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35 Replies Latest reply: Dec 15, 2008 6:07 PM by DSTREET1 RSS

Starting my first business

noleafclover6 Newbie
Currently Being Moderated
Hello all!

I have a few questions about moving forward with a business that I have been planning for a few months.
Needless to say, I am both excited and nervous, but I am determined to get started! My name is Matt, and I studied business marketing and IT at college. My father has worked in restaurant supply all his life, and we had always talked about someday starting a business of our own. After graduation and some planning, I decided to move forward with an online business (to start!)

Some background:
This is an internet business - my website will sell professional knives and cutlery and will utilize a payment processing service, which I still have to choose. I have investigated a few types of these, Authorize.net and Paypal being the ones that stand out the most.

My biggest questions regard actually registering the business and incorporating, if need be. Since this business is starting out from my home, and I won't have any employees to start with, what do you think the best way to go about registering the business is, and choosing a structure? Essentially, I want to make sure that I avoid any issues with taxation and protect myself from liability.

Does anyone have any experience with different payment processing services? Which ones do you like best / most?

Any additional advice for me would be great as this is the first time I have moved foward with something like this. Thanks for reading!

--Matt
  • Re: Starting my first business
    Ed O'Gee Apprentice
    Currently Being Moderated
    Hey Matt - Welcome to the community

    1. Congrats on starting your first business you should be excited and nervous but it sounds like your dad has prepared you well

    2. If you are going to incorporate right away I'd say look at an LLC - the advantages are if someone sues you they can only come after the business just like any other corporation, so your personal assets are safe. From a tax standpoint you'll file just one return. All you'd do on your personal return is claim your businesses loss or profit so an LLC makes tax time easier

    3. As far as payment options, PayPal is definitely the most recognized but if I were you I'd start with the bank that holds my business checking account. Usually you get paid faster if the entity that processes your card transactions, also is the place where your money is deposited.

    Good luck!!
  • Re: Starting my first business
    LUCKIEST Master
    Currently Being Moderated
    Matt, This is a great start. You should be both excited and nervous.
    I am a SCORE counselor, both on line and in person. We always suggest you Develop both a Business and
    Marketing Plan. You can get great info by visiting "www.score.org" and it is FREE.
    Do you have a Business Name?? You should register the name with the I R S. (You can register on line at "IRS.gov")
    Every business should have an Accountant, a Lawyer and an Insurance Agent.
    I have used Paypal with NO problems.
    Good luck, LUCKIEST
  • Re: Starting my first business
    Biz Online Novice
    Currently Being Moderated
    Congrats, Matt, on taking the plunge!
    As far as registering your business, talk to a business attorney. The main two options to protect yourself is either an LLC or C-Corp, but taxation is different for both, so ask a lot of questions. I did an LLC. Once I got my first employee, I then set up and got EIN, or employer identification number (required by the IRS if you have employees.)

    As far as payment processing, PayPal will get you started and they only charge a fee for each transaction. Authorize.net is usually a bit more expensive on a monthly basis, so you may want to check with your bank first. There are hundreds of merchant account service operators. Try finding one without a big monthly minimum.

    Have you done your keyword research for your new website? Determine before you build a single web page your target keywords. Then, and old search engine optimization (SEO) idea is to name the page with those keywords (put a dash - between each word in the page name, not a space!) For instance:

    Example of new page names:
    butcher-knives.htm
    professional-knife-sets.htm
    cutlery-set.htm
    kitchen-cutlery.htm
    custom-knives.htm

    And if you plan on doing pay per click advertising, don't forget possible negative keywords:
    -hunting knives
    -case knives
    -pocket knives
    -buck knives
    -folding knives
    -throwing knives

    Good luck with your business venture!
    Cliff
  • Re: Starting my first business
    noleafclover6 Newbie
    Currently Being Moderated
    Thank you all for your informative and helpful responses.

    I heard on the radio about www.legalzoom.com and they offer document preparation services and legal help with setting up an LLC or similar companies. Does anyone here have expreience with them or similar online service providers of this type? My head is spinning with all of the options I seem to have.
  • Re: Starting my first business
    Lighthouse24 Master
    Currently Being Moderated

    My suggestion is to start with a set-up that's easy, fast, and inexpensive -- because none of your initial decisions has to be forever.

     


    Will you and your father be true partners in running the business? If so, an LLC is probably the way to go. But if it's really just YOUR business at this point, you could begin as a sole proprietor, and after a trip to county clerk and the bank, be legally up and running today. Taxes are simple, and although you'd have unlimited liability, that can actually help you get more money to build the business in the beginning (because it isn't just the new business entity that's liable to creditors, it's you personally). People often read "liability" and worry about lawsuits, but being sued is not really a concern until you sell things and accumulate enough assets to make a lawsuit worthwhile. When you reach that stage, you can incorporate -- and there some very advantageous ways to do that and bring your father or other family members into the business at that time.

    As for merchant services, I'd begin with PayPal -- again, simply because you could be set-up and accepting credit cards 30 minutes after you registered the business and opened a bank account. Once you're making a profit, you can investigate other options and change your provider. In fact, your history of credit card revenues will help you get more favorable rates in a year or two that you would be offered as a new business today. PayPal's service is very easy to use, and most on-line shoppers recognize it. Keep in mind that unlike your business bank account balance, your PayPal balance is not federally insured -- so make regular transfers to keep the PayPal balance relatively low.

    Hope this helps. Good luck with your new enterprise!
    • Re: Starting my first business
      noleafclover6 Newbie
      Currently Being Moderated
      Thanks so much !

      One additional question I ahve after reading your post - do I have to set up my LLC / business structure right away before I begin selling online? I realize tha the setup of the bank account and registering with paypal is relatively easy and quick, but I believe Bank of America wants you to be registered before they open your business account. Thoughts on this?

      Thanks again
      --Matt
      • Re: Starting my first business
        Lighthouse24 Master
        Currently Being Moderated
        Yes, you need to "give birth" to the business first -- making it a legal entity. Your DBA or articles of incorporation will be like the "birth certificate" and the EID (Employer Identification Number -- available on-line from the IRS) will be the business' "social security number." You need those to open a bank account in the business' name.
      • Re: Starting my first business
        Ed O'Gee Apprentice
        Currently Being Moderated
        Matt - if it will just be you owning the business, the you can set it up as a sole prop and use your social to open your business checking account. Although I'd start with the LLC because I think it is better to have a true corporate structure. I think legal zoom does incorporations for like 150, you'll get an EIN, articles of incorporation, all the things bofa or any bank will need to get your business checking account open.
  • Re: Starting my first business
    NatOnline Expert
    Currently Being Moderated
    Congratulations on your new online business project.

    I suggest like Lighthouse24 said by using first Paypal only, then check how your customers pay. If the majority pay with credit cards and you make enough sales to pay a gateway provider like authorize.net and a merchant account, then do it. Some people prefer not to use paypal for payments. This is why I give the customers both option.

    Good luck
  • Re: Starting my first business
    Lighthouse24 Master
    Currently Being Moderated
    Ed is correct, you CAN use your social, but then that's the number your state sales tax account and use permit would have to be set up under (and some states/counties/cities disallow that), plus you'd have to provide your social to other business entities (for example, suppliers with whom you want to establish payment terms or discounts). It's fast and easy to get an EID on-line, and it lets you keep you business and personal entities legally separate from the very start.
  • Re: Starting my first business
    LT Lawn Care Newbie
    Currently Being Moderated
    Matt,

    Welcome to the board - I won't reiterate all the great advice you've received on the board so far but I just want to say that I am with Ed. I think it is important that you incorporate right away. It will just make things easier. I will say you don't need a lawyer to do it. You can go to your state office to file articles of incorporation and you can go online to get your EIN from the IRS.
  • Re: Starting my first business
    noleafclover6 Newbie
    Currently Being Moderated
    Thanks for all the great info everyone. This place is truly a great resource!

    One additional question - when setting up a Bank of America business bank account, what do I need to know about savings / checking? Do I need both? Benefits of either?
    • Re: Starting my first business
      NatOnline Expert
      Currently Being Moderated
      If you are planning to take a merchant account, business account, credit card, etc... from the Bank of America, they've got a great pack deal. The name is "Business Advantage" it's a prenium account.

      Hope you will find this useful.

      Good luck
    • Re: Starting my first business
      Lighthouse24 Master
      Currently Being Moderated
      I began with the Business Economy Checking -- it's the lowest cost option, and until you start writing a lot of checks or making a lot of deposits, it provides everything you need -- including a free three-month trial of Premier On-line Services. As I said in my initial post, these initial decisions do not have to be forever -- you can always upgrade to banking products and services with greater functionality when the need arises. For most new one or two person operations, the most important things are to get started quickly and to spend no more money than absolutely necessary.
    • Re: Starting my first business
      maxamillion Newbie
      Currently Being Moderated
      Hi Matt

      Advice regarding setting up the business, look for the cheapest form of incorporation. LLC's are okay at a later level after you have partnerships and assets put into the business that are your own etc. Leave the LLC for now, just get a regular business license that registers the company name to you. If you can afford an incorporation do it. Go through the cheapest online incorporation. When you business catches on then decide your legal status, specially since you are not partnering with an outsider. Since you are selling knives an incorporation is the safest.

      As far as bank account is concerned you need a chequing account. Savings accounts are no use to you since you are going to need to write checks. Regarding the merchant accounts, paypal becomes an expensive account for each transaction. The best thing is to get your own merchant account. This reduces your cost per transaction. But it is difficult for a new business to set up a merchant account, depending on your standing with your bank and your relationship. Check it out with your bank branch. If you cant get a merchant bank, authorize net and credit cards international and other processors are fine. Just make sure that when you are setting up your shopping card that it can handle the credit card processor that you plan to use. You cant pick a credit card processor and then get stuck trying to work with the shopping card they have. Initially if you can include the cost of the processing use paypal, it reduces your headache and does not cost you anything to set up and for terminal costs etc.

      Also pick a good shipping agent for your courier costs. Dont get stuck with one courier service. They all have different rates for different locations

      Good luck.
      • Re: Starting my first business
        noleafclover6 Newbie
        Currently Being Moderated
        Hi Maxamillion,

        Thank you for your input!

        In order to set up a business bank account with Bank of America, I believe one of the questions online involves incorporation. If I simply register the business name with the county, and set up the legal structure afterwards (when I know more about my sales volume, etc.) can I still open an account with them?

        I will probably start with paypal because it doesn't involve monthly fees and I would like something cheaper in the beginning.

        Thanks,
        --Matt
        • Re: Starting my first business
          LUCKIEST Master
          Currently Being Moderated
          Everybody in business should have a checking account. For many reasons !) It shows that you really are
          in business. 2) Your Accountant and the I R S want to see deposits and checks written. 3) What are you
          going to do when you receive checks?? You get a Federal I D number on line at I R S.gov.
          In business, you have to SPEND money to MAKE money.
          Also remember SCORE. They are FREE and help the small businessman succeed.
          Again, LUCKIEST
        • Re: Starting my first business
          maxamillion Newbie
          Currently Being Moderated
          Hi Matt

          Yes you must have a checking account and you dont have to be incorporated to have a business checking account, since you couuld be a proprietor of the business.

          Also, having a checking account allows you to reduce your banking costs and be more professional of writing regular checks and not making cashiers checks and paying bank charges for them.

          Paypal should be fine, as long as you keep maintaining a good connection with your bank for a later merchant account. If you need any business help dont hesitate to ask
        • Re: Starting my first business
          42n8lady Newbie
          Currently Being Moderated
          For two years, Bank of America allowed me to open three business accounts with no paperwork involved. Two of them had savings, one, just checking account. I have since closed two of these accounts because I have now converted them to "real business accounts". I have recently opened (just checking) accounts for one C-Corp, an LLC and one LP with complete documentation (such as EINs, Articles, By-Laws, and the like).
          I am a great loyalist fan of Bank of America and I think that by allowing new entrepreneurs to "practice" banking , this experience helps build confidence in money management and paves the way for ultimate business success. I don't think that they have changed their policies about this.

          By the way, do you know that you can open these legitimate business accounts with just $100.00 each. I had bigger balances for my unregistered accounts!
  • Re: Starting my first business
    noleafclover6 Newbie
    Currently Being Moderated

    Thanks again for all the input..I will take what everyone has said and evaluate my options.

     

    In case you wanted to check out my site right now, please send me an e-mail at noleafclover614 at optonline dot com

  • Re: Starting my first business
    Supreneur Newbie
    Currently Being Moderated
    Well Matt it all depends on what your ambitions are at this time. If you are serious about your biz
    then you should definitely think about avoiding legal and tax issues. A thing you can definitely do is
    to establish a business entity. Start by:
    1. Establish a fictitious business name as an individual and file it with your county
    2. Get a city business license
    3. Get a resellers permit with your state
    4. Establish business checking account
    5. Establish a business line of credit
    6. Find a tax advisor and share with him your situation.
  • Re: Starting my first business
    noleafclover6 Newbie
    Currently Being Moderated
    Hello again all.

    I have decided that I want to form an LLC - after doing extensive research this seems to be the best legal form to start out with.
    My only problem is that I don't have the money to lay out in order to pay for the registration process - after all is said and done (even with LegalZoom.com's help) the cost would be around $600 +. Does anyone out there have any advice for me? This roadblock seems to be the thing that stands in the way of getting the business off the ground - Once I have the business formed, I can activate my bank account with Bank of America (which is pending registration documents), link my business PayPal account to this, set up my website with payment processing and start ordering my stock.

    Any help or advice would be great..

    Thanks a lot. Regards,

    Matt
    • Re: Starting my first business
      Lighthouse24 Master
      Currently Being Moderated

      I'd recommend that you file a DBA with your county clerk and get your business up and running now as a sole proprietor. It's by far the cheapest, fastest, and simplest structure -- you could probably file the paperwork, get an Employer ID, and open a business bank account before today was over. Once you make some money and build a customer base, there are all kinds of creative options available for restructuring your enterprise (many of which are more advantageous than if you'd started with an LLC).

       

      For the short term, you'd lose the "limited liability" that an LLC provides -- but you've indicated that you don't have any money, and that in itself effectively renders you "judgment proof" (attorneys who'd sue you for everything you've got won't bother if you don't have anything!).
      • Re: Starting my first business
        noleafclover6 Newbie
        Currently Being Moderated
        Thanks Lighthouse24.

        What I have decided to do is use LegalZoom.com to file a DBA for a sole proprietorship, and I will form an LLC later once I know more about my sales volume and customer base. Once I have the business registered, I can move forward with my bank account and paypal accounts, and start gathering inventory.

        Legalzoom also offers to file a Tax Identification Number for me when applying for a DBA, but this is optional. Would you reccomend this?
        Does this gameplan appear to be sound? I want to move ahead with this venture!
        Thanks for the support,

        --Matt
  • Re: Starting my first business
    EagleClimateT Newbie
    Currently Being Moderated
    The way I was always told you is if you can succeed going forward in your business than you should go for it. I was taught that you should take failure as a success, reason I say that is if you fail doing it one way than the next time you will remember not to do it that way, so when you do it again you will find a new and better way to succeed.
  • Re: Starting my first business
    dollsbags Novice
    Currently Being Moderated
    Hi Matt

    My background is in IT and my wife and I recently started an online handbag website and a boutique in St Pete FL.

    Not sure if you have decided on an e-comm application as of yet but I would highly recommend shop-script.com. I am not a sales rep for them and have no affiliation with them! LOL. However, I have investigated MANY shopping cart apps and this one was the easiest to set up and configure. I use it at my site: Http://www.DollsBags.com

    As far as transaction processing goes, I have used PayPal Pro and it is good. I wasn't too fond of having to transfer funds out of PayPal to my AR account constantly, so I went with Authorize.net instead.

    Regarding advertising and search engines. I have also done a LOT of research here too. Being in IT helps me quite a bit because I know a lot about how to get to the top of search engines. It takes 6 months to a year to do so effectively using FREE methods. Pay per click is OK if you write effective ads but it's tricky to beat the big guys to the top of the "Sponsored Links" column. But since you are just starting out and probably have a tight advertising budget, keep the costs down and use things like like exchange and affiliate programs.

    Best of luck! Remember, Rome wasn't built in a day. What makes your business BETTER than all the other cutlery sites out there. Focus on that and you will have success!

    Best Regards,

    Rich Petrelli, VP
    DollsBags.com
    • Re: Starting my first business
      Lighthouse24 Master
      Currently Being Moderated
      Rich, welcome to the board! You seem to have the experiences and a business owner's perspective that will benefit this community. I hope to you'll contribute your thoughts to future threads.
    • Re: Starting my first business
      laocial Novice
      Currently Being Moderated
      Hello,

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      We are located in the center of handbag production base in China, that is Shiling International Leather Center. So we can offer specialized service to meet our customers' specified requirements from price to quality.

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      Skype: nono-skype1

      Mobile: 86-13826039586
  • Re: Starting my first business
    BizWorld Newbie
    Currently Being Moderated

    Congrats Matt...

    Have you thought of S-corp which can save you self-employment taxes on the profits unlike sole prop/LLC?

    BizWorld
  • Re: Starting my first business
    instance Newbie
    Currently Being Moderated
    Hello Matt, we are a Web design company and we have some experience with Web design =)

    I would recommend either paypal pro or authorize.net

    Look that there are different options, for example, you can accept payments in your Web site or in your merchant Web site. Paypal payments pro will allow you to process payments in your Web site (you will need a SSL certificate) and it costs something liek 24 usd a month (At least it was what it costed like two months ago) and authorize.net will allow you as well I dont remember how much it was.

    Also, take a look at the % they charge you per transaction. It should be between 1.9% and 2.3% average plus like 24 cents per transaction.

    Also if you need a Web site developed or an online/offline marketing campaign (you dont need that much money as it sounds like! many people get scared) let us know I'll be glad to assist you!

    take care and I hope it helps!
  • Re: Starting my first business
    DSTREET1 Novice
    Currently Being Moderated

    For starters, Congrats to stepping out there on starting your business!.You can if a lot of info that will be important to you from protecting yourself to hiring and firing employees. Go www.smallbiztool.info and click on the " Watch Movie" link on lower left hand side. This should be very helpful..

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