What's the least I need to do to start a legitimate 'business'?

I work for a software company that was bought out by another company which is now phasing out the product in which I still support(for a few more months). I still get requests to have modifications done to the old product.

Assuming my current company would not object to me doing these modifications myself, what’s the least I need to do in order to have a registered, legitimate business? I cannot work ‘under the table’ for the types of customers that I’ll be working with so it * has * to be legit. If it helps, these customizations will involve purchase orders which must be able to be verified if investigated.

I fully intend to pay taxes at the end of the year(even though I absolutely detest the amount of taxes the gov’t already takes from me, but hey, that’s another rant in another forum) and comply with the law to the fullest extent. Btw, I’m in Massachusetts in case that matters.

A Sole Proprietorship is pretty easy, just apply for a business license, usually with the state; file your business name with the state or local authorities that collect sales tax (check your local regulations to see if sales tax applies in your case), and you are in business. Your business license will enable you to get a business checking account. You can declare the income on a Schedule C along with your regular income tax return.

To expand on what Fear Itself said a bit:

  1. Register business name. (Here in California you pay a fee, list one of those ads for 4 weeks or something and they send you a certificate that’s good for 3 years. If you slip up after 3 years and forget to renew it another company could steal your name and wreck everything you’ve put all your work into.)

  2. Obtain actual business license. Here, you go through your city hall, but it varies. If your city hall is as moronic as mine, be prepared to do a lot of beating your head against a wall. Pay yearly.

  3. If Sales tax is an issue you also have to register with the state board of equalization. Here it was free and they decide how often you report your sales taxes based on how much money is changing hands. I made a piddling amount so I only had to pay yearly, but it may be quarterly for you.

Check your library. Here in Minnesota the Dept of Commerce produces a book called “Starting Your Own Business In Minnesota”, or something like that, and you can even get a copy sent to you for free if you request it.

It guides you on what type of business to set up (sole proprietor or LLC, etc.) and the step-by-step procedure for each.

Mass might produce something like it.

Another thing to keep something in mind, even the though company might agree verbally to let you enhance the product and charge companies for continued support, you don’t own the IP unless it is granted to you specifically in writing.

And also keep in mind that if the program causes any customer damages demonstrable in a court you might be on the hook (not the original owners or designers). Speak to a lawyer to get more details…

I second what the previous poster said about IP rights - if you’re going to use this software to set up your business, make sure you have the legal title to it. Get an assignment, license, whatever, so that your modifications aren’t considered your employers (work for hire) and in turn the purchaser of your employer.

For some details about small business and the different types of legal entities, see Nolo Press at:


But of course, check with a lawyer and all that.

In TX it is so easy. You’re in business in one day with the "sole proprietor” papers. You simply go down to the county courthouse and file papers, get them notarized, and pay about $10.00 for everything. All they want to know is what is the name of your company (DBA-- doing business as). That’s it. Now you’re officially in business. Write in a logbook all of the income you made. Write in another all of your capital expenses. Save all of your receipts, and then at the end of the year have a good CPA and then let them sort it out. I’ve been in business in TX for a few years now, and it is great. I cannot believe more are not self-employed. I’m sure your state has something like ours called a SBDA (small business development administration). They’ll have a wealth of information waiting for you, and it’s all free.


Why not? They cut a check. You deposit it into your bank. Unless you’re audited or its an obscene amount little chance of the IRS finding out. But if they file a 1099 that’s a different story. If you go legit route don’t forget to deduct expenses. Also the IRS does not count a hobby as a business so you can’t have more expenses than income.

There is a legal term called ‘Judgement Proof.’ As in, “Sure you can sue but you won’t recover enough money to pay your legal costs.” Especially if the ‘contract’ is a verbal, “Can you fix this for me?”

Disclaimer: I am not a lawyer but I play one on the Internet.

Exclaimer: I’m an hardware tech and I fix stuff on the side all the time. But if you expect this to expand into a full time income I’d go legit if for no other reason than those IRS guys are great and I have the upmost respect and admiration for the fine upstanding patriotic work they perform in the service of this great country.

Well, I agree with this, at least. The rest of this response, I suggest you ignore.

Most of the other responses have some good ideas, if you are talking about a few thousand dollars a year. More than that, see a lawyer or accountant in your state. Ask about limited liability companies (if your state permits them) or corporations with an IRS Subchapter S election. Be especially careful if you are going to remain an employee of your current employer. Anything that could be interpreted as being in competition with your employer is a breach of your legal duty to that employer unless the employer agrees to it.

[ul][li]sufficent capital[/li][li]knowledge of the business[/li][li]a plan[/ul][/li]
:smiley: [sup]That’s it[/sup]