Are all business owners geniuses?

In My Humble Opinion
1

Ok, my SO and I want to start our own remodeling business along with a friend. Nothing fancy, just trying to work for ourselves, live the American Dream, whatever. We’ve been doing jobs on the side up to this point, not licensed, not reporting income, etc. Now, in starting to research everything that has to be done to be legal, taxes, insurance, etc. I have come to the conclusion that one of several things must be true:

  1. The government does not want people to own businesses and makes the process a confusing mess of red tape.
  2. Everyone who owns a small business is actually working illegally because it is impossible to set everything up correctly.
  3. Everyone who owns a business is smarter than me and I am the only stupid person who thinks it is utterly confusing.

Now, I don’t think I’m a stupid person, especially when I see some of the other people who run their own businesses.
Sometimes when I consider this I wonder how in the world some of these people got through this process. Do I need a million dollars to pay others to set all this up for me? I am planning on having a lawyer draw up contracts, accountant to do our taxes, etc. but I think I should be able to do the bulk of it myself. Am I crazy?

You’re smart. Help me out. Anyone who owns a business / knows about this please give advice. I dont’ even know what to call us…a partnership, corporation, aaaugh! I am afraid of missing something and being sued for a jillion dollars. (I realize different states / countries are different, but any advice would be great. I live in Michigan, BTW.)

Is it worth it or should we give up and continue working for the man?

2
  1. I understand your frustration, but not everybody in government is out to sabotage small business endeavor.
  2. Not true; it can be a PITA, but it’s not that big a deal to get your company trimmed out and legal.
  3. Just start, and you will learn; one thing I hope you learn is that it can be fatal to the business to not take care of details.

Good luck!

3

At least, from a tax perspective, the IRS has some decent information they can send you, go to www.irs.gov and look at the Businesses section for their Small Business information.

Owning a business is not a trivial matter, especially if you wish to be incorporated, and have insurance, etc. I believe that you can “run your own business” very simply and legally if you just report the income on your taxes, and be properly licenced for the work.

There are many different ways that you can structure a business, from just you doing work by yourself to a full blown corporation. An accountant should be able to discuss the various options to find out what best suits your needs. Talk to an accountant!

Nice thing is, once the structure is set up, you don’t have to set it up again. For a long term business, the hassle is worth it.

For the record, my dad has his own small business, a corporation, with a few employees, medical benefits, inventory, suppliers, the whole bit. He’s no business genius, but he’s kept it going nicely for 30 years.

4

The government does want to help you out. You should definitely get in touch with the Small Business Administration. They can help you figure out all the details and perhaps even direct you to loans or grants, if you’re eligible.

And to answer your question, you can’t just call yourself a corporation – that indicates a specific legal entity that you have to establish. (some companies will take care of the red tape for you for a fee, most notably the Corporation Corporation). You’re right, starting a new business requires endless hard work and worry. Many will fail. But my parents have owned a company (now a corporation) for 20 years now, and they tell me nothing beats the satisfaction of building a business from scratch.

Good luck!

5

Why don’t I add a little to my last post… If you incorporate, you will be creating a separate legal entity, Velma’s Remodeling, Inc. Lawsuits will generally have to be filed against VRI not you personally, taxes are paid by VRI, you get a paycheck or dividends from VRI, so on and so forth. If you stick with a partnership, there are a few different kinds, some will protect you personally from lawsuits, some don’t.

Incorporating isn’t very expensive, but it isn’t trivial. If you decide to end the business, you will have to dissolve the corporation, for instance. I thought about starting up a corporation once, but I wasn’t really ready to make a long term thing of it, so I didn’t go through the effort.

There are simpler, less formal ways to run a business, but you lose lots of legal protection.

6

It does give some perspective doesnt it? I hear so many employees bitching about how they are exploited by the higher ups who have it so easy… why don’t they go into business on their own?

I remember a bumper sticker: “Make getting welfare as difficult as getting a building permit”. It made me think.

7

Thanks for the info. I guess I should have been more specific in my post, I have been diligently checking out all these sites, been in contact with Chamber of Commerce, SBA, etc. Have also researched what it means to be a “partnership, corporation”, etc. It just is stunning to me to realize there is SO MUCH that has to be done, and I am hoping to not have to spend a fortune on fees just to get going.

I have more respect for business owners. I am also convinced that “if they can do it, so can I”.

Also worrying to me is giving up our (currently super) health insurance. I guess I am just looking for reassurance from people that it can be done. I am also worried about going into business with SO and friend, if it doesn’t work out I don’t want any hard feelings. In your opinions, is it better to keep personal and business relationships separate?

Sorry, rambling.

:o

So hey, let me know about your business stories, sucessful or otherwise so I can see what I’m in for!

8

Separation of business and friendships… This is a big thing because a lot of friendships (and family relationships) have been ruined in the past when money became involved. You need to tread very carefully.

I considered starting up a website with two friends, and one friend (the programmer) got bent out of shape because he didn’t want to give up control over the programs he wrote. I (and the 3rd friend) didn’t want any control over that, but he got all worried that the benefits of his sizable effort would be split among us all when he did all the work. There was some tension there, and we hadn’t even started the company yet!

Are you thinking about a going concern, i.e. a long term business venture? Or, are you thinking about working together for a couple of years until something better comes along?

If the three of you form a corporation together, it is owned by the stock holders, you and your SO and friend. If friend decides to get a new job, he(she) still owns a third of the corporation, and is under no requirement to sell, and has a valid legal right to dividends, and any eventual proceeds from the breakup of the company.

Of course, you and SO still have two thirds of the shares, so whatever you two say, goes. You could even dissolve the corporation at the time friend leaves, and reform under a different name with just your SO, or buy out your friend, if they are willing. Also, if friend decides to slack off, he(she) is still an owner, and may not take kindly to a reduction in salary or dividend.

I don’t really know all that much about the various Partnership arrangements, though.

I don’t believe that fees themselves should really hit you all that hard. From what I saw the last time I looked, it can’t be much more than a few hundred to get a business legally defined with the state (NY in my case).

Remember, running a business is a job in and of itself. Companies can easily spend at least 15% of their revenues (many spend more, many less, I’m sure) on SG&A, Selling, General and Administrative tasks. The fact that you are a small business and not an international conglomerate does not absolve you of these tasks.

Don’t think of this stuff as an irritant you need to get past before doing your “real” job. This is part of your real job, which is business owner/operator. It’s not all that hard, but it will take up a fair amount of your time.

9

Yes, owning a business can be a real PITA, but just take it one step at a time. I’m majority owner of a tech consulting company now in its fourth year. We started off with just the two of us running out of the dining room of the house. I was less than a year out of college with no “real job” experience and while he had the “real job” experience I lacked, neither of us had ever done anything like this. We essentially jumped right in and have been learning as we’ve gone along. We’re now up to 6 full time, 2 part time, and independent contractors as needed running out of a real, live professional office.

Things I have learned:
– Get incorporated in some form (Inc, LLC, LLP, S Corp, whatever) to provide some protection for you personally.
– Get a corporate lawyer that you can call when you need one.
– Get an accountant who can help you set things up to work out best for you and keep you out of trouble as much as possible.
– Both the Federal and (most) State governments have Small Business programs. Look into them.
– At some point, you will hate the company and wish you’d never started it. This will pass.
– As much as it might seem like a Good Thing at the time, try to avoid hiring by nepotism and cronyism. It just isn’t worth the headache in the long run.
– You Will Make Mistakes, but as long as you handle them one at a time, they’re not all that overwhelming.
– No matter what your your “official” job is, you will do everything at some point. Officially, I’m CEO, but in actuality, I’m a glorified bookkeeper and Head Peanut Farmer.

Is it worth it? Depends. We have a lot more freedom in what we do, as we can choose not to accept a job if we don’t want to do it. We don’t suddenly have to be shipped off for three weeks of training on two days notice. We don’t find ourselves working with people we don’t like all that often. I didn’t have to sell my soul to Corporate America. And of course, the money’s a bit better. Conversely, we can’t escape the business. It’s hard to “leave it at the office” so to speak. When we go on vacation, we check in at least once a day to make sure nothing has exploded. And in a lot of ways, the company is the third person in our marriage. It took a while to get used to it, and I suppose we’re still getting used to it, really, but it just takes a but more effort to separate “my business partner” from “my husband.”

Overall, though, while its something I never thought I’d do, its not too bad.

10

I too had a bit of trouble starting my first business. I was never truly successful until I finally asked for some advice from a successful small business owner.

My problems seemed to stem from my idea of pricing the parts that I used in the service business. I was way too low in my markup, thinking that I wanted to give my customers the best deal possible.

It does look daunting at first, but successful people usually are the ones who jump in feet first.

In the remodeling business, specifically, depending on the rules of your particular state, get licensed. Incredibly, here in Idaho, there is no requirement for licensing of contractors. My solution was to license in a nearby state, two in fact. You will get more and better jobs, present a more professional appearance and above all, avoid legal problems by attaining that piece of paper.

Partnerships nearly always fail, most sooner than later. The very few successful ones I have seen always had a lead partner who made the business decisions and the other partner, fulfilling more of a support role.

Unless you have significant assets, there is really no pressing need to incorporate.

Do hire a bookkeeper to start you off with good books and record keeping. You can easily keep the books and do your own taxes after having the initial help of an excellent bookkeeper. It doesn’t hurt to run them by periodically to make sure you aren’t missing something.

I happen to agree with your perception of all business owners being geniuses. After all, we can pretty much do as we please with no one to answer to but the customer.

Above all else, find a business mentor!

11

Just look at a lot of liquor store owners…:slight_smile: