Ask the entrepreneurs advice
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but consider that the 600$ is TEN times my YEARLY operating costs
Where do you live that filing costs for an LLC are so high? Here you can file for an LLC for ~$100 and biennial business entity reports are ~$25 to file. Very cheap insurance of your personal assets. Anyone who plans on having employees or contractors should consider this to be essential before employing anyone as they are always a potential liability.
And provides virtually no benefit to an web-only company (where there is virtually no scope for my business causing damage to anybody)
It is up to each of us to decide our own personal level of risk that we are willing to assume, but just a word of caution should be said here: Once you hit a certain level of success, that success becomes a liability. In our litigious society, any person even perceived to be successful can be a target of lawsuits whether there is harm or not. The reason that I said it could be sorted out later and not necessary to get started is that until you have revenue, you are not a target.
The impression I get from reading both of you is that it isn't something that you hold back on getting started on running a business for, but it is something that is worth sorting out relatively soon after you get started out.
Pretty much. The most important part is to just get started. Do something. Motion creates emotion. If you think to yourself, "I will start on X after I sort out Y and Z", you will likely never do anything. If you wait on all the lights to be green before you start driving, you will never leave the driveway.
If you are forming a partnership, or planning to pay or partially pay someone with equity, you need an LLC and an operating agreement before they enter in to that agreement. In the legal world, if it isn't on paper it didn't happen. If what you are going to do could ever even be misconstrued to cause injury to someone else, you need a great contract and an LLC in place before you get your first customers. CYA is a good mantra to go by in business. Even if you cannot see a way that you can be made liable, some rat bastard lawyer may try to find one.
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The most important part is to just get started. Do something. Motion creates emotion. If you think to yourself, "I will start on X after I sort out Y and Z", you will likely never do anything. If you wait on all the lights to be green before you start driving, you will never leave the driveway.
I think this is the single most important part of this whole conversation. What's more, it applies not just to starting a business. I work for a large university, and over and over I see that it is the people who get on with it who have the upper hand in setting the agenda.
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Where do you live that filing costs for an LLC are so high?
Probably NYS or some other Glorious Paradise where a lawyer is required just to sell OR buy a house.
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Probably NYS or some other Glorious Paradise where a lawyer is required just to sell OR buy a house.
Or perhaps "doesn't know about Delaware corporations" or the like.
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My guess would be that it was a price quoted to him by a lawyer, and an expensive one. My lawyer will file (more correctly, have his paralegal file) LLC paperwork for $200 total, including the fee. Pretty inexpensive. Business Entity Reports take like 5 minutes to file, so I do those myself. It is mostly just confirming that no information has changed, etc. Same business owner, same address, all that good stuff. No big deal and I think it is $30 by mail or $22.50 if you file online.
Cheap insurance if you ask me. I don't like moving, I would become homicidal if I had to move because someone sued my business and got my house in the settlement. That's worth $200 one time and $11.25/year.
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Or perhaps "doesn't know about Delaware corporations" or the like.
obably NYS or some other Glorious Paradise where a lawyer is required just to sell OR buy a house.
Possibly Taxachusetts. $500 filing fee, annual report is $500. Holy christ. Illinois is also $500 filing fee, but $250 for annual report.
Most of the rest are pretty inexpensive: https://thecorpsec.files.wordpress.com/2012/03/llc-annual-costs-by-state2.pdf
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No. It was quoted to me by a lawyer, on the web. But it wasn't for an LLC. It was for a Limited Liability Partnership, which limits liability without the need multiple capital owners, like an LLC requires (in theory, though it can be gotten around, I'm sure).
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Limited Liability Partnership, which limits liability without the need multiple capital owners, like an LLC requires
Hmmmm, that must be specific to your state? Are you certain about that requirement? I have done business (while directing businesses for others) in over a dozen states and that was never a requirement to my knowledge. In fact, I do believe that is backwards. In our state, an LLP requires 2 or more capital owners. Also, that would make sense given the naming convention...
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Well, regardless, I am not here to pick nits. A lot of the legal side of things will come down to the laws of your state so you should probably seek the advice of a lawyer. They are typically not that expensive in the grand scheme of things, and are comparatively cheap compared to what they can protect you from.
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You're right, LLC's don't "require" multiple owners. But the legal issue is that an LLC with a single owner doesn't really provide much liability protection. It is very easy to pierce the veil in those cases.
The LLP is a newer business entity, and hasn't had any veil piercing precedents set. Nevada allows single owner LLPs (and another state does too).
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But the legal issue is that an LLC with a single owner doesn't really provide much liability protection. It is very easy to pierce the veil in those cases.
In cases where it has been pierced, it is because the owner has done something that they shouldn't. If you ever pay personal bills from a company account, you have given them a way to pierce the corporate veil. That is probably #1 on the list of things they look for. Even one occurrence of that can cause you problems. Also, if you do anything fraudulent, it is not hard to get courts to pierce the corporate veil on an LLC.
But, from a debt liability standpoint, neither one really do much for you when you are starting out. No what how you form your business, it is still an infant from a credit rating standpoint. You will still be personally guaranteeing those debts. Basically, you are co-signing for yourself. But I always tell people, starting a business with debt is just asking for trouble. You are starting out on the wrong foot. You just added to your fixed costs by adding debt service to the mix.
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If you wait on all the lights to be green before you start driving, you will never leave the driveway.
'ding'To flesh out the image/metaphor (with social commentary about why kids today are waiting for all-green <waves cane>)....
Example 1 - Automotively, I actually just ran into this, I couldn't tell with certainity whether I had an electrical problem and a clutch-interlock switch problem or just the switch problem. With just idiot lights and no gauges - "ooh, hey it started" wasn't completely satisfying with snow and ice in the forecast.
Example 2- When you watch the pros shoot rockets - you hear them talk about things like "thrust is nominal", etc, which to me conveys the idea that "we have a range for this value", which in turn conveys a much more nuanced measurement than simply Red/Green.
FILED UNDER: so there's two interlocking switches, and if they're not both working your check engine light comes on... huh. So, a bum switch means I can't get my emissions checked on time as required, nice.
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Also another's take on the issue.
Advice for going out on your own solo
Two years ago I left my job at MD Anderson to become an independent consultant. When people ask me what I learned or what advice I'd give, here are some of the things I usually say. You can't transition gradually I've done consulting on the side throughout my career, and I planned to ramp up
What he advises that is novel to this thread is that he advocates going all in at the beginning for a few reasons. Which I point out because it's "go do it" (seen above) on steroids.
He's almost entirely in a non-commoditized field so
YMMV.
This is the sort of thing I was semi-trolling PD to put out there.
Not necessarily the opinion per se, but "What I have done/seen leads me to say X" with implied YMMV.
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That is all well and good if the person has savings and is the type that thrives in "sink or swim" environments. That is how I did it, but you are also jumping in headfirst before you even take a glance to see if there is water in the pool. Also, unless you have a lot of connections to glean work from, your first iteration is fairly likely to fail. If you make your first failure and learn from it while you still have some income to pay the bills, you will be much more likely to bounce and not go splat.
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And he says so.
And he points out how it nearly blew up on him.
He's a fair bit older than most here, has had a a few very nice positions in his field, and probably has his finances squared away to take his chances - OTOH someone with a less specialized service has a better chance of bringing in business earlier.
Just throwing another log onto the fire.
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Just throwing another log onto the fire.
No worries. As the hillbillies say: "There is more than one way to skin a cat." What works for me, may not work for others. That is why I generally recommend a more conservative path. If I help lead a person to failure, I just hope that I keep the damage to a minimum. ;)
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As the hillbillies say: "There is more than one way to skin a cat."
Not just the hillbillies…
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@Polygeekery said:
As the hillbillies say: "There is more than one way to skin a cat."
Not just the hillbillies…Oh, I had assumed that I'd somehow become a hillbilly without noticin', y'all.
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I say it also, so don't think I was being condescending. ;-)
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Oh, I had assumed that I'd somehow become a hillbilly without noticin', y'all.
Talk like that and I'll assume you're from Louisiana. :) Which isn't a bad thing unless you're a politician.
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Hillbillies, Louisiana, that's all basically the same thing, right, yo?
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Hillbillies, Louisiana, that's all basically the same thing, right, yo?
I dunno. The guys I know down there are software contractors for the oil industry…
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Before you read ahead, standard disclaimers apply: IANAL, IANAA, YMMV, this is not tax advice, consult an accountant before making any business decisions, etc.
As this is all fresh in my mind due to it being tax season and all, I thought I might touch on how taxes are levied on businesses differently than on individuals. This all came to mind due to a discussion in another thread that started with:
The cool thing is that if he didn't make those videos, that money would be sitting in a YouTube bank account.
Since he made the videos and was paid, the government got to tax that money.... again.
Does a business also expense supplies and product components.I'm thinking that if they can't expense comp/ingred then the final product on store shelves has been sales-taxed multiple times.
As a wage earner, things are much different than they are as a business owner. Due to tax withholding laws on wages, taxes are withheld from income before you ever even get paid. The business that you work for withholds from each paycheck an amount approximately equal to your tax burden. Everything you pay for is with money that has already been taxed. As a business owner, you are responsible for withholding your own money for taxes, and you get to pay for business expenses with pre-tax income.
If you earn wages, any investing you do or any saving that you do to start a business is with a portion of your income, with the rest being paid in taxes. If you own a business, investing that you do in that business is done with pre-tax dollars. For those who have asked about what are the benefits of being a business owner, IMHO that is the best one.
So what qualifies as a business expense? As a general rule, if you would not purchase something if you were not a business owner, then it is a QBE. In addition, any mileage that you drive for business purposes can be expensed at $.56/mile for travel between places of business. (Traveling to your office does not count, as that falls under "commuting") If you claim a home office deduction, you can expense up to 300sq/ft at $5sq/ft and that would put your home as a place of business allowing you to expense all of your business driving.
Home internet access is a bit tricky as some people have been audited and found to have expensed all of their internet costs but it would be hard to make the argument that you would not have internet if you did not have a business. What you can expense though is upgraded services for business purposes. Essentially, find the cheapest internet in your area, subtract that from what you pay and you can expense the remainder. As a general rule, you can do the same with your mobile device service.
All office supplies can be expensed, office furniture, remodeling done to your home office, coffee machine for home office, etc. If you are buying it for business purposes, you can write that off on your taxes.
Also, as was stated later in the referenced thread, sales tax is only assessed on the end-consumer of a good. If you purchase something to resell, or you purchase something that will be part of an assembly that you will resell to an end-consumer, you do not pay sales tax on that. When you purchase office supplies, office furniture, etc., you are the end-consumer and you and your business pay sales tax on that.
Other things purchased for business purposes like: Computers, software, services, apparel with company logos, advertising, web hosting, server space, etc., are all QBE's. Meals purchased while doing business are expenses, but only at 50%. You still have to eat, but you could make the argument that you would have eaten at home if you did not need to meet with Person X.
Meals and lodging while traveling for business are expensed at 100% in addition to almost every other expense while traveling. This is an area where you really should consult an accountant though, as in this area there is a fair amount of nuance and there are significant differences between business travel abroad versus in the USA. Travel for business also includes traveling to conventions, for education related to your business, etc. Legitimately combining a business trip with a vacation is usually frowned upon, but if the convention you want to go to is in Bermuda...you have to go, right? ;)
Now, what does all of this really mean?
Well, if you are an employee making $75K/year, you are paying 25% taxes on income above $73,800, plus state and local taxes. Let's just roll with 25% though, for the sake of simplicity (Yes, I realize that tax brackets make this more complex, I am going for simple numbers). If you want to spend $5K on a business, you have to earn ~$6,666 dollars to be able to spend $5K after taxes are withheld from that money.
If you are a business owner, you only need $5K in gross profits to pay for $5K in investment as long as all of that is a QBE.
Now, yes, for a lot of things you can deduct that on your taxes, but there are many things that you cannot. I have a home office, so that deducts $1,500 from my taxable income. I drive ~15K miles a year for business, so that nets me another $8,400 in deductions from taxable income. That is nearly $10K right off the top that no taxes are paid on. Office furniture, books, printer paper, business lunches, etc., all are paid for with pre-tax dollars. If a business owner wants to spend $5K on a server, they only have to earn $5K dollars.
There is a lot of nuance to it, so if you have any questions refer back to my disclaimer at the beginning. Double-taxation situations like @xaade referred to are pretty rare though. Now, when you pay sales tax, etc., those are definitely double-taxation situations. Or, profits carried over from year to year inside of a C-Corp as capital reserves may be double-taxed. That is why a lot of closely-held companies are virtually broke at the start of new fiscal years. They pay out all they can as bonuses in order to avoid double-taxation and run cash poor until revenues build the bank account back up.
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Fun thing about sales tax: depending on the state, it might have to be paid quarterly. Of course, I think a lot of business taxes are paid quarterly too; a sole proprietorship doesn't need to do that, and I've never been anything more complicated than a SP owner with a transient vendor license who had to pay my own sales tax based on the county and state I sold goods in.
Every quarter there isn't a book fair, I have to go file my $0 sales tax >.>
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I have no experience in that area, but our state has its share of WTFs in that area. As we are a service provider, and our state does not assess sales tax on services (other areas may be different), I have never had to deal with it.
From a friend and fellow business owner, and his anecdotes, it is not fun. Our state virtually requires you to pay it online, and at least once a year the system gets overloaded and crashes due to everyone trying to pay on the same day. Also, if you are even a few minutes late, even if the system crashes, you still have to pay late fees.
I am certainly glad it is not something I have to deal with...
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That is nearly $10K right off the top that no taxes are paid on.
I'm sure you realize this, but a caution:
Don't forget there's (notionally at least) around $10K of expense.
The basic idea is to tax the profits of the business: which is business income - business expense. The expenses have to be ... expended.
At the margins, I'm sure it's fun to e.g. rake in the difference between your actual auto expense and $.56/mile, and wearing all company logo clothes[1]... but I wouldn't like that to be the sole raison d'etre[2] for a business.
It's like people who borrow a crapton for a house since the mortgage interest is deductible - they forget they still have to pay the interest!!
Now, I'm curious. What sort of cars are exactly at that $.56/mile threshold... and how does that compare to what I see on the road...I wonder if there's a huge drop-off right after that price point (well, more exactly how huge?)
[1] Somewhere in the IRS rulebook has got to be a precedent on Company-branded underwear. I can't be the first to have thought of it.
[2] "raison d'etre" is a borrowed phrase, so, no, I don't need the dang cicrumflex (and I don't care that misspelled circumflex ;)).
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What sort of cars are exactly at that $.56/mile threshold..
Whichever ones they are, there are a lot more of them these days! It's almost exciting to go to the gas station and be able to get out of there for under $20 (or $50 if I'm filling the van).
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Whichever ones they are, there are a lot more of them these days! It's almost exciting to go to the gas station and be able to get out of there for under $20 (or $50 if I'm filling the van).
I'd be far more excited if understood the "whys" behind it. And if I had a van.
Yes, I have heard of supply and demand and increased US production, why do you ask?
There seem to be a large number of factors in the world today that could/should pushing down supply and increasing demand, that, to me, this is fascinating stuff.
@tarunik, you are the closest we have to an Oil Industry Insider... is the outflow from the current US boom especially suited to gasoline production?
(But then again I'm fascinated by "Dumpster". And shiny things.)
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I'm sure you realize this, but a caution:
Don't forget there's (notionally at least) around $10K of expense.
You are (notionally) correct. There are expenses tied to them, and you do not want to run up your expenses in order to gain deductions (people do it all the time in order to save on their taxes and it is an idiotic idea). But, owning a business does let you move a lot of things to the expense column.
I actually would be interested where the breakeven on 56 cents a mile is at also. In my case, it is way more than actual expenses as i drive an older vehicle and nevery buy new. I drive a 2003 Lexus LX470. I average 18mpg, I do my own oil changes, tires last me 60-75K miles at $800/set and as I buy 2-3 year old vehicles to save on depreciation that does not wipe out the savings.
Now, you can also keep track of all expenses and all mileage and write off the exact expenses that were accrued for business purposes. That usually makes sense for more expensive vehicles that cost more than $.56/mile. Mine are well under that. It is also a lot less record keeping on my part.
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It is also a lot less record keeping on my part.
And the IRS' part. ;)
I used to hate working with people gaming all their travel to snag extra per-diem and mileage.
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Yes, I have heard of supply and demand and increased US production, why do you ask?
There seem to be a large number of factors in the world today that could/should pushing down supply and increasing demand, that, to me, this is fascinating stuff.
@tarunik, you are the closest we have to an Oil Industry Insider... is the outflow from the current US boom especially suited to gasoline production?
First off -- refineries these days are pretty good at smashing up and glomming together hydrocarbons to make whatever products they wish to. However, most refineries are designed to take a certain type of crude (a British refinery will take a light, sweet Brent crude, while Gulf Coast refineries often are designed/built to deal with the intermediate crudes that show up in that area, and a Canadian refiner might build one specifically for tar sands output), and while the Bakken crude does seem to be fairly light, I'm not sure how well US refiners are set up to deal with light crudes in this day and age.
The main problem with the oil production boom in the US is we are running short on refinery capacity as-is; this is aggravated by folks who can't stand the idea of building another refinery anywhere because they want to extend their NIMBYism to everybody's back yard. There are also some fairly nasty latent issues floating around when it comes to refinery maintenance and safety (some of the recent reports from the US Chemical Safety Board are scathing).
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And the IRS' part.
Yeah, they don't give a shit about that until it is audit time.
IRS audits are still less obtrusive than MS audits...
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The main problem with the oil production boom in the US is we are running short on refinery capacity as-is; this is aggravated by folks who can't stand the idea of building another refinery anywhere because they want to extend their NIMBYism to everybody's back yard.
But I think it's also important to note that we're exporting refined products these days.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFEXUS1&f=M
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http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFEXUS1&f=M
Ooooooooooooooooh! Data!!!
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First off -- refineries these days are pretty good at smashing up and glomming together hydrocarbons to make whatever products they wish to. However, most refineries are designed to take a certain type of crude
Which is how I understood it as well...
with the additional layer that differing supplies (light vs. heavy, import vs. domestic), varying demands for fuel oil vs. gasoline(*), and varying uptime for different refineries changes the absolute and relative prices of the outputs.
It may be just a warm winter and refineries that weren't crushed by hurricanes...
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But I think it's also important to note that we're exporting refined products these days.
Yeah, we probably have surpluses in some areas, and also pretty much have to export specialist fuels -- not many foreign refiners make 100LL avgas, for instance!
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100LL avgas
Well...I don't know where that would be in the charts here:
But both items with "aviation" in the name come up as goose eggs. Lots of gasoline going out, though.
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There seem to be a large number of factors in the world today that could/should pushing down supply and increasing demand, that, to me, this is fascinating stuff.
Oil is a highly fungible good; once it has been cracked, the results from it being extracted from one place are very similar to those where it has been extracted from another, and nearly everyone wants to have some. This means that even when some countries have fairly restrictive regimes on petroleum exports, the effect on world prices of supply in one place is very much like it is in another place.
The big factors at the moment are that the US is producing a lot more than it used to a decade or so back, the Saudis are using their production capacity to further their political ends (which currently means supporting domestic tranquility and exporting trouble to Iraq and Iran) though that's pretty much situation normal, and it looks like China is going through something of a relative slowdown. The Chinese market is big enough that this has a substantial impact.
The net effect is that production is high and demand is low, which means that the oil price is very low. For now. Classic economics.
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Saudis are using their production capacity to further their political ends (which currently means supporting domestic tranquility and exporting trouble to Iraq and Iran)
I think they'd also like to damage American unconventional oil production.
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I think they'd also like to damage American unconventional oil production.
Yes, and Russian conventional oil production. The Saudis are assholes, but that's hardly new.
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The Saudis are assholes, but that's hardly new.
Eh, I don't disagree, but this is just basic economic competition. The Russians will be hurt more. Our economy is more diverse, and most of it benefits from cheaper oil no matter where it's coming from.
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Eh, I don't disagree, but this is just basic economic competition. The Russians will be hurt more. Our economy is more diverse, and most of it benefits from cheaper oil no matter where it's coming from.
Sure, and with oil being so fungible, the Saudis don't really need to care too much who buckles first (though they have some policy aims in terms of regional politics) as they've got the capacity and reserves to ensure that it won't be them. It wouldn't matter so much if it wasn't for the Chinese slowdown (which is noticeable in a lot of other commodities too) and it's the combination of things that is hitting the price so hard.
The net effect is indeed good for many countries, especially those where oil consumption is more important than production.
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Revive this topic?
Yes.
Okay. You wrote a book some months ago. You own and operate a related service. The book was meant as a loss-leader for the service, but it is performing well. So well, in fact, you decided to raise prices. You did that about a week ago, and sales have slowed down, instead of gone up (this is the busy month in a 3 month cycle). Now you're nervous.
What do you do. WHAT DO YOU DO.
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... sales have slowed down, instead of gone up ...
What do you do. WHAT DO YOU DO.
Blame piracy, make a fuss.
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Stay above fifty, naturally.
I like it. It's at $52.74 MSRP now.
Amazon is selling it for 34.55. Maybe I'll raise the price a tiny bit, so the customer can get Amazon's free shipping for purchases over $35. As it is, the customer has to buy another thing to get free shipping. I might as well get that dollar instead of annoying the customer and giving it to Amazon.
