3 Losing years of running in the red and reinvesting all of your profitability back into the company before you actually start Consistantly running in the black. Any business plan should take that into account, and include sufficient funding to see you through those first slim years of keeping your bills paid via some other means than sheer profit margin.
If/when you go to a bank to set up accounts in the name of the business, the bank is going to expect to see more than just your business name. They're going to expect to see any pertinant state licencing, sales tax permits, articles of incorporation (if you've gone the route of either S-Corp or regular Corp) or your LLC paperwork (if you go with an LLC). They'll expect to see an EIN (employer's identifcation number) assigned by the IRS for tax purposes if you're going with something other than Sole Proprietorship. (The information on obtaining an EIN can be found easily and readily at the IRS website - it's clear and concise and easy to understand, and the paperwork can be filed there online if you determine that you'll need one.)
I 100% agree with Erin that Liability Insurance is a must have. Even with craft type businesses that aren't food related (such as mine) it's extremely prudent. Fortunately, there are also plenty of companies out there who specialize in small business insurance (I'll look up some of the companies that I've looked at, and send you links to their websites via cmail) at a reasonable and affordable rate. For me, finding the insurance was easy, since mine is a group policy that was required for membership in a professional guild that I'm part of for those in the independant beauty industry. (The guild requires either proof of existing insurance, or taking the policy that's offered through the guild - the guild dues each year include the insurance premium on the policy for those who choose that route.)
While you're at it, you might want to consider professional and/or trade organizations such as unions or guilds for just such things. At the very least, such groups can often help provide you with a plethora of information sources concerning the Practicalities of your profession.
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