I think I have an original idea. I have purchased all of the necessary materials to sell my products. I have sold them to friends and family to rave reviews and repeat business over the last couple of months. I am in the process of filing a DBA with the county I live in. I have had a logo designed. I have a simple website. I have brochures. I have considered filing an LLC but have not done so as of yet. I intend to open a bank account in the business name this weekend. Once I have that account, I am considering creating an account with merchantwarehouse.com so that I can process credit card payments through a web portal (I currently take Paypal). I do not have a store front, nor do I think I will need one.
I have not as of yet hired a lawyer or an accountant. I have been keeping all of my receipts for said materials. I have been keeping a log of all the sales I have made.
What advice can you give me about how to best position myself for success, those of you who have been there, done that?
You’re being very vague. I don’t think you need an accountant, or a lawyer if you’re doing “sole proprietorship”. If you want to set up a company to limit your liability (are you selling home-made step ladders?), then go for the LLC thing, but you might not need to.
You might need some sort of sole-proprietor license if you are opening a business acct at a bank, but maybe not. I’m not sure.
I’d highly recommend quickbooks. If you want to be serious, and grow year to year, you need to track your accounts. . .your good times to sell, your good places to sell, your best products, etc.
I was being vague because there are rules here about advertising and trying to sell things. I don’t want to break those rules. I am very enthusiastic about my products, so it could come across as a sales pitch if I discussed them at all, so I figured being vague was best.
My products could cause people to have allergic reactions, but otherwise, the liability issues should be low.
The reccommendation about quickbooks is the sort of thing I am looking for. Right now, I am just putting everything in Excel, which will get cumbersome quickly, I presume.
I have already talked to the bank, and they say everything I have thus far is enough to open an account.
Thanks for the input! Anyone else have more suggestions?
I second getting Quickbooks and an accountant. Your accountant will tell you how to set up Quickbooks correctly for your company. I do 90% of all the accounting in my small company, but the other 10% is done by the accountant and that’s the 10% that keeps us all legal.
We have used a lawyer twice in our 8 years - once to set up our LLC, and once to back us with a trademark issue (got a letter from someone else’s lawyer). We do not need a lawyer on retainer but knowing where to find one at the drop of a hat is key.
Also, try to make a relationship with a manager at your bank. I know that some of the other larger business owners I know have very important relationships with their bankers because they run a lot of money through there. But I have formed a relationship with one of the managers at my local branch at the national bank I use, and it has been very helpful. I can shoot her an email and have her take care of stuff for me lickety-split or just answer questions.
Great stuff! I am considering going LLC, how has that worked for you? Did you start the company that way, or wait until you had enough business and then change over? I guess it depends greatly on what state you define and operate in, too. I have done quite a bit of research on them, but there isn’t any advice like that in the stuff I have been reading.
With my current job, I also part-own two businesses. If you have any partners, you definitely want some protection from your home assets. The cost of hiring a lawyer to form your corporation is relatively small compared to your sales, unless what you’re doing is mostly a side thing. First and foremost, though, you will definitely need an accountant, as others have pointed out already. And, to follow-up the bank advice, talk to your bank and see what credit card processing rates you can get from them (unless your credit sucks). In both my businesses, they were far cheaper than going through a web portal. The web portal isn’t going to break it down the costs for you. The surcharge and rate computations are hard to figure out on a per-transaction basis without an in-depth analysis. We had one credit card processor wanting to charge us $0.25 per transaction. For my one company, that pushed up our rates from like 1.9% to 2.6% because of the volume. If you’re completely on-line, you should also look into finding a web developer to set up your IT infrastructure and do a cost analysis versus the monthly fee of having someone host your web site.
When my business was tiny, I did all of my own accounting in Excel too, and filed taxes myself, and it was OK. Now that it’s bigger and I have both Quickbooks and an accountant, it’s interesting to see the deductions I missed. She’s worth every penny - find one that comes recommended by people you know.
Business license procedures may vary by state. I had to run mine by the local planning department and get my landlord to sign off on it, since I was technically running it from my house. Really, only my accounting was done there, since I’m mobile, but that’s how they wanted it. I don’t remember the order of things, but after that, I had to get a business license and publish a DBA in the newspaper, which let me open a business account and cash checks written to the business.
I am a sole proprietership. I considered going LLC, but at this level, I don’t feel the need. I have a boatload of professional liability insurance, and I don’t own anything much to lose in a lawsuit anyway. If I owned my own home or a shop, I might reconsider, but my accountant says it’s not worth the money to incorporate at this time. And the financial management gets much more complicated. You might not need to do that either; check with your accountant.
Did I mention an accountant? And how much money I probably lost by not having one?
We started in a really weird way, and didn’t need any capital (we’re just two people programming Web sites) so having money in the bank wasn’t really a concern for us. My partner had a checking account that was also his DBA account so money went there and he wrote me checks from time to time as a “paycheck” (probably illegal, yes). We waited a hell of a long time for the LLC to come through and I think it was because our lawyer was a friend of my partner and he just didn’t find it that important to push it through.
Once we got the LLC we got an EIN and we set up a bank account, got Quickbooks, I met with the accountant (who was already my partner’s accountant) and we were good to go.
I like having an LLC because there is a very clear divide as to what is the company’s money and business, and what is my money and business. I do realize that me and my partner are still personally responsible for any money problems that the LLC runs in to, but it’s just nice to get a paycheck and have my deductions taken out and get a W-2 at the end of the year. Even if getting a paycheck means I open Quickbooks and print out a check and sign it myself, it’s all just easier to keep track of in my mind. It’s also easier with two people, instead of a DBA or two DBAs, of course.
Your Chamber Of Commerce may have (like San Jose has) a great packet for you, with all the nessesary forms, etc.
Next- you are not “your own boss”. Every customer with money in their pocket is your boss and if you don’t treat them like it, you’ll end up just as out of work, but with no Un-Employment benefits.
Get liability insurance.
Do not pass go, do not collect $200, until you do. One judgment will put your ass in the poor house otherwise.
Never forget, your customers are idiots, and juries are also idiots, and therefore on their side.
I’m serious, cover your ass.
That may sound facetious but I’m serious. What often happens in new businesses is that you have a few hours or a day or two with little or nothing to do (i.e. no clients or sales happening). You might also have things go wrong that make you despondent. (i.e. sales fall through or negative people around you). On those days you decide to take some time off (clear your mind?) or you sit around fidgeting with stuff (or reading the Dope?) and you don’t get anything done. This can quickly become a habit (remember procrastinating in school?).
This is the time to do something positive for the business. Make a list of things that need to get done, even small, relatively inconsequential things. Then DO THEM. Just doing something on these days helps with the negativity that sometimes comes with starting a new business (will it work?, o my god, did I do the right thing?)
This is undoubtedly the best advice I can give. You’ll get a lot of very useful advice from people about starting a business but the one thing you seldom get told is that a good idea, and even enthusiasm, is not always enough. You need to cultivate a habit of doing what needs to be done.
Thanks to everyone for all of the good advice. I actually filed for an LLC with my state last night on-line at 10pm. I had the approved paperwork in my email this morning, so I have an official LLC. I have a meeting with an accountant and the bank on Friday. I have a phone meeting today with a professional web designer to make it more ecommerce friendly and search engine optimized. Today I have to arrange for liability insurance. I have inquired to my local radio station about advertising rates, as I am planning on making a push towards the end of April for Mother’s Day gifts. (my products make excellent gifts)
Note: I still have my “day job”, so I am not out of work, and make a very good living doing what I currently do. I am doing this in my spare time because it is an idea I believe in. I think I am doing something never offered before that fills a need for a reasonable price. I have always been a very ambitious, workaholic sort of person and I always make lists for everything. I paid my own way through college working 30 hours a week plus finishing a double major in Engineering in 4 years with no summers. The hard part will be growing the business enough to make quitting my “Real job” worthwhile, because I am paid well now and have all my benefits through my employer.
Thanks again to everyone! Feel free to chime in if you have more to say!
Are people using “accountant” and “tax preparer” interchangeably.
I can’t believe so many people think you need an accountant for a business that has ONE (am I right?) employee.
I certainly don’t think you need an accountant to help you set up Quickbooks correctly.
You can’t be frivolous with your money in a small business. There are things you need to learn how to do on your own. There are people out there who want to tap into your hard work (like people who will sell you the “service” of getting your ad to come up in a google search). You need your cash for re-investment, for advertising, etc. A few hundred dollars on an accountant to do something you can do yourself can buy an ad, or pay for Quickbooks, or Dreamweaver, or some graphic design work.
And, if this is your first year, don’t forget to pay your quarterlies. The first year my wife’s business made a profit, we didn’t pay any taxes and got jammed with a big unexpected tax bill.
You might want to check out your local Small Business Administration and Small Business Development Center. They usually offer free counseling and little to no cost classes and/or training seminars.
I think we are using accountant and tax preparer interchangably. I don’t intend to have the accountant do much of anything except help me pay my taxes properly and just point me in the right direction - like your comment about paying quarterlies. That certainly would have bitten me without advice. I am my only employee, and I never intend to have any other employees. I intend to sell my products the way Mary Kay or PartyLite sells them - so I think I will have to 1099 those people for their commissions… but I want to talk to a tax professional to make sure I am on correct on that account.
FYI - I ended up talking to the “accountant” on the phone - he did it for free, and answered all my questions.
Also, my web designer who is going to optimize my site is a friend who is doing it pro bono. If my business takes off, he would like me to pay him his usual fee, but he isn’t charging me right now.
If you sell outside the US at all (and maybe even if you sell in the US in certain situations), set a price in EUR… with the falling USD you’ll better protect yourself against a currency that is fast becoming worthless.
