How hard is it to start a company?

[CrazedClerkthe2nd]

Let me elaborate:

I was thinking of starting a small company (actually a one man operation) that I run as a part time business for some supplemental income.

I have an idea I think it is pretty workable. I won't repeat it here but suffice to say it would be a service based business (as opposed to products based).

I know at least some people on here are in business for themselves and I'm curious about how difficult (and expensive) it is to get the company registered and the name trademarked.

[HorrorFrogPrincess]

A lot of it depends on the state you're in, what kind of entity you'll be, and how much you'd be making per year.

State, County, and City licenses are required. If you'll be taking payroll, you'll have to get set up for State Unemployment if your state has it.

License are NOT cheap, and they aren't a one-time thing. And they take forever to get, at least in my state.

Service-based, so you won't have to pay or collect sales tax.

I know in Nevada, if you work from home under your own name and make less than 17 grand a year, you don't need a business license. Just have to send an application to the Secretary of State and cite the exception. Check the Sec of State website and see if there's a similar exception for what you want to do. That would basically be a Sole Proprietership, so would act as additional income for your Income Tax (Schedule C form). Same thing as anyone who gets paid as an Independent Contractor, so you'd have to pay 2 parts of Medicare and Social Security on that income.

So... yeah, definitely keep all records of expenses.

[Exaspera]

If you're here in the US you can go to an SBA (Small Business Administration) and get free advice. Your tax dollars at work.

http://www.sba.gov/

That would basically be a Sole Proprietership, so would act as additional income for your Income Tax (Schedule C form). Same thing as anyone who gets paid as an Independent Contractor, so you'd have to pay 2 parts of Medicare and Social Security on that income.

As a small business, that's not necessarily true. But, you're correct on depending on what state you're in.

[KiaKat]

Also, in many states, if you're the only person doing the work, you can consider it freelance, join the freelancer's union, and just be able to report "self employed" on taxes. Which means you don't have to file quarterlies. That might be easier, unless you're planning on making this a full-time business with employees.

[Pedersen]

In the USA, there are different types of corporations. Understanding the distinction between them is critical to the choice of what type of business to file as. Should you file for one type, and later realize you need another, there can be considerable fees to make the switch.

One concept that you must be aware of before making your choice on business type is something I've heard called the "Corporate Veil". I'm not sure if that's the official term or not, but what it amounts to is how easy is it to sue you, the person, when your company makes a mistake.

For example, let's say you're offering a house cleaning service. You bring in house cleaners that, as it turns out, have very bad side effects on people, but this is not discovered until well after your business has closed down (makes it easier to show the point). Some of your customers decide to sue your company for its use of that cleaner. Since your company has now closed, what can those former customers do? Each type gets answered below.

The types that I can remember are as follows.

• Sole Proprietorship. Available in all 50 states. This is the simplest to get started with, and the cheapest. It is also the most risky to you, personally.
  
  In this company type, as you are a sole proprietor, you are the company. If you die, the company dies. As a result, this type of company has the thinnest corporate veil. In the above scenario, the customers would have a relatively easy time of suing you personally.
  
  It's the easiest to get started with. I'd still not use it if I had other options.
• Limited Liability Corporation (or LLC). Not available in all 50 states (or at least it wasn't 10 years ago when I last was considering it myself). Depending on the legalities of your state, might require a partner.
  
  In this company type, the company is a separate entity from you/your partner(s). Even if all of you died in a horrific accident, the company would continue. As such, in the above scenario, your customers would have a very hard time piercing that corporate veil. They can sue the company, but unless they can show reason for personal liability on your part, they cannot come after you.
  
  If you're not going for an S-Corp or a C-Corp, this is your best choice (if you can get it).
• S-Corp/C-Corp. Available in all 50 states, but also the most expensive to get going, and the costliest to keep going. Corporate veil protection here is strong. Then again, if you're considering this choice, anything else I can say is totally redundant to what your lawyer(s) should be telling you.

I highly recommend looking at the LLC. I also highly recommend spending the cash to hire an accountant to manage your books, and a lawyer to manage the legal side of making the business happen. Failure to do those things can get you into trouble down the road that could have been easily prevented, and the kind of trouble I'm talking about could cost you your home.

[Midorikawa]

I ran a business for a year, and I really learned a lot, among them that it was too stressful for me to do everything by myself, despite that I had several repeat customers and turned a 30% profit after first year in operation. My main piece of advise is to remember that you are the marketing, finance, IT, and production departments. It takes a LOT as a one-man operation. I'm not trying to discourage you, but I do want you to understand that a lot of business owners in one man operations work 80+ hours a week just to pull a 40 hour a week paycheck that doesn't come from someone higher up.

I second exaspera's motion to check the SBA. They were a great resource when I ran my PC repair service.

[Mikkel]

It takes a LOT as a one-man operation. I'm not trying to discourage you, but I do want you to understand that a lot of business owners in one man operations work 80+ hours a week just to pull a 40 hour a week paycheck that doesn't come from someone higher up.

That is true, it can be fun to do but you'll work long days for low pay. I have enjoyed the 16 years I had my shop but I could have earned lots more working 8 hours a day for someone else. On the upside you decide everything, no silly bosses to change the rules on you.

[Midorikawa]

On the upside you decide everything, no silly bosses to change the rules on you.

I definitely miss that aspect, but stress related health problems dictated otherwise. :-(

[CrazedClerkthe2nd]

On the upside you decide everything, no silly bosses to change the rules on you.

This is one of several reasons I have considered this for some time. I'm tired of working jobs where I am at the whim of harebrained corporate management.

[protege]

[*]S-Corp/C-Corp. Available in all 50 states, but also the most expensive to get going, and the costliest to keep going. Corporate veil protection here is strong. Then again, if you're considering this choice, anything else I can say is totally redundant to what your lawyer(s) should be telling you.

I highly recommend looking at the LLC. I also highly recommend spending the cash to hire an accountant to manage your books, and a lawyer to manage the legal side of making the business happen. Failure to do those things can get you into trouble down the road that could have been easily prevented, and the kind of trouble I'm talking about could cost you your home.

Good advice all 'round

Dad once had an advertising company, which was set up as an S-Corp. At the time, he wanted the benefits of being in charge, but also be able to sell stock to raise cash. IIRC, most of the stock was held by the company itself--smaller shares were held by my parents, their lawyer (who was also part-owner), and my grandparents. Right now though, it only exists as a "paper" corporation. That is, we still own the rights to the name, logos and other items, but it's dormant right now.

[casey13]

Well, I know a couple that "owns" a business but basically they are home healthcare. They are state-tested-nursing-aides and they help their clients remain independent. I think she is at least certified to pass medicine. They do alright and theirs is a two-man operation. I think they may be considered independent contractors technically, but I swear they said it is a business.

[Pedersen]

I think they may be considered independent contractors technically, but I swear they said it is a business.

Being an independent contractor is a business. Now, with taxes, legals, etc, it can be painful to be so, but it is a business.

Anybody looking to do contract work should look at http://www.mbopartners.com/

Not just them, they're just the only name I know. Have never used them, though when I do my own business, I intend to do so. Short version: They become your employer of record. They take a percentage of your gross billing. For this, they allow you to have a long term employer of record (helpful with bank loans of any sort), manage collections, and allow you to sign up for their group insurance coverages. This also means that you get the regular employment taxes taken out, too, so you only continue to file your taxes as you always have.

I know there are other companies out there that do the same, I just don't know who they are. But I do know that, for a one-man company, you're going to find such a thing incredibly valuable. Lots of benefits, very few downsides that I could find.