27 {{ upvoteCount | shortNum }}
27 {{ upvoteCount | shortNum }}

Jump right in or get "legal" first?

by lambkr01
23 replies
Hi all,

I'm working on starting my offline business focusing on SMS, SEO, social media, and web development/hosting. At this point I'm getting eager to start cold calling and drumming up some business, but I'm not sure if I should make my business "legal" before I really start at it.

By "legal" I mean creating a legal business structure (LLC or S-Corp), getting a tax id, city/state business license and all that other fun stuff that comes along with starting a business. To be honest I haven't looked too much into this end of things too much yet because I've been so focused on developing the actual services. I'm not sure if my city requires a business license or anything, but if it's something I should take care of before I start doing business then it's what I'll be working on next.

Does anyone have any suggestions or advice?

Thanks!
-Kyle
#jump #legal
  • Profile picture of the author MaxReferrals
    Get things set up right out of the gate, so you don;t run into any issue down the road.

    Good luck.
    Signature
    {{ DiscussionBoard.errors[5261864].message }}
    • Profile picture of the author lambkr01
      Originally Posted by MaxReferrals View Post

      Get things set up right out of the gate, so you don;t run into any issue down the road.

      Good luck.
      Thanks a lot!

      I kind of figured this would be the smart thing to do, but I thought I'd see what others thought. Most of the things it looks like I'll have to do will be easy and cheap, but unfortunately the costs and time associated with forming an LLC or S-Corp are going to throw a big wrench in my plans. Guess I better start saving!
      {{ DiscussionBoard.errors[5261945].message }}
  • Profile picture of the author A8ch
    If you are serious about your business then getting started the right way is the smart thing to do for several reasons:

    1. It says to the marketplace that you are a real business and not a hobby.
    2. You get to write off different expenses associated with the startup.
    3. Having a formal legal structure and all that goes with it can help you keep your focus.

    Hermas
    Signature
    http://HermasHaynes.com - Web Marketing - Simple & Direct
    http://www.OnlineListBuildingFormula.com - How to Build a Super Responsive List Fast!
    http://www.eBizInfoProducts.com - Prosper with Info Products
    {{ DiscussionBoard.errors[5262083].message }}
  • Profile picture of the author russkampmann
    If only you could predict how successful or not you will be. Anyhow, also consider that you probably will need an attorney and accountant as well. And maybe an insurance agent.
    {{ DiscussionBoard.errors[5262092].message }}
  • Profile picture of the author DaniMc
    One of the most important aspects leading to success is momentum...don't fret about "this or that" just go! Get things done faster. Fail faster. Get rejected more. File those forms now. Register that business now. Open that bank now. Make that sale now.

    Give yourself a quick kick in the ass and just DO it.
    Signature
    Be kind, for everyone you meet is fighting a hard battle.
    {{ DiscussionBoard.errors[5262117].message }}
    • Profile picture of the author David Miller
      Just do it...the details will all fall into place.
      Signature
      The big lesson in life, baby, is never be scared of anyone or anything.
      -- FRANK SINATRA, quoted in The Way You Wear Your Hat
      {{ DiscussionBoard.errors[5262131].message }}
  • Profile picture of the author lambkr01
    You are all awesome. You have found a way to make even this part of starting a business seem like an exciting adventure! I've already done SEO work for the physical therapy clinic my girlfriend works for and they've been telling other people about my services so if I get any calls I'll take the work, but not really start calling until I'm all set up legally.

    I was looking at using Legal Zoom to help me file for incorporation. It makes it all so much easier, but it's expensive for me. I have a full-time job, but student loans and rent are killing me so I don't have a lot of extra cash right now (which is a big motivation for me to really kick a** with this business!). On the other hand, my father is a CPA and has helped a couple of other people form LLCs so I can always have him help me.

    I took vacation time from work starting this Friday through Jan. 2, so this is definitely what I'll be working on. Thanks again!
    {{ DiscussionBoard.errors[5262213].message }}
    • Profile picture of the author DaniMc
      Originally Posted by lambkr01 View Post

      On the other hand, my father is a CPA and has helped a couple of other people form LLCs so I can always have him help me.
      Ask your dad if you can borrow the money. Tell him you will pay him back double. Guarantee it with your word.

      And if he agrees to give the money, offer another option...if he could just take care of it for you, you will pay him back the amount of money he was going to loan you. This gets you filed, no immediate out of pocket expense, and it didn't cost you more than Legal Zoom.
      Signature
      Be kind, for everyone you meet is fighting a hard battle.
      {{ DiscussionBoard.errors[5262240].message }}
      • Profile picture of the author lambkr01
        Originally Posted by Prevalent View Post

        Ask your dad if you can borrow the money. Tell him you will pay him back double. Guarantee it with your word.

        And if he agrees to give the money, offer another option...if he could just take care of it for you, you will pay him back the amount of money he was going to loan you. This gets you filed, no immediate out of pocket expense, and it didn't cost you more than Legal Zoom.
        Yeah I was considering this option. I just really hate borrowing money from family. I might just ask him to help me file it. This way the only thing I have to pay is the filing fee and not pay for the Legal Zoom service. This would be manageable.
        {{ DiscussionBoard.errors[5262293].message }}
        • Profile picture of the author Aussieguy
          How about not borrowing, but rather, getting all the services you require in exchange for your services? win, win eh? Even if it's not family. e.g. "Hi, I'm in start up mode and going through the set up process. I don't have a lot of start up capital and wondering if you'd be interested in talking about bartering my fantastic website and SEO services for your website (and would you like a free SMS appointment reminder service?) for 12 months while I get my feet on the ground etc? Plus I'd love to hear any advice you might have...."

          what about that?
          {{ DiscussionBoard.errors[5263477].message }}
  • Profile picture of the author lambkr01
    That's a good idea too, Aussieguy. Maybe there's a law firm that wants a new site or something and would be willing to trade services.

    I'm just extremely excited to get going with actually doing business. It will be nice to be completely legal about it though. Since my father is a CPA I'm very aware that the last people I want to anger is the IRS. And being legal with the city and state will certainly save a lot of headaches. I can just see myself going by a business name but asking clients to make their checks out to my name haha.
    {{ DiscussionBoard.errors[5267366].message }}
  • Profile picture of the author D Alishouse
    I'm sure you're excited to get going, but it truly is a good idea to make sure you have at least the basics of what you need regarding proper paperwork. If your father is a CPA I would think he would have great advice on the subject of the different tax issues regarding LLCs and S Corps. If he's not able to sit down with you and get you rolling (I believe you can file that kind of paperwork online in a very short time), you could also contact the Small Business Association (sba.gov) and meet up with them to help you get started.

    It's great you have clients already! The good news is once you start getting paid you can just hire an accountant to handle these things for you!
    {{ DiscussionBoard.errors[5267541].message }}
    • Profile picture of the author lambkr01
      Yeah I've been researching the process for forming an LLC and it doesn't look like it's too difficult. It can be done online fairly easily. I'm planning on forming an LLC, but applying for S-Corp tax status. I haven't asked my dad for help yet because I haven't been up to my parents' house since last week, but I'll probably need it with the tax stuff.

      I'm hoping after the first of the year I'll have some extra cash to pay for it (there's a $200 filing fee in New York). If not I'll start approaching businesses for barter propositions.

      Thanks for everyone's help and advice!
      {{ DiscussionBoard.errors[5267741].message }}
  • Profile picture of the author ChrisG
    Another option to generate cashflow is to contract yourself out to a reputable internet marketing company and generate sales for them. Negotiate a percentage of invoice, including residuals and an advanced draw against commissions once contracts are signed.

    This allows you to also leverage the clout of that company and focus on just getting sales instead of having to get sales and then deliver the services as well. Once you get some cashflow from that you can throw it into forming your own corp and get rolling with your own thing (plus you'll have a little sales experience under your belt).
    {{ DiscussionBoard.errors[5267987].message }}
  • Profile picture of the author Aaron Doud
    First get legal as a sole proprietor. This is cheap and easy. Also get a business checking account. To get started you do not need an LLC or Corp as they will afford you little protection if you are the only employee. Plus what you will be doing has little chance of getting you sued but talk to your insurance man. He may be able to get you a policy to protect you against that as well.

    After you get up and running well than talk to a lawyer about what form is best for your business based on your states rules. Also may want you cpa in a conference call so you can discuss legal and tax issues all at once.
    Signature
    Aaron Doud - Sales & Success
    {{ DiscussionBoard.errors[5268045].message }}
    • Profile picture of the author SoCalMarketing
      Originally Posted by Aaron Doud View Post

      First get legal as a sole proprietor. This is cheap and easy. Also get a business checking account. To get started you do not need an LLC or Corp as they will afford you little protection if you are the only employee. Plus what you will be doing has little chance of getting you sued but talk to your insurance man. He may be able to get you a policy to protect you against that as well.

      After you get up and running well than talk to a lawyer about what form is best for your business based on your states rules. Also may want you cpa in a conference call so you can discuss legal and tax issues all at once.
      VERY sensible advise... I have owned many a business over the years and I can tell you with absulute certainty that for the type of business the OP is engaging in, and at this stage of the business... sole proprietorship is the way to go. You can just file a DBA (fictitious business name) with your county/city and for less than $50 usually have a legitimate business entity you can present yourself with. If you want a separate tax ID for your biz, the feds will give you one in a short time.. for free.

      What I don't see any of the proponents of overly complicating life with legal entities here discussing is the ongoing state and federal fees associated with LLCs and 1120s. All in all there are literally thousands of dollars a year just to keep those entities alive and legal.. and the paperwork.. horrendous!

      There is absolutely NO reason to make things more complicated when you are starting out, from someone who's been there done that.. LLC, 1120s, and SP... KISS! my friend.. and make money instead of wasting your time with the legal &^ap at this stage..
      {{ DiscussionBoard.errors[5268319].message }}
      • Profile picture of the author lambkr01
        Originally Posted by IMnewbie63 View Post

        VERY sensible advise... I have owned many a business over the years and I can tell you with absulute certainty that for the type of business the OP is engaging in, and at this stage of the business... sole proprietorship is the way to go. You can just file a DBA (fictitious business name) with your county/city and for less than $50 usually have a legitimate business entity you can present yourself with. If you want a separate tax ID for your biz, the feds will give you one in a short time.. for free.

        There is absolutely NO reason to make things more complicated when you are starting out, from someone who's been there done that.. LLC, 1120s, and SP... KISS! my friend.. and make money instead of wasting your time with the legal &^ap at this stage..
        This helped a lot. A sole proprietorship is the cheapest and quickest way to go and then maybe down the road I can consider incorporating if necessary. This way I can just get rolling with things!

        I guess I'd have one other question then: When charging clients do you usually invoice them and take checks? If so, are you supposed to charge tax or do you pay the taxes later yourself? That's one thing that I was worried about. I know I could ask my dad about this stuff (and I will, to be sure), but I'm curious about what my fellow Warriors do. Thanks!
        {{ DiscussionBoard.errors[5268353].message }}
        • Profile picture of the author SoCalMarketing
          Originally Posted by lambkr01 View Post

          This helped a lot. A sole proprietorship is the cheapest and quickest way to go and then maybe down the road I can consider incorporating if necessary. This way I can just get rolling with things!

          I guess I'd have one other question then: When charging clients do you usually invoice them and take checks? If so, are you supposed to charge tax or do you pay the taxes later yourself? That's one thing that I was worried about. I know I could ask my dad about this stuff (and I will, to be sure), but I'm curious about what my fellow Warriors do. Thanks!
          In my state we do not tax services.. only products. I only sell services, therefore, no tax. Most anyone who sells taxable items has to do a passthrough, you have quarterly reporting and you need to submit your collected tax. At least in my state.. may be different where you are..
          {{ DiscussionBoard.errors[5268478].message }}
  • Profile picture of the author PhilaPM
    Just get started. So many people waste time trying to figure out how to setup their business that they never actually get started on the business. You can operate legally now as a sole proprietor. You don't need a business entity right now. See how you lime this business and if it's really something you will continue to build. If after a year you're ready to take it to the next level then look into incorporating. Dont bother with an LLC as they dont offer any benefits over being a sole praprietor.
    Signature
    Metal Detectors
    {{ DiscussionBoard.errors[5268168].message }}
  • Profile picture of the author sownsow
    Originally Posted by lambkr01 View Post

    Hi all,

    I'm working on starting my offline business focusing on SMS, SEO, social media, and web development/hosting. At this point I'm getting eager to start cold calling and drumming up some business, but I'm not sure if I should make my business "legal" before I really start at it.

    By "legal" I mean creating a legal business structure (LLC or S-Corp), getting a tax id, city/state business license and all that other fun stuff that comes along with starting a business. To be honest I haven't looked too much into this end of things too much yet because I've been so focused on developing the actual services. I'm not sure if my city requires a business license or anything, but if it's something I should take care of before I start doing business then it's what I'll be working on next.

    Does anyone have any suggestions or advice?

    Thanks!
    -Kyle
    I have a friend who has been doing offline for about a year now. At first when he started he didn't even have a website. He just went out there and got it done.

    I am more the type of person who likes to have everything set up first before I get started, but I think that is just another form of procrastination. In order for you to get an incorporation or LLC, you should have to spend between 50-150.

    There should be a place in your local city for you to get that taken care of. I have done it before and it only takes a few minutes after you sign your application. You can get a tax id instantly online. It will at first tell you that it is a temporary tax id but the number will always remain the same. A tax id is not really even necessary if you choose to use your SSN.

    My personal advice would be to just get to work, those particular features that you mentioned are all very mundane tasks that can be taken care of whiile you are working.
    Signature
    {{ DiscussionBoard.errors[5268264].message }}
  • Profile picture of the author kymobilemedia
    Personally, I formed an llc myself. I plan on just doing pass through with taxes and claiming all income on my personal tax return.

    It was really simple, and did not cost much at all to do.
    {{ DiscussionBoard.errors[5268364].message }}
    • Profile picture of the author SoCalMarketing
      Originally Posted by kymobilemedia View Post

      Personally, I formed an llc myself. I plan on just doing pass through with taxes and claiming all income on my personal tax return.

      It was really simple, and did not cost much at all to do.
      You may be fortunate in your state, in CA we have a $600 a year fee just to maintain the LLC in compliance.. then there is the CPA to file your federal and state returns, the quarterly FUTA reports and sundry other state and county reports.
      {{ DiscussionBoard.errors[5268500].message }}
  • Profile picture of the author kymobilemedia
    Wow, didn't realize it was that high in some states.

    In ky, it is $50 per year for the state llc, then just got a EIN through the IRS.

    I will claim all income and expenses on my personal tax returns, but will have mt CPA do the returns as usual.

    Of course there is the 13% self employment tax.

    I will let everyone know how it works for me at tax time, since this is my first tax year with the llc. I have just been doing it before under my name and ssn.
    {{ DiscussionBoard.errors[5268544].message }}

Trending Topics