Author Topic: Starting out: financial/legal questions  (Read 1019 times)

AMandM

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Starting out: financial/legal questions
« on: May 20, 2019, 06:55:39 PM »
A group of local teenagers, headed mostly by my 19yo son and an 18y0 friend, made some videos just for fun. Now a friend of a friend wants to hire them to make a promo video for a non-profit she's on the board of. This is great for them, because they would love to eventually have a real filmmaking business.

They have a name for their company, but legally, there is nothing else. They don't have a bank account, an EIN, or anything. My son and his friend are the only legal adults involved.  So their question is, how do they go about writing a contract and receiving payment? Should they just draw up the contract between them as individuals and the non-profit?  Can they set up a DBA account and receive a check made out to their "company"? OR is there some other route I'm not aware of? (I'm a third-generation academic and know zero about entrepreneurship!)

TIA!

feelingroovy

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Re: Starting out: financial/legal questions
« Reply #1 on: May 20, 2019, 09:34:18 PM »
They could just do it as individuals if the client is willing to. Any downside of doing it that way would be hers if the state or IRS decided she was hiring them as contractors when they should have been employees.

That said, it might not be a bad idea for them to get a DBA. The bank won't set up an account without a certificate from the county. Here it takes a simple form and $25 at the county clerk and then you're in business.

This could be way overcomplicating things or it might be a great learning experience.

You might check out small business resources in your community. The chamber of commerce or SCORE could answer a lot of logistical questions.

tyler2016

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Re: Starting out: financial/legal questions
« Reply #2 on: May 21, 2019, 03:31:59 AM »
IANAL, but according to this lawyer, it sounds like they probably need to file a fictitious name:

https://rachelbrenke.com/is-your-blog-name-legal/

I filed one for me website. It was only $10 if I remember correctly.

SeattleCPA

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Re: Starting out: financial/legal questions
« Reply #3 on: May 21, 2019, 07:13:28 AM »
It sounds to me as if they have a partnership (which needs a name and an EIN) and will need to file a partnership tax return.

Given that, you wonder if it might make sense to have an actual partnership agreement that spells out the details of the relationship.

The practical problem in all this is, you can't justify a bunch of legal and accounting work for something that generates (say) $3K in revenue, incurs $2K of expenses and produces profits of $1K which a couple of teenagers share.

Most people, I think, would not worry too much about this... and the downside there is, if the numbers ever get larger, not doing the accounting and legal stuff right up front will create a terrible mess. E.g.,

https://en.wikipedia.org/wiki/Creedence_Clearwater_Revival

AMandM

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Re: Starting out: financial/legal questions
« Reply #4 on: May 21, 2019, 03:47:50 PM »
Thanks all!
I think I'll suggest to them that they do this job as two individual contractors. At the same time I'll point them to the local small business startup resources. Thanks for the pointers to those, too!