Business Start-up

Discussion in 'Off-Topic' started by ISUFan22, Mar 7, 2008.

  1. ISUFan22

    ISUFan22 Well-Known Member

    Apr 11, 2006
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    #1 ISUFan22, Mar 7, 2008
    Last edited: Mar 11, 2008
    I'm looking for feedback on the "right" ways to get a new small business started in regards to...

    - Corporate Naming and Business Structure
    - Tax ramifications
    - Legal issues
    - Etc.

    It will be very informal for the first 6-8 months I suspect. Also, it wouldn't involve any employees (at least for a long time), health care, etc.

    EDIT

    Now that I've obtained the domains, I feel good enough about the progress to reveal my venture. :)

    Photography.

    It's not going to be one that will replace my current job - at least that's not my plan right now. It's always been a passionate hobby of mine and I'm turning it into a small business.

    I have not yet setup any type of corporation or business credit account...I have selected a name though and have the domains for such.

    I have the majority of my initial equipment - including the camera, lenses (bought late last year), lights, backdrops and stands (just bought last week). I bought them from my personal account, so I'm curious if that will have a negative impact on my venture from an accounting perspective.

    I'm also wondering what type of corporation I should setup. While I don't feel I'd need a ton of protection, I would want to be shielded from any lawsuits should there be one via a disagreement for image use, etc.

    Am I able to receive some sort of tax deduction for equipment bought in '07 (camera/lenses)?

    Also (and this could get interesting 'round here [​IMG]) - I do not yet have an accountant or lawyer selected regarding this venture and would like feedback (PM me if you prefer) on good options.
     
  2. cybsball20

    cybsball20 Well-Known Member

    Nov 26, 2006
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    legalzoom.com

    I just hear it advertised all the time, I actually have no clue about any of those things...
     
  3. keepngoal

    keepngoal Jobless Jerk
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    Jun 20, 2006
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    An accountant or lawyer (typically i use accountants as they can be ISU grads) should be able to get the corp papers all lined up for about $300 or so. You will want it to be an S-Corp so you can file it on with your 1040. Use the professionals help for the first time you set on up and file your taxes.. after that you are smart enough to do it yourself. or maybe a CF.com member will step up with a Cyclone discount!!

    WIKI on S Corps

    IRS site on S Corps

    - keep.
     
  4. IsUaClone2

    IsUaClone2 Well-Known Member

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    It's been a few years but I thought that an LLC was less complicated than an S-Corp to form, operate, and disband. Be sure that who ever you talk to knows about both.
     
  5. brianhos

    brianhos Moderator
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    Jun 1, 2006
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    LLC's are much easier to setup and get going as small or very small businesses. You can usually draw the paper work up pretty cheaply, and you can go a long ways with them.
     
  6. TykeClone

    TykeClone Burgermeister!

    Oct 18, 2006
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    From what I've read, LLC's are taxed on the 1040 Schedule C - meaning that you would still have to pay self employment tax on the income generated.

    S-Corps are taxed on a different form, and while you pay self employment taxes on the salary you take, the rest of the income from the S-Corp is taxable as ordinary income (and avoids the self employment tax). This is how John Edwards minimized his tax load as a practicing attorney.

    If the choice is either just operating as a sole proprietorship or an LLC, I'd just go with the easy way until I started to make a good deal of money at it. At that point you can form an LLC, an S-Corp or a full blown C-Corp depending upon your needs.
     
  7. Phaedrus

    Phaedrus Well-Known Member

    Jan 13, 2008
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    ISUFan22, I admire you for stepping out on your own. I've found through much trial and error that I'm not really cut out to work for myself, but I truly admire those who do.

    The majority of our economy rides on the back of entrepreneurs and small business.
     
  8. MrGreg

    MrGreg Active Member

    Oct 18, 2006
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    That's awesome that you want to start up your own business. I don't mean to go off topic, but who here runs their own business? And what type of business is it? I find it interesting to hear about the different things people do
     
  9. balken

    balken Well-Known Member

    Apr 14, 2006
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    You do have to pay self-employment taxes on an LLC as all income flows through to your personal 1040. However, this is preferable for a lot of people (including me) as you are then subject to personal income tax rates versus corporate tax rates. For example, if your AGI is 75K, an LLC will be taxed at the 25% rate, whereas a corporation will be hit at the 34% rate. (No guarantees on these numbers, but they illustrate the general point.) There are some advantages to corporations both legally and tax wise, but for most startups an LLC is the way to go. It gives you the personal income tax treatment with better liability protection than a sole proprietorship. However, I would recommend speaking with both your accountant and attorney to go through your situation.

    As a recovering corporate type, I highly recommend going out on your own. Just be passionate about what you are doing and have a well thought out, executable plan.
     
  10. CTAClone

    CTAClone Addict

    Mar 28, 2006
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    I'm a part owner of an S-Corp. Really wasn't that hard to set up, but we paid a lawyer to do it for us.

    We frequently set up LLC's for different projects we do, and once again it's fairly easy to do with a lawyers help. For a few hundred bucks we can set up a new LLC within a couple of weeks. In California, you can actually drive to the capital and form an LLC in one day. I've also had our payroll company file for the appropriate tax ID numbers for the LLC and our S Corp. I would say all in all it cost us around $500 to set up an LLC through a lawyer and an accountant/payroll company and all we really had to do was sign a few forms. I don't remember what it cost us for the S Corp though, because there was definitely more paperwork to be done.
     
  11. Ficklone02

    Ficklone02 Well-Known Member

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    #11 Ficklone02, Mar 11, 2008
    Last edited: Mar 11, 2008
    If you form an "S" corporation, it is a flow-thru entity...and the income would be subject to personal rates as well, without the SE tax.....and you would still receive the benefits of the corporate shield. As in most cases, it probably depends on the situation for which form is most beneficial.

    One very important question to ask yourself is, where do I see my employee base growing to...or maybe you don't see yourself having employees at all.

    Edit: I see you have the information above about no employee involvement....
     
  12. ISUboi12

    ISUboi12 Well-Known Member

    Apr 12, 2006
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    I went to the ISU entreprenueral workshop for this very thing. Best bet is a LLC, seperates you personally from the business, as well as any liability.

    Cost is 50 dollars to register with the state. If your business is very small and not complicated you probably won't need to have a lawyer or accountant help you set it up. If you want a cheat sheet "Articles of Organization" PM me your email addy and I will forward what the ISU Pappajons Service provided me.
     
  13. Phaedrus

    Phaedrus Well-Known Member

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    I wouldn't go so far as to say an LLC protects you all THAT well. If you're worth anything worth suing over, I'd still carry umbrella protection. I used to work for an Ames lawyer serving papers and doing basic legal "research" and that kind of opened my eyes over how well an LLC "really" protects you, provided a determined person wants to come after you.
     
  14. balken

    balken Well-Known Member

    Apr 14, 2006
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    You are exactly right. My post was more geared towards a C corp, which is rarely the right choice for small business owners these days. I have interest in one C corp, and it is a bit cumbersome to manage.

    The biggest difference between LLC and S corp is the flexibility in funds management and paperwork. On the money side, if you would like to reinvest all of your income back into the LLC, you may do so. Or, you can pull all income out for your personal use. However, in a S corp, there are some limits due to IRS regulations on reasonable salaries and shareholder interest. Further, an LLC requires only (in Iowa) an annual registration that takes about 10 minutes total. S corps are subject to payroll tax filings and quarterly paperwork and payment submissions. Also, they must hold a shareholder meeting.
     
  15. snowcraig2.0

    snowcraig2.0 Well-Known Member

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    The world has enough strip clubs....just kidding!
     
  16. balken

    balken Well-Known Member

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    Agree on liability protection. I carry both a personal and LLC umbrella policy. There are too many factors to risk leaving yourself exposed. (e.g. Where you doing business for the LLC or personal business at the time of the accident, Mr Phaedrus? Or both?)
     
  17. ISUFan22

    ISUFan22 Well-Known Member

    Apr 11, 2006
    33,751
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    Healthcare IT Project Manager
    Denver, CO
    Now that I've obtained the domains, I feel good enough about the progress to reveal my venture. :)

    Photography.

    It's not going to be one that will replace my current job - at least that's not my plan right now. It's always been a passionate hobby of mine and I'm turning it into a small business.

    I have not yet setup any type of corporation or business credit account...I have selected a name though and have the domains for such.

    I have the majority of my initial equipment - including the camera, lenses (bought late last year), lights, backdrops and stands (just bought last week). I bought them from my personal account, so I'm curious if that will have a negative impact on my venture from an accounting perspective.

    I'm also wondering what type of corporation I should setup. While I don't feel I'd need a ton of protection, I would want to be shielded from any lawsuits should there be one via a disagreement for image use, etc.

    Am I able to receive some sort of tax deduction for equipment bought in '07 (camera/lenses)?

    Also (and this could get interesting 'round here :wink:) - I do not yet have an accountant or lawyer selected regarding this venture and would like feedback (PM me if you prefer) on good options.
     
  18. balken

    balken Well-Known Member

    Apr 14, 2006
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    As far as tax deductions, you should be able to write off business expenses regardless of your legal status as a business (LLC, S corp, sole prop, etc.) I can't speak for all entities, but with an LLC you have one year from the date of formation to transfer assets into the LLC from personal. Otherwise you will have to pay taxes on the "sale." You should think about what assets you want the LLC to own (if you go this way). For example, should my vehicle be in the LLC? This will impact insurance rates, whether you write off business miles versus taking depreciation on the vehicle and writing off fuel, maintenence and repair and other factors. There are several ways to handle this from a tax standpoint, and it will depend on your situation. I would recommend finding a good accountant and attorney to discuss, as you have mentioned. Sorry, no recommendations off of the top of my head.
     
  19. cytech

    cytech Well-Known Member

    Apr 10, 2006
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    I have my own computer repair business I started up after I moved back to Cedar Rapids from Ames. I also now run my families other business interests as well. Which are 3 storage garage facilities, and a mobile pressure washing business. Over the next year I will be phasing out the computer business and focusing on just the pressure washing and storage.
    Mainly because those are easier to maintain w/o additional employee's .
     
  20. Phaedrus

    Phaedrus Well-Known Member

    Jan 13, 2008
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    Dude, once we get back to the states, I need to hook you and my wife, who is a pilot, up. She has flown a couple of aerial photography "missions" and she really enjoys it. We don't really make money with it, but it usually covers the airplane rent, she gets to fly for free, and the photographer usually makes some decent coin/gets a free airplane ride out of it.
     

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