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Starting A Small Business from Scratch - What to DO? What to AVOID?

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posted on Dec, 19 2018 @ 12:33 PM
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Greetings to all business-minded ATS members and lurkers!

Okay, I am starting a new small business. It has been a very sloppy set up so far, and the project is already 2 years behind schedule, but finally January 1, 2019, we (myself and 3 other partners) are going to officially start.

We formed a LLC (limited liability corporation) in the state of Rhode Island, USA. We have a second location in Illinois, which is where I will be doing the business paperwork stuff, and meeting with our primary attorney. I know very little about what we can do with our LLC, and am trying to learn the structure of that, and what it means for how we operate. We will be opening a business bank account in Rhode Island.

I will personally provide the sole source of capitol for the startup, and will be doing the books. My partners in Rhode Island are going to fabricate and ship beauty type products (mainly) from that location over the internet, without any actual 'brick and mortar' store front. This is because the startup location of the business is going to be in a home zoned as residential. There will not be any walk-up customers. We are selling a product(s), and no services. All workers are set up at the start to be partners in the LLC, not employees. I am trying to make this startup as low cost as possible, with incentive for us all to work.

The plan is to start January 1, 2019, though we have already incurred some expenses in 2018. I want to be able to write off as much of the expenses on my own taxes as possible, and also if possible, write off my initial investment with time too. Can I retroactively use the 2018 expenses in our 2019 tax season?

The main problems: I have never done this before. I am primarily a scientist by training, and not a businessperson; so, this is waaay out of my comfort zone. I will be doing the paperwork at a location separate from where the production and shipping will occur. I am afraid of the IRS, both due to my ignorance of what all I might be able to write off on taxes (don't want to miss something...), and also due to my not wanting to neglect something that will get me into any future trouble with the IRS. I have an accountant who does my taxes, and she will help to do the taxes in addition for this business, but she is busy and won't have time to 'teach' me …. so I need to know the information I should give her beforehand, if possible.

I welcome any advice that you can give, because I am scared as heck, having anxiety, and some sleepless nights. My primary fear is fear of failure, and that is a big phobia for me. So fellow ATS'ers - what would you tell me to do in these final days before startup, that can save me as many headaches in the year(s)(?) to come as possible?

Thanks so much in advance for all replies - good AND bad hah




posted on Dec, 19 2018 @ 12:39 PM
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a reply to: Fowlerstoad

Get a good tax person asap, you should do this before you do anything.




she is busy and won't have time to 'teach' me



Seriously, get someone that has more time, it will be invaluable.
My aunt did this before she died. Her clients treated her like a God because she helped them so much.

edit on 19-12-2018 by JAGStorm because: (no reason given)

edit on 19-12-2018 by JAGStorm because: (no reason given)



posted on Dec, 19 2018 @ 12:46 PM
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originally posted by: JAGStorm
a reply to: Fowlerstoad

Get a good tax person asap, you should do this before you do anything.


That and a mean ass attorney. I have owned and operated a number of LLC and been sued a few times.

It's also been my experience that no matter how well capitalized you think you are. It's never enough!!

Also make sure you partnership papers are iron clad. Partnerships can get very ugly. Voice of experience here...

Also entrepreneurship is filled with odd and strange experiences and some can put you out of business and flat broke...that's what makes is exciting and worth while. It builds character and turns you into a Zen guru.
edit on 19-12-2018 by olaru12 because: (no reason given)



posted on Dec, 19 2018 @ 12:47 PM
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a reply to: Fowlerstoad

Find a good accountant.
I cant stress that enough.
You will have enough other headaches with that to worry about.

I would also recommend you find a small business group in your area. They usually exist and most of the time they know the right people to help you.



posted on Dec, 19 2018 @ 12:52 PM
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a reply to: Fowlerstoad

First, I want to congratulate you. It takes guts to take the plunge. And my first bit of advice is to take a deep breath, let it out, and repeat. Good.

First, your fear is healthy. Failure is a real possibility, so you are right to be cautious. And yeah, the IRS is scary, but if you are not trying to do anything shady you should be just fine. That said, you should move forward with your plan and adjust it as necessary. And believe me, it will be necessary. Being fluid and able to adapt is key. Always have a backup plan, and never over-promise. Remember how your business took two years longer than you thought it would to get started? That is typical, so remember that things always take longer than you think.

Other than that, surround yourself with good people, don't grow faster than you can keep up with, and apply realism and pragmatism in all of your decision-making, and... well... you have a 50/50 shot! Such is small business in America.
It can be done. I am writing from my home office, where I run my business. I wish you all the best in your endeavor. It sounds great. Just remember that luck is a huge factor. Carpe Noctem!

ETA: I have a Legal Shield account. I highly recommend.
edit on 19-12-2018 by MisterMcKill because: ETA



posted on Dec, 19 2018 @ 12:56 PM
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You want to know how to make a million dollars? Start with two million dollars!



posted on Dec, 19 2018 @ 01:10 PM
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Whatever you do, do NOT stick all receipts in a box to be filed at the end of the year. If you don't have time to record the ins and outs in a ledger or on an excel sheet and file paperwork daily, make sure you do it weekly or you can get swamped and in a big mess.

Good luck with your new venture!



posted on Dec, 19 2018 @ 01:10 PM
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Stupid double post!
edit on 19-12-2018 by CthulhuMythos because: (no reason given)



posted on Dec, 19 2018 @ 01:15 PM
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Congrats!

I'd say number one is communication of expectations between partners.

Partnership should be equal to the amount invested.

Meaning guy A puts in 10%, guy A gets only 10% of the profit after overhead.

..unless it's your kid

Partners can always reinvest their part of the profit for a bigger chunk.

But point is, whatever you do to structure, make sure it is WRITTEN.

Do not leave job duties/expectations and pay/ownership structure up to word of mouth EVER.

You can pull off partnerships much easier, if you do this beforehand, otherwise it's a nightmare.

As far as taxes get a cpa that has time for you.

Keep receipts for everything and ask them if there is more expenses you can write off. You can write off your home office expenses, and things related to that, as well as mileage on your car.

A good cpa will hook you up and minimize your liabilities. When you use a cpa vs. doing the 1099's yourself, it should go much smoother.

I can't stress the written expectations enough. It avoids bs that should have never been an issue.

Good luck. Fun stuff!




posted on Dec, 19 2018 @ 02:42 PM
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Main things would be insurance for anything and everything to do with the business as if you're running out of lockups etc and someone empties the place one night then what and the same for any company assets like computers etc and make sure theres plenty of copies of all the important stuff as the tax man is never a happy chappy at the best of times.

If theres a local business start up agency that can sit down and give some help on all the little things.



posted on Dec, 19 2018 @ 02:46 PM
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A separate computer for the business and have a way to back it up on a regular basis. Having it on your personal one can bring in too many issues. Good secure passwords on everything business related.

Will think of more when I walk away.





posted on Dec, 19 2018 @ 04:57 PM
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If you plan on doing online sales you will need a good CRM (Client Relationship Management) software as well as email marketing and an E-Commerce Site.

I suggest Infusionsoft as a great company who does all of that.

Email marketing is absolutely essential for online business. If someone buys from you once they are 60% more likely to buy again if you hit them with the right marketing at the right time.

I am a Regional Account Manager for a SAAS company that does marketing and CRM. So if you have questions on that stuff feel free to PM me.
edit on 19-12-2018 by PraetorianAZ because: (no reason given)



posted on Dec, 19 2018 @ 04:58 PM
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I am also starting a business, and already I've made several significant mistakes.

I recognise my need of a good accountant & solicitor to advise me, and hopefully with a bit of graft I can ensure that everything's ready for the tax man to inspect at the year end. Other than that it's an exciting time, and I'm enjoying the sense of adventure which comes with it. In my company there's very little in the way of overheads - my assets are what I've termed 'intellectual capital'. I stated that to the bank & they were happy with my description of how I'll be operating from such tiny startup costs, and duly opened a business account for me. It was nice to have someone putting a bit of confidence in 'the plan', and it's definitely helped to motivate me.

There's a long way to go, and I'm sure I could be equally liable to fall flat on my face as to strike success - but the attempt will be worth the risk in terms of the learning experience. A man can fall six times & stand up on the seventh - that's some Bible scripture aimed squarely at the entrepreneurs of the world! No matter what, NEVER GIVE UP. The system is designed to enable inventive & entrepreneurial-minded people to try, try, try again - because they are the ones who provide economic opportunity to the nation, hence tax, tax & more tax for the government.

A toast to any & all who make the effort to stand up!



posted on Dec, 19 2018 @ 05:18 PM
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a reply to: JAGStorm

Start with the tax person CPA , they will help you more than you think, they will let you know things that you haven't even thought of.
And if you want to do it right and stay away from the IRS then get a great tax person CPA and you will not regret it. Should have been your first call ,even before the lawyer.
edit on 190500000012 by JHumm because: (no reason given)



posted on Dec, 19 2018 @ 05:36 PM
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a reply to: Fowlerstoad

Something I forgot....

Learn about intellectual property laws. If in your business you develop a unique product or service be prepared to have it stolen. Protect yourself with a mad dog lawyer and sue the sh!t out of the thieves. Take plenty of photos, videos and document EVERYTHING.

Being new to the game, you wouldn't believe how common it is. I know we want to trust our partners...just don't!!! When money is involved humans will morph into snakes in a heartbeat.

And good luck!! First time enterprises fail often for many reasons but don't despair, just start a new one.

If you haven't made and lost a million dollars, you're still an amateur.
edit on 19-12-2018 by olaru12 because: (no reason given)



posted on Dec, 19 2018 @ 06:44 PM
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Definitely have a lawyer draw up a contract. There will eventually be a dispute between partners.
a reply to: Fowlerstoad



posted on Dec, 19 2018 @ 07:06 PM
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Too many make the mistake of what they want to be 3, 6 and 12 months out and forecasting based on that.

I suggest developing a detailed vision of what you want to be 10 years from now and work backwards.

Marketing/advertising and branding are also incredibly important.

Since your background is in science and you'll be doing the books, I'd highly, highly recommend hiring a bookkeeper who can double as an organizer. While general bookkeeping can be learned quickly you also will need to hire an accountant from outside to help with month end, quarterly and annual closing and audits.

Study your competition and find a way to brand yourself differently. Stick out. Create an individual appeal and image.

I didn't start a business but I did recently move cross country to buy a business which I'm working 24/7 on cleaning up. The above are some things I'd consider vital.



posted on Dec, 19 2018 @ 07:10 PM
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First.

The term is Limited Liability Company, not corporation.

Specifically, you have formed a multi-member LLC, apparently operating in at least two different states.

You may want to consider converting your LLC into sub chapter “S” corporation, once you review your liability exposure and multi-state tax status.

Be sure to know and comply with the registration and tax requirements in every state you operate in. Some states will consider your company to be “doing business” in their state, and thus subject to entity level taxation, based on the amount of sales shipped to customers in their state.

I strongly recommend that you have your company’s taxes done in each required state by someone in that state who is an expert in that state’s tax laws.

This advice is based on more than 20 years experience serving as a tax agent for the state of California.

Best of luck!



posted on Dec, 19 2018 @ 07:15 PM
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You are starting an ecommerce business but rather than drop ship or white label you are manufacturing your own goods

Thats very risky and rime consuming and requires massive effort into branding

Try drop shopping or white laveling an already reliably manufactured product. You wont have to source materials or deal with such high freight cost and is far less riskier

It'll be a better use of your capital investment. Once you stabilize you can begin considering creating your own products



posted on Dec, 19 2018 @ 07:17 PM
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a reply to: Fowlerstoad

Immediately if not sooner get professional advice and help with tax issues. I'd think the Small Business Administration advice would be helpful.

Unless you are providing a service, producing a product can mean a couple of years before you realize a profit. The old rule of thumb was have enough money to carry you through the first three years.

Start slowly and test the market. Just because you think you have a winner does not mean it will float.

Avoid employees if you can. Partnerships often run into issues and has split up even best friends quickly. Do everything on paper with signed agreements that detail what each person is responsible for to avoid conflict. Promises made on paper hold weight, handshakes do not.



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