Author Topic: Business owners - How would you go about starting a new business today?  (Read 4593 times)

ChrisM

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I've never started a business before and I want to take my new found Mustachian-ism to a new business.

I know what I want to do (for the business), but I want to discuss the benefits of different types of business structures (and anything else I may not be thinking of).  Again, I'm new at this, but it's time to start increasing my income at least a little bit.  I am finding the amount of information daunting.  I know a lot of you have started businesses.

So, if you were starting a business today, How would you go about it?  What resources(books, sites) would you recommend?  Anything, will be helpful.

I guess it might be helpful to say I'm working on an online selling business (think eBay/Amazon seller).  Thanks.

Insanity

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It depends on the type of business.  But I still would recommend the LLC route.  It can be a little more work, but offers a lot more protection.

I actually went with the "Company Corporation" to get everything rolling when I created my business almost 6 years ago. I pay them a yearly fee and they do a lot of the licensing work for me.  I still have to file and manage the taxes and do the record keeping, but they deal with filing the necessary forms to keep the business active.

LegalZoom apparently has a similar service.

There are some online who do the eBay Amazon seller thing, so I will let them speak up.  I'm doing more software consulting so there is very little in expenditures that I have to deal with.

stuckinmn

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For a small business like that I'd go with LLC.  Protection of personal assets to a certain extent, flow through taxation (i.e. you don't get hit with a corporate tax), and easy to set up, especially if it is only you as sole owner.  If you are going to have other owners you will have to think about all the things that come with sharing ownership (who makes decisions, what if you disagree, what if one person dies or wants out, etc.), but with a single member LLC it is a piece of cake. 

arebelspy

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It depends on the type of business, but for the vast majority, I would get a paying client before doing anything else.
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ChrisM

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It depends on the type of business, but for the vast majority, I would get a paying client before doing anything else.

This is specifically for an online selling business.  I've sold some items personally and have done pretty well.  I don't know how scalable the business is, but I want to find out.  It's quite expensive to setup an LLC in my state ($500+), but I do understand my personal assets are protected vs. a DBA.  I would be the sole owner.

OldDogNewTrick

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Make certain you have 12 months personal living expenses in the bank prior to embarking on this path. I cannot stress the importance of that enough. You will find it difficult to grow a business while worrying about the groceries and utilities.

Write up a detailed business plan. You can google what such plans entail. The fact you are here asking how to start a start-up tells me you haven't done this yet.

I hired an attorney to draw up the articles of incorporation and help me with permits, licenses, etc.. Also hired a CPA. Then I didn't listen to them. They told me a contract I had entered into was one sided and could potentially kill my business. It did--3 years later.

Incorporate. Otherwise you risk your personal assets.

I'd say under-capitalization is the biggest killer. You'll be amazed at how much cash a new business can chew through. When you are new your vendors aren't really willing to front you much.




ChrisM

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Make certain you have 12 months personal living expenses in the bank prior to embarking on this path. I cannot stress the importance of that enough. You will find it difficult to grow a business while worrying about the groceries and utilities.

Write up a detailed business plan. You can google what such plans entail. The fact you are here asking how to start a start-up tells me you haven't done this yet.

I hired an attorney to draw up the articles of incorporation and help me with permits, licenses, etc.. Also hired a CPA. Then I didn't listen to them. They told me a contract I had entered into was one sided and could potentially kill my business. It did--3 years later.

Incorporate. Otherwise you risk your personal assets.

I'd say under-capitalization is the biggest killer. You'll be amazed at how much cash a new business can chew through. When you are new your vendors aren't really willing to front you much.

Thank you, I will consider all that you've said.  I have started a business plan, but not detailed.  This is not a full time business.  It's really just a "side hustle".  Our main income comes from a full time job, but I have all our expenses in order and want to start to try and bring in "a little" extra money to accelerate FI.

Because this is only a side hustle, I'm tempted to just go the DBA route.  If it grows larger then go ahead with an LLC.  I asked the question because you all have way more experience than I.  I don't want to downplay what I'm doing, but I do feel it's "small potatoes" compared to what someone might do with this full time.  I hope that might help form the discussion better?

And thanks so much to everyone taking the time to comment.  I've learned a lot being a member here.

Thegoblinchief

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With LLC being so expensive, I'd stay DBA for now, as there's not a lot of liability in being a reseller (depending on what you sell, of course).

I'd plug for it once your annual net income exceeds, say, $3,000.

In my state, LLC is cheap ($100ish), so I bought mine and have already repaid the cost several times over. I did it as a preliminary step to have settled once I start growing in earnest. I haven't had time/energy yet but my one customer keeps me going so far.

ChrisM

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With LLC being so expensive, I'd stay DBA for now, as there's not a lot of liability in being a reseller (depending on what you sell, of course).

I'd plug for it once your annual net income exceeds, say, $3,000.

In my state, LLC is cheap ($100ish), so I bought mine and have already repaid the cost several times over. I did it as a preliminary step to have settled once I start growing in earnest. I haven't had time/energy yet but my one customer keeps me going so far.

I think for the moment I've settled on starting as DBA.  If things work out well, then I'll dissolve the DBA and start the LLC.

I'm still looking for any resources business minded people might recommend.  I'm sure there's a lot of reading that can be done.  I looked through MMM's list of books, but he doesn't really have any business books.  It's surprising since he seems to run multiple businesses at this point.

vespito

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Not sure where you are located, but the SBA (small business admin) may have some resources.  They also have something called SCORE which can pair you up with a mentor/counselor: http://www.sba.gov/content/score.  I've visited a couple of SCORE counselors - they were pretty helpful.  In the end, I decided to nix one idea based on good feedback that saved me a lot of time and money.

sparklebunny

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Re: Business owners - How would you go about starting a new business today?
« Reply #10 on: March 20, 2014, 12:52:10 PM »
LLC costs $125 to set up in my state and $75 per year after that.  It's well worth it to have the separation of your business assets separated from your personal assets.  I own a law firm and am an S-corp. once you get going, check out the LLC filing as an S-corp.  Wicked good tax benefits with an S-corp structure.

ChrisM

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Re: Business owners - How would you go about starting a new business today?
« Reply #11 on: March 20, 2014, 01:41:35 PM »
Not sure where you are located, but the SBA (small business admin) may have some resources.  They also have something called SCORE which can pair you up with a mentor/counselor: http://www.sba.gov/content/score.  I've visited a couple of SCORE counselors - they were pretty helpful.  In the end, I decided to nix one idea based on good feedback that saved me a lot of time and money.

I did happen to come across SCORE and plan to make an appointment with them. 

LLC costs $125 to set up in my state and $75 per year after that.  It's well worth it to have the separation of your business assets separated from your personal assets.  I own a law firm and am an S-corp. once you get going, check out the LLC filing as an S-corp.  Wicked good tax benefits with an S-corp structure.

I agree completely.  I wish LLC was so cheap here.  In MA it's $520 just to file and I'm not even sure what it is per year after that.  I've researched the LLC as an S-corp a bit already and that is what I'm planning.

I'm concerned about exposing our assets going as a DBA at first, but honestly, we don't have many assets to lose!  That's why I'm so focused on building up diverse incomes at the moment.  As soon as I figure out if this business will return anything worthwhile I'll LLC.  I have another business I've started working on, but that one won't be formed until later this year.  That one will definitely be an LLC from the beginning. 

Saverocity

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Re: Business owners - How would you go about starting a new business today?
« Reply #12 on: March 20, 2014, 03:12:13 PM »
I have a S corp designated LLC and a C corp.  Depending on the style of your business you may favor one  over the other, the LLC is a great option, but the taxation method you elect refers to the C or S.

One great tip I would give anyone setting up a business and trying to use a LLC as a liability shield, get partners, spouses or whatever. When the LLC is owned solely by one person it is a lot easier to make a claim against those assets, whereas multiple partners strengthen the structure and make it hard to come after individual owners.

ChrisM

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Re: Business owners - How would you go about starting a new business today?
« Reply #13 on: March 22, 2014, 07:14:44 AM »
One great tip I would give anyone setting up a business and trying to use a LLC as a liability shield, get partners, spouses or whatever. When the LLC is owned solely by one person it is a lot easier to make a claim against those assets, whereas multiple partners strengthen the structure and make it hard to come after individual owners.

This is really interesting and concerning.  I'll have to consider bringing my spouse in as a partner if I LLC later.  It's not a bad idea since we plan to funnel most, if not all, of the income into retirement accounts.

jawisco

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Re: Business owners - How would you go about starting a new business today?
« Reply #14 on: March 22, 2014, 07:49:06 AM »
I think you are going about this the best way - especially considering the high cost of LLC, your lack of assets, and the low probability of liability with  re-selling.

I have found the NOLO books (setting up LLC, setting up small business, taxes for small business) to be very useful.

You could treat this as a chance to learn some of the ins and outs of running a small business and see how you like it.  Good luck!

ChrisM

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Re: Business owners - How would you go about starting a new business today?
« Reply #15 on: March 25, 2014, 07:00:22 PM »
I think you are going about this the best way - especially considering the high cost of LLC, your lack of assets, and the low probability of liability with  re-selling.

I have found the NOLO books (setting up LLC, setting up small business, taxes for small business) to be very useful.

You could treat this as a chance to learn some of the ins and outs of running a small business and see how you like it.  Good luck!

Thanks.  I'm learning a lot already.

I got my Business Certificate today!  It wasn't too hard.  Now the real work starts, making income from this side hustle.  And learning as much as I can before I start my next side hustle.  Thanks to those who chimed in here.