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    9 Replies Latest reply on Feb 17, 2008 10:52 AM by grantsforce

    Starting a business. Type of business and merchant accounts?

    Martin-444 Newbie
      Hello all.
      I am very new to this. I am trying to determine, what type of Business Formation better suit
      me. I am in California, Bay Area.
      Some merchandise will be arriving to US from a foreign country.
      I only have to charge a the customer a price for that merchandise, send it to the customer, take a profit % for myself and the remainder will be sent back to that country. I will be only on my own. No other people involved.
      Marketing, finding a customer and expenses with production of that merchandise will be handled by people in that foreign country. They have their own company back there.

      So, I did a research, I found all kinds of types of Business Formations
      here: http://smallbusiness.findlaw.com/business-structures/business-structures-quickstart/

      Also I did a research on merchant accounts
      :
      http://en.wikipedia.org/wiki/Merchant_account

      Did anybody had a similar business? What would be the most effective solution for this kind of business? regarding types of business formation, merchant account and taxation?

      Thanks an advance.
        • Re: Starting a business. Type of business and merchant accounts?
          LUCKIEST Guide
          444, Welcome to this web site.
          You are new to this and trying to determine, what type of Business Formation better suit s you.
          You Need an Accountant and a Lawyer.
          It would also help to have a Business and Marketing Plan
          Good luck, LUCKIEST
          • Re: Starting a business. Type of business and merchant accounts?
            Lighthouse24 Ranger

            My advice is to begin as sole proprietorship. It's the most common business structure in the U.S. for a reason: it's the fastest, least expensive, and easiest to set up -- and it's simplest to manage and administer. If the business eventually "outgrows" that structure, you can always incorporate later. If it doesn't, you've avoided spending unnecessary time and money up front.

            As far as how to do it, you can follow the checklist on the webpage you referenced. The main steps are to (a) register the business name with your state/county, (b) apply for an EIN, (c) open a business checking account, and (4) get a sellers permit (or sales tax and use permit) from your state. (Note: the site says the IRS won't issue an EIN to a sole proprietor, but that's incorrect -- so DO get an EIN.)

            As for as a merchant account (or possibly just a payment processor), the best solution depends on how you will be selling your products -- in a retail store, from a remote location like a fair or flea market, from a website, or a combination of those? If you can provide more info about that aspect of your business, it will be easier to advise you. Thanks.
              • Re: Starting a business. Type of business and merchant accounts?
                Martin-444 Newbie
                Thank you, Lighthouse24. I appreciate your answer.
                I am thinking about either Limited Liability Company or Sole Proprietorship.
                I would say, I even more into Limited Liability Company. I see that Sole Proprietorship
                might damage my credit score or might get me into personal trouble, if something will go wrong.

                 

                I can't find a good source about the difference between Foreign Limited Liability Company or just regular Limited Liability Company.
                The real thing is that the company only wants to sell a merchandise in US. They need just somebody to process the payments, send the merchandise and transfer the profit back. Will Foreign Limited Liability Company type work for this?

                There will be no retail store and payment will not be accepted using the web-site. I might use some web-site to process the payment, but customers will not do that by themselfs. I've heard, that somebody buys that credit card processing machine and somebody uses a web-site, where they can just enter a credit card number.
                  • Re: Starting a business. Type of business and merchant accounts?
                    Lighthouse24 Ranger

                    A "foreign" LLC is simply an LLC created in a state other than the one it is doing business in. In other words, a "regular" LLC that was created in Texas and also does business in California is considered a "foreign" LLC in CA. If you're living in CA and doing business in CA, it doesn't make a lot of sense to create your LLC elsewhere -- as you'd have to pay annual registration and agent fees in that other state, as well as fees to CA to register as a foreign corporation -- plus either type of LLC in CA has to pay a minimum $800 a year state tax and an additional fee based on the percentage of sales revenue).

                    As for the other issue, if there is no retail store and you are not accepting customer payments via a website, exactly where and how are customers buying from you?
                      • Re: Starting a business. Type of business and merchant accounts?
                        Martin-444 Newbie
                        I am not sure for now how it's going to be set. This is what I am working on right now.
                        I guess, I have to clear out this with the company, which is will be going to supply me with that merchandise.
                        But, it's not going to be a retail store.

                        But, what I know exactly, is that I will need to set up that merchant account, which would allow me to accept payments using buyer's credit card. Will it be a machine and they will submit me the Credit Card number over the phone or will it be a web-site - whatever cheaper and safer.

                        I heard from people who applied for merchant account, that some of companies, who offer the merchant account, have tonnes of hidden fees and catches. They send you tonnes of terms and conditions, which you are going to read for days. They use tiny letters and a very difficult language.
                        You know what I mean? Of course, when it's advertised, it looks perfect and like you are getting a great deal.
                        So, this is why I am looking for some kind of recommendation.
                  • Re: Starting a business. Type of business and merchant accounts?
                    grantsforce Adventurer
                    Martin-444 - There seems to be a presumption here that you have done appropriate research on this company with the understanding that there are similar offers from foreign companies that turn out to be scams. Lawyers may not warn you of this unless specifically paid to do so.