QUESTION.
My husband has designed a sub assembly for a textile weaving machine. His employer wants to put the design into production. They both agree it will revolutionize the non commercial weaving industry. They have agreed on a royalty amount and now we need to sign a contract. The employer is currently having his lawyer draft an agreement - we need to find a lawyer to review the agreement on our behalf. My question is: How do I find a lawyer versed in royalties? Any help you can give will be appreciated. Thank you.
ANSWER.
Nowhere in your email do you mention that your husband is going to get a patent for his design. He really should get it patented before he starts charging royalties for it. To get it patented you could consult an intellectual property attorney. And a good IP attorney will also be adept at reviewing royalty contracts.
Consider taking a look at the following link. See http://www.martindale.com/Intellectual-Property/. IP attorneys are a true specialty. They usually are fairly expensive. Treat yourself to an initial consultation at least. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Saturday, March 31, 2007
Friday, March 30, 2007
Small business owner wants to know about the necessity of 3-day consumer right of refusal with his contracts.
QUESTION.
We are a General Contractor in Morris County, NJ. Need to know about the necessity of 3-day consumer right of refusal requirement within my contracts.
ANSWER.
That is a legal question. As a SCORE counselor I am supposed to stick to business coaching. Quite honestly, I could answer your question by doing a simple search on Google and finding a few articles on the subject. But I will leave that for you to do. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
We are a General Contractor in Morris County, NJ. Need to know about the necessity of 3-day consumer right of refusal requirement within my contracts.
ANSWER.
That is a legal question. As a SCORE counselor I am supposed to stick to business coaching. Quite honestly, I could answer your question by doing a simple search on Google and finding a few articles on the subject. But I will leave that for you to do. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Thursday, March 29, 2007
A Web site will help your small business more if it can be found using the Search Engines. Study a few books and a few Web sites to learn about SEO.
QUESTION.
We find ourselves starting a home-based business through the Internet. We have developed our own website which offers custom-designed widgets as well as stock widgets. Unfortunately we are having problems getting recognized by the Search Engines. We get conflicting advice as to how long it takes as well as what approach is best to become recognized. Some say "weeks" -- some say "years." Since marketing on the Web is new to us, we need immediate help in the form of sound advice from someone who has "been there, done that." To complicate our situation, we find ourselves on a shoestring budget which limits our ability to go and hire "Experts." I will admit to overestimating our ability to promote ourselves quickly on the Web. Can you help us? We truly hope so! Hope to hear from you soon.
ANSWER.
Books can be written on the subject you are asking me to send you an email about. I just took a look at your site and it looks pretty nice. Take a look at the following list of books. See BOOKS ON SEARCH ENGINE OPTIMIZATION (SEO).
I recommend you get three of the five books and read them and study them. Then put a list of questions you have and send them to me. I will answer your questions. However, in a nutshell, you need to figure out who your competitors are on the Web. Find at least 10 to 15 top Web sites that sell what you sell. Then examine the source code to the home pages to see what Meta-Name keywords are listed. Collect those keywords on a sheet of paper for all 15 top Web sites. Then type the keywords into Google and check the Meta-Name keywords used by the top 20 listed sites for each search. After a bit you will find patterns and typically used keywords people use to search your type of business. Those are the words you have to use to market your site on the Web.
You should write articles that people will enjoy reading, but that have those keywords embedded in the articles. Post those article on free article submission sites. See the list of sites in the bottom left quadrant of my homepage (http://www.jlippin.com/). You will want to sign the articles and and include the URL to your site's home page. Links from sites external to your site give your site more credibility and thus higher rankings with the search engines. Also, you should create FOUR different free blogs that regularly link to your site. See the way I have done it with my site at www.jlippin.com.
I signed up for a free Blogger site and a free WordPress site. Each blog entry is a simple article of sorts, but don't take as long writing the blog entries as you would an article. If you do an entry a day in each of your blogs (that's four blog entries a day) for a couple of months, then your Web site should be ranked high in the search engines. Make sure each entry has a link back to your site and each entry relates to some of the keywords that are critical to your site. Study my site (http://www.jlippin.com/) and see how it interrelates to my Amazon profile and two blogs. Then type my name (Jeff Lippincott) into Google, MSN, Yahoo!, Altavista, and Webcrawler. Create an Amazon profile and review a couple of books. Create a few lists and guides at Amazon under the account. You should name your profile the name of our Web site (it's URL). Having a meaningful profile at Amazon link to your site goes a long way in giving your site credibility.
Take a look at the following site: http://www.businessinfoguide.com/. It was created by Stephanie Chandler. See her Amazon profile at AMAZON. See how she interrelates her Guide site with her profile page. You can do the same, but name the profile the same as your Web site. I've given you a few things to think about. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
We find ourselves starting a home-based business through the Internet. We have developed our own website which offers custom-designed widgets as well as stock widgets. Unfortunately we are having problems getting recognized by the Search Engines. We get conflicting advice as to how long it takes as well as what approach is best to become recognized. Some say "weeks" -- some say "years." Since marketing on the Web is new to us, we need immediate help in the form of sound advice from someone who has "been there, done that." To complicate our situation, we find ourselves on a shoestring budget which limits our ability to go and hire "Experts." I will admit to overestimating our ability to promote ourselves quickly on the Web. Can you help us? We truly hope so! Hope to hear from you soon.
ANSWER.
Books can be written on the subject you are asking me to send you an email about. I just took a look at your site and it looks pretty nice. Take a look at the following list of books. See BOOKS ON SEARCH ENGINE OPTIMIZATION (SEO).
I recommend you get three of the five books and read them and study them. Then put a list of questions you have and send them to me. I will answer your questions. However, in a nutshell, you need to figure out who your competitors are on the Web. Find at least 10 to 15 top Web sites that sell what you sell. Then examine the source code to the home pages to see what Meta-Name keywords are listed. Collect those keywords on a sheet of paper for all 15 top Web sites. Then type the keywords into Google and check the Meta-Name keywords used by the top 20 listed sites for each search. After a bit you will find patterns and typically used keywords people use to search your type of business. Those are the words you have to use to market your site on the Web.
You should write articles that people will enjoy reading, but that have those keywords embedded in the articles. Post those article on free article submission sites. See the list of sites in the bottom left quadrant of my homepage (http://www.jlippin.com/). You will want to sign the articles and and include the URL to your site's home page. Links from sites external to your site give your site more credibility and thus higher rankings with the search engines. Also, you should create FOUR different free blogs that regularly link to your site. See the way I have done it with my site at www.jlippin.com.
I signed up for a free Blogger site and a free WordPress site. Each blog entry is a simple article of sorts, but don't take as long writing the blog entries as you would an article. If you do an entry a day in each of your blogs (that's four blog entries a day) for a couple of months, then your Web site should be ranked high in the search engines. Make sure each entry has a link back to your site and each entry relates to some of the keywords that are critical to your site. Study my site (http://www.jlippin.com/) and see how it interrelates to my Amazon profile and two blogs. Then type my name (Jeff Lippincott) into Google, MSN, Yahoo!, Altavista, and Webcrawler. Create an Amazon profile and review a couple of books. Create a few lists and guides at Amazon under the account. You should name your profile the name of our Web site (it's URL). Having a meaningful profile at Amazon link to your site goes a long way in giving your site credibility.
Take a look at the following site: http://www.businessinfoguide.com/. It was created by Stephanie Chandler. See her Amazon profile at AMAZON. See how she interrelates her Guide site with her profile page. You can do the same, but name the profile the same as your Web site. I've given you a few things to think about. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Wednesday, March 28, 2007
Someone starting a new business will do well to limit their liability exposure by forming either a corporation or an LLC.
QUESTION.
I have worked for 18+ years in electrical contracting (electric, heating, & plumbing). I want to start up a business on my own, but also want to protect myself legally. I have secured an insurance policy but need to know more about setting up this business to protect my assets. I plan on incorporating in September. Can you give me any specific areas that I should be aware of?
ANSWER.
From your email question I am not sure whether you are asking me how to limit your liability exposure or how to start your business properly. If you want to know how to limit liability you can form either a limited liability company (LLC) or form a corporation. Of course, you will want to have some liability insurance, too. The insurance will cover a small claim so you will not have to shut your business down. The LLC or corporate form protects you from losing your house (if you have one), but the company might have to be liquidated if the claim is big enough. For that reason, you never want to have too much invested in your company. But your email sounds like you want to know what you need to do to start your business. You need a written business plan for starters. See PICK A BUSINESS
WRITE A BUSINESS PLAN
You may want to take a look at the following book, too? See STRUCTURING YOUR BUSINESS.
Consider contacting your local SCORE chapter and scheduling a 1-hour face-to-face session with two volunteer counselors. At SCORE we are business coaches and excel at helping wanta-be entrepreneurs create great business plans for their new ventures. See http://www.score.org/findscore/chapter_maps.html and input your home zip code to find the chapter nearest to you.
I've given you some things to think about. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I have worked for 18+ years in electrical contracting (electric, heating, & plumbing). I want to start up a business on my own, but also want to protect myself legally. I have secured an insurance policy but need to know more about setting up this business to protect my assets. I plan on incorporating in September. Can you give me any specific areas that I should be aware of?
ANSWER.
From your email question I am not sure whether you are asking me how to limit your liability exposure or how to start your business properly. If you want to know how to limit liability you can form either a limited liability company (LLC) or form a corporation. Of course, you will want to have some liability insurance, too. The insurance will cover a small claim so you will not have to shut your business down. The LLC or corporate form protects you from losing your house (if you have one), but the company might have to be liquidated if the claim is big enough. For that reason, you never want to have too much invested in your company. But your email sounds like you want to know what you need to do to start your business. You need a written business plan for starters. See PICK A BUSINESS
WRITE A BUSINESS PLAN
You may want to take a look at the following book, too? See STRUCTURING YOUR BUSINESS.
Consider contacting your local SCORE chapter and scheduling a 1-hour face-to-face session with two volunteer counselors. At SCORE we are business coaches and excel at helping wanta-be entrepreneurs create great business plans for their new ventures. See http://www.score.org/findscore/chapter_maps.html and input your home zip code to find the chapter nearest to you.
I've given you some things to think about. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Tuesday, March 27, 2007
Retailer from the West Coast sold expensive equipment to someone on the East Coast and is now having trouble getting paid. Oops!
QUESTION.
I sell and install web video camera systems. Against my better judgment I sold equipment to a childcare center in a distant state from my home. The customer made an initial payment of $1,500 and we agreed to terms to pay monthly for the rest, about $5k to $6K in total. She made one payment and then stopped. She said she had a car accident so I suspended payment for several months if she agreed to pay the equipment off. She sent me 3 checks for $1,500 all post dated for the 20th of Jan,Feb & March. They have all bounced and she is not returning my calls.
ANSWER.
For starters you can notify the woman and tell her that she had better pay you what you are owed or else you are going to notify the county prosecutor's office in the customer's county that she paid you with post-dated checks that all bounced. That is a crime, and I think it can create some jail time. She will probably pay you what you are owed if she doesn't want to go to jail.
I'm not sure what the terms of the contract you had with this debtor. Did the contract provide that you were allowed to repossess the property that you sold her? If so, then you can contact the woman and determine if she will voluntarily return your property to you. You may have to send someone out there to pick it up if she will voluntarily give it back to you. Then you can sue her for your loss (i.e., the difference between what you ultimately sell it for and how much she owes you).
If you don't have a contract, and the lady is not willing to give you back your product without paying for it, then that is another form of theft. You can contact the local police in West Virginia and explain that the woman has stolen your property. Chances are they will escort someone of your choosing to go pick up the property.
As a SCORE counselor I am a business coach. I am not supposed to dish out free legal advice. Instead I'm supposed to tell you to see an attorney to help you in this matter. I crossed the line a bit in writing you this email.
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I sell and install web video camera systems. Against my better judgment I sold equipment to a childcare center in a distant state from my home. The customer made an initial payment of $1,500 and we agreed to terms to pay monthly for the rest, about $5k to $6K in total. She made one payment and then stopped. She said she had a car accident so I suspended payment for several months if she agreed to pay the equipment off. She sent me 3 checks for $1,500 all post dated for the 20th of Jan,Feb & March. They have all bounced and she is not returning my calls.
ANSWER.
For starters you can notify the woman and tell her that she had better pay you what you are owed or else you are going to notify the county prosecutor's office in the customer's county that she paid you with post-dated checks that all bounced. That is a crime, and I think it can create some jail time. She will probably pay you what you are owed if she doesn't want to go to jail.
I'm not sure what the terms of the contract you had with this debtor. Did the contract provide that you were allowed to repossess the property that you sold her? If so, then you can contact the woman and determine if she will voluntarily return your property to you. You may have to send someone out there to pick it up if she will voluntarily give it back to you. Then you can sue her for your loss (i.e., the difference between what you ultimately sell it for and how much she owes you).
If you don't have a contract, and the lady is not willing to give you back your product without paying for it, then that is another form of theft. You can contact the local police in West Virginia and explain that the woman has stolen your property. Chances are they will escort someone of your choosing to go pick up the property.
As a SCORE counselor I am a business coach. I am not supposed to dish out free legal advice. Instead I'm supposed to tell you to see an attorney to help you in this matter. I crossed the line a bit in writing you this email.
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Monday, March 26, 2007
No need to incorporate a church in order to gain tax-exempt status. Only nonprofits need to incorporate.
QUESTION.
I am trying to incorporate a new business, a church, as a nonprofit in the state of New Jersey. I am not clear what is the difference or the benefit if I file a certificate of incorporation using "Title 16" form or filing the Public Records Filing for New Business Entity form. Please advise. Thank you in advance.
ANSWER.
Your email is puzzling a little. You mention business, church, and nonprofit all in one sentence. My take on what you are up to is that you want to incorporate a church. There is no need to do that because a church is tax-exempt. A church is a religious organization and cannot be taxed. A church is NOT a nonprofit organization. A nonprofit organization is by definition a tax-exempt entity that is not religious.
SCORE exists to help people start and run small businesses and small nonprofits. It is an arm of the US government. As such, it is not allowed to help form religious organizations.
I hope my comments are helpful to you. It appears you really did not need much, if any, help from me. If you think I have misinterpreted your email, then feel free to send me a follow-on question or questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I am trying to incorporate a new business, a church, as a nonprofit in the state of New Jersey. I am not clear what is the difference or the benefit if I file a certificate of incorporation using "Title 16" form or filing the Public Records Filing for New Business Entity form. Please advise. Thank you in advance.
ANSWER.
Your email is puzzling a little. You mention business, church, and nonprofit all in one sentence. My take on what you are up to is that you want to incorporate a church. There is no need to do that because a church is tax-exempt. A church is a religious organization and cannot be taxed. A church is NOT a nonprofit organization. A nonprofit organization is by definition a tax-exempt entity that is not religious.
SCORE exists to help people start and run small businesses and small nonprofits. It is an arm of the US government. As such, it is not allowed to help form religious organizations.
I hope my comments are helpful to you. It appears you really did not need much, if any, help from me. If you think I have misinterpreted your email, then feel free to send me a follow-on question or questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Sunday, March 25, 2007
Wanta-be entrepreneur has bad personal credit history. What are his options for getting startup capital?
QUESTION.
How do I attain start up capital with a bad personal credit history? I am cleaning it up and will be on track very soon but still look bad on paper. My small business venture is a full Interior Design service focusing on Re Staging and Re Design. I have been an Interior Designer for 16 years. This experience is like gold. I have written a full Bussiness Plan and know that $10,000.00 is the amount needed to start my dream. So?
ANSWER.
The simple answer is to bring in a partner who has good credit. Use the partner's credit history instead of yours. If you don't want a partner, then you will have to save the $10,000 before you start your new venture. That way you won't have to borrow anything.
I hope my comments are helpful. If you want to have someone examine your business plan for soundness, then contact us at SCORE and schedule a face-to-face session for an hour. You'll sit with two of us and we can troubleshoot it for you. See http://www.score.org/findscore/chapter_maps.html and type in your home zip code to find the closest SCORE chapter to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
How do I attain start up capital with a bad personal credit history? I am cleaning it up and will be on track very soon but still look bad on paper. My small business venture is a full Interior Design service focusing on Re Staging and Re Design. I have been an Interior Designer for 16 years. This experience is like gold. I have written a full Bussiness Plan and know that $10,000.00 is the amount needed to start my dream. So?
ANSWER.
The simple answer is to bring in a partner who has good credit. Use the partner's credit history instead of yours. If you don't want a partner, then you will have to save the $10,000 before you start your new venture. That way you won't have to borrow anything.
I hope my comments are helpful. If you want to have someone examine your business plan for soundness, then contact us at SCORE and schedule a face-to-face session for an hour. You'll sit with two of us and we can troubleshoot it for you. See http://www.score.org/findscore/chapter_maps.html and type in your home zip code to find the closest SCORE chapter to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Saturday, March 24, 2007
Group of professionals want to start their own professional association. It's probably the simplest type of nonprofit to form.
QUESTION.
A group of us are trying to start up an nonprofit organization to benefit the profession that we are in. We would charge yearly dues, offer a certificate, newsletter, educational opportunities, and a pin for members. We would like to know how to go about getting a business structure put into place. We have established an interim board, and have had several meetings. Any help that you could give would be greatly appreciated. One board member has a CPA that we are consulting as far as trying to establish a non-profit status.
ANSWER.
The type of nonprofit you are seeking to form is one of the easiest to create. Your members will be your donor base. Therefore, fundraising is very simple. It is similar to a trade association or bar association group. You will need to incorporate in order to qualify for IRC Section 503(c) status. Consider taking a look at the material in the following link. See BECOME A FOUNDER OF A NONPROFIT ORGANIZATION.
After reviewing the above link I suspect you will have some follow-on questions. Feel free to send them to me via email. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
A group of us are trying to start up an nonprofit organization to benefit the profession that we are in. We would charge yearly dues, offer a certificate, newsletter, educational opportunities, and a pin for members. We would like to know how to go about getting a business structure put into place. We have established an interim board, and have had several meetings. Any help that you could give would be greatly appreciated. One board member has a CPA that we are consulting as far as trying to establish a non-profit status.
ANSWER.
The type of nonprofit you are seeking to form is one of the easiest to create. Your members will be your donor base. Therefore, fundraising is very simple. It is similar to a trade association or bar association group. You will need to incorporate in order to qualify for IRC Section 503(c) status. Consider taking a look at the material in the following link. See BECOME A FOUNDER OF A NONPROFIT ORGANIZATION.
After reviewing the above link I suspect you will have some follow-on questions. Feel free to send them to me via email. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Friday, March 23, 2007
Sometimes a business should be formed as a not-for-profit. Don't always assume a business is really a for-profit venture.
QUESTION.
I would like to start an entertainment Web site for youths who will be able to display there talent and skills there. For instance, I will rent camera equipment so they will be able to produce commercial(s) or music video(s) as an internship, if the major is in TV production. Anything they need to receive experience we will help them do and the outcome will be displayed on the Web site. They will also be able to view tips, play games and sell items. For example, if they have a clothing line a shirt may be sold on the site. Anything to help them succeed! My following questions are:
1. I am considering making the entity of this business an LLC, do you think that is okay or should I make it a partnership?
2. Before I launch the Website I know I should have the company's name, logo etc. trademarked. Should I set-up the LLC, i.e., prepare articles of organization, tax ID application etc. (even if there is no income) before I launch the Web site or after?
3. I would like to branch off and start a nonprofit that will support the entertainment site. We will provide career counseling, have seminars and throw events for the community to attend for free. Will I be able to fund the nonprofit with the funds I receive from the entertainment site?
Thank You for all your help!!!
ANSWER.
Wow! I am impressed with your vision in the email you sent me. I think making it happen will take a lot of work on your part, but the vision and goals you hope to achieve are very commendable.
Now let's come back down to earth. What you describe is a nonprofit organization you want to form. It is not a business - or at least it should not be a business. To qualify for tax deductible donations you will have to incorporate. It is never a good idea to intertwine nonprofits with for-profits. And you never fund or support a for-profit with a nonprofit.
Nonprofits can be run much like a business. And, in fact, they should be run that way. There is no need for you to think in terms of starting a for-profit business. And you certainly don't want to start two businesses at the same time.
By the way, LLCs are not corporations. LLCs do not have articles of incorporation. They have what are called Operating Agreements that are very similar to Partnership Agreements.
You are going to need to put together a Financial & Operations Plan for your nonprofit. See BECOME A FOUNDER OF A NONPROFIT
See also, WRITE A BUSINESS PLAN
I highly recommend you read a few business plan samples to get a feel for what they are about. See BUSINESS PLANS HANDBOOK. You should be able to find a library around Washington that has the 12-volume set. Spend a Saturday at the library reading through them.
Consider learning as much as you can about nonprofits. Scroll down the following link to the nonprofits section. See http://www.jlippin.com/listmania.html.
I've given you a bunch to think about. Consider contacting your local SCORE office to schedule a 1-hour face-to-face meeting with two SCORE volunteers. See http://www.score.org/findscore/chapter_maps.html and type your home zip code in to find the office. The meeting is free. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I would like to start an entertainment Web site for youths who will be able to display there talent and skills there. For instance, I will rent camera equipment so they will be able to produce commercial(s) or music video(s) as an internship, if the major is in TV production. Anything they need to receive experience we will help them do and the outcome will be displayed on the Web site. They will also be able to view tips, play games and sell items. For example, if they have a clothing line a shirt may be sold on the site. Anything to help them succeed! My following questions are:
1. I am considering making the entity of this business an LLC, do you think that is okay or should I make it a partnership?
2. Before I launch the Website I know I should have the company's name, logo etc. trademarked. Should I set-up the LLC, i.e., prepare articles of organization, tax ID application etc. (even if there is no income) before I launch the Web site or after?
3. I would like to branch off and start a nonprofit that will support the entertainment site. We will provide career counseling, have seminars and throw events for the community to attend for free. Will I be able to fund the nonprofit with the funds I receive from the entertainment site?
Thank You for all your help!!!
ANSWER.
Wow! I am impressed with your vision in the email you sent me. I think making it happen will take a lot of work on your part, but the vision and goals you hope to achieve are very commendable.
Now let's come back down to earth. What you describe is a nonprofit organization you want to form. It is not a business - or at least it should not be a business. To qualify for tax deductible donations you will have to incorporate. It is never a good idea to intertwine nonprofits with for-profits. And you never fund or support a for-profit with a nonprofit.
Nonprofits can be run much like a business. And, in fact, they should be run that way. There is no need for you to think in terms of starting a for-profit business. And you certainly don't want to start two businesses at the same time.
By the way, LLCs are not corporations. LLCs do not have articles of incorporation. They have what are called Operating Agreements that are very similar to Partnership Agreements.
You are going to need to put together a Financial & Operations Plan for your nonprofit. See BECOME A FOUNDER OF A NONPROFIT
See also, WRITE A BUSINESS PLAN
I highly recommend you read a few business plan samples to get a feel for what they are about. See BUSINESS PLANS HANDBOOK. You should be able to find a library around Washington that has the 12-volume set. Spend a Saturday at the library reading through them.
Consider learning as much as you can about nonprofits. Scroll down the following link to the nonprofits section. See http://www.jlippin.com/listmania.html.
I've given you a bunch to think about. Consider contacting your local SCORE office to schedule a 1-hour face-to-face meeting with two SCORE volunteers. See http://www.score.org/findscore/chapter_maps.html and type your home zip code in to find the office. The meeting is free. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Thursday, March 22, 2007
How does an inventor get his product patented and to market so he can make money off it?
QUESTION.
Well, I came up with an idea for a good business, but due to the lack of funding I am unable to secure the business. I have partnered with someone to make a unique machine, but he lives outside the US and has only signed a non-compete and non-disclosure. Therefore, I am worried if he makes this machine then he may partner with someone else, because he essentially is making an expensive machine for me out of his own pocket. Also, if the partnership works out and we move to the next level, which is selling this machine to a big corporation, then I think I will need counsel with me there too for a large order.
ANSWER.
You have an idea for a machine, but you do not have the money to build a prototype. That is such a common story. I think you can be classified as an inventor. As such, you should have figured out how to get the money to have your prototype built instead of having someone build it for you for free. What happens if this person who is building YOUR machine doesn't want to partner with you (or you don't want to partner with him)? Are you going to owe him for his troubles in that case? This person has signed a nondisclose agreement with you, so chances are he won't be able to partner with someone else.
Normally an inventor who has an idea has a few steps to perform before he or she takes their invention to a commercial level. First, she needs to have a prototype built. She will do that by saving the necessary capital to have the protype built (or she will build it herself). She may borrow funds in order to have the prototype built. This is often the case if she owns a home and has equity in that home she can borrow against. Second, after the prototype is built she tests it to see if it does what it is supposed to do. If other people are involved in this testing, then they sign noncompete and nondisclosure agreements. Fourth, if the invention does what it is supposed to do, then she should consult a patent attorney to have the idea patented. That is going to cost her some money, too. She should expect to pay for that cost herself, too.
While the invention is being patented, she is protected from anybody swiping her idea. Now the fifth step comes into play: do market research and prepare a business plan. You have many options available to you as to how to start your new business. You may want to go it alone. You may want to find partners. You may want to form a corporation and sell shares in it to investors. You may want to license your invention? It can get complicated, but that is why you need to do market research and prepare a business plan. Doing this will help you uncomplicate what it is you want to do. The written business plan will be your roadmap to success.
When the plan is complete, then you are ready to use it yourself, or to use it to attract partners, investors, or license your invention.
Consider taking a look at the following links. See PICK A BUSINESS
WRITE A BUSINESS PLAN
BOOKS ON VENTURE CAPITAL
LICENSE YOUR IDEA OR INVENTION
FINANCING YOUR SMALL BUSINESS & ANGEL INVESTORS
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Well, I came up with an idea for a good business, but due to the lack of funding I am unable to secure the business. I have partnered with someone to make a unique machine, but he lives outside the US and has only signed a non-compete and non-disclosure. Therefore, I am worried if he makes this machine then he may partner with someone else, because he essentially is making an expensive machine for me out of his own pocket. Also, if the partnership works out and we move to the next level, which is selling this machine to a big corporation, then I think I will need counsel with me there too for a large order.
ANSWER.
You have an idea for a machine, but you do not have the money to build a prototype. That is such a common story. I think you can be classified as an inventor. As such, you should have figured out how to get the money to have your prototype built instead of having someone build it for you for free. What happens if this person who is building YOUR machine doesn't want to partner with you (or you don't want to partner with him)? Are you going to owe him for his troubles in that case? This person has signed a nondisclose agreement with you, so chances are he won't be able to partner with someone else.
Normally an inventor who has an idea has a few steps to perform before he or she takes their invention to a commercial level. First, she needs to have a prototype built. She will do that by saving the necessary capital to have the protype built (or she will build it herself). She may borrow funds in order to have the prototype built. This is often the case if she owns a home and has equity in that home she can borrow against. Second, after the prototype is built she tests it to see if it does what it is supposed to do. If other people are involved in this testing, then they sign noncompete and nondisclosure agreements. Fourth, if the invention does what it is supposed to do, then she should consult a patent attorney to have the idea patented. That is going to cost her some money, too. She should expect to pay for that cost herself, too.
While the invention is being patented, she is protected from anybody swiping her idea. Now the fifth step comes into play: do market research and prepare a business plan. You have many options available to you as to how to start your new business. You may want to go it alone. You may want to find partners. You may want to form a corporation and sell shares in it to investors. You may want to license your invention? It can get complicated, but that is why you need to do market research and prepare a business plan. Doing this will help you uncomplicate what it is you want to do. The written business plan will be your roadmap to success.
When the plan is complete, then you are ready to use it yourself, or to use it to attract partners, investors, or license your invention.
Consider taking a look at the following links. See PICK A BUSINESS
WRITE A BUSINESS PLAN
BOOKS ON VENTURE CAPITAL
LICENSE YOUR IDEA OR INVENTION
FINANCING YOUR SMALL BUSINESS & ANGEL INVESTORS
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Wednesday, March 21, 2007
Small business owner doing import/export got screwed by its shipping agent. What should he do to minimize his loss?
QUESTION.
I am doing importing business and have some problems with shipping companies. A month has passed since I was supposed to receive my package, and I still have not received it yet. I'm told the shipping company did not do all the proper paperwork and as a result my goods cannot clear customs. My goods sit in storage at present and there is a storage fee associated. The storage fee will be higher if someone does not move the package out of warehouse. Eventually the merchandise will be auctioned after 6 months if nobody takes action.
What can I do? Pay the storage fee by myself to get package first and then sue the shipping company for the loss? My business is on the US east coast and the shipper is on the US west coast.
ANSWER.
You answered your own question at the end of your email. You need to pay the storage and then sue the US company that is responsible. Your shipping documents should have their name and address on which to sue. Furthermore, since they ship to you in your home state they should be subject to suit there.
Personally, I think you should eat the exta cost you have suffered. The legal battle and costs will not be worth it to you. Write off the extra cost as an expense of doing business. There is no need to dig a bigger hole than you have already dug. Learn from your experience. You need to better research your business and how you run it so this won't happen again. Do you have a sound written business plan? It doesn't sound like it. If you did, then you would already know who was a reliable shipper, how much it would cost, and how dependable they were.
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I am doing importing business and have some problems with shipping companies. A month has passed since I was supposed to receive my package, and I still have not received it yet. I'm told the shipping company did not do all the proper paperwork and as a result my goods cannot clear customs. My goods sit in storage at present and there is a storage fee associated. The storage fee will be higher if someone does not move the package out of warehouse. Eventually the merchandise will be auctioned after 6 months if nobody takes action.
What can I do? Pay the storage fee by myself to get package first and then sue the shipping company for the loss? My business is on the US east coast and the shipper is on the US west coast.
ANSWER.
You answered your own question at the end of your email. You need to pay the storage and then sue the US company that is responsible. Your shipping documents should have their name and address on which to sue. Furthermore, since they ship to you in your home state they should be subject to suit there.
Personally, I think you should eat the exta cost you have suffered. The legal battle and costs will not be worth it to you. Write off the extra cost as an expense of doing business. There is no need to dig a bigger hole than you have already dug. Learn from your experience. You need to better research your business and how you run it so this won't happen again. Do you have a sound written business plan? It doesn't sound like it. If you did, then you would already know who was a reliable shipper, how much it would cost, and how dependable they were.
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Tuesday, March 20, 2007
One brother wants to take over the other brother's business without getting nailed with too much wealth transfer tax.
QUESTION.
I need advice from an attorney on changing the name of an existing LLC owned by my brother and then forming a second (new) LLC with the name of the old LLC. What is the most straightforward process to do such a thing?
ANSWER.
To accomplish what you want to do you only need to contact your State's secretary of state and change the primary contact or owner of the existing LLC from your brother to you. Then your brother needs to form a new LLC. The State's business records dept isn't going to have a problem with you doing this. However, the IRS and the State's taxing authorities might have a problem with this because in effect your brother is giving you an asset (a business) that you never owned before. Transferring title of a business from one person to another is a taxable event. Let's say the business is worth $100,000. By transferring the business to you the IRS will argue that your brother just gave you $100,000, and the transfer would be subject to a gift tax. If your brother had recently died and left the business to you in his will, then the business would be subject to an estate tax.
The normal way to go about all this and avoid tax issues is for your brother to file for a ficticious name which is owned by the existing LLC. Then your brother does business under the ficticious name and ceases to do business under the original name. You will need to form a new LLC with a new name. Your brother's LLC will license the old name of his LLC to your new LLC which in turn uses the name for some of its marketing efforts. Eventually you will stop using the licensed name in your business. When your new LLC's name becomes popular enough and the old name isn't needed any longer to draw business you'll be set. The licensing fee need not be very much - a nominal amount.
You'll probably need to visit an attorney to help you accomplish all of this. As a SCORE counselor I'm not supposed to provide free legal advice. I'm just a business coach. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I need advice from an attorney on changing the name of an existing LLC owned by my brother and then forming a second (new) LLC with the name of the old LLC. What is the most straightforward process to do such a thing?
ANSWER.
To accomplish what you want to do you only need to contact your State's secretary of state and change the primary contact or owner of the existing LLC from your brother to you. Then your brother needs to form a new LLC. The State's business records dept isn't going to have a problem with you doing this. However, the IRS and the State's taxing authorities might have a problem with this because in effect your brother is giving you an asset (a business) that you never owned before. Transferring title of a business from one person to another is a taxable event. Let's say the business is worth $100,000. By transferring the business to you the IRS will argue that your brother just gave you $100,000, and the transfer would be subject to a gift tax. If your brother had recently died and left the business to you in his will, then the business would be subject to an estate tax.
The normal way to go about all this and avoid tax issues is for your brother to file for a ficticious name which is owned by the existing LLC. Then your brother does business under the ficticious name and ceases to do business under the original name. You will need to form a new LLC with a new name. Your brother's LLC will license the old name of his LLC to your new LLC which in turn uses the name for some of its marketing efforts. Eventually you will stop using the licensed name in your business. When your new LLC's name becomes popular enough and the old name isn't needed any longer to draw business you'll be set. The licensing fee need not be very much - a nominal amount.
You'll probably need to visit an attorney to help you accomplish all of this. As a SCORE counselor I'm not supposed to provide free legal advice. I'm just a business coach. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Monday, March 19, 2007
Simple networking group wants to be converted into a full-fledged not-for-profit.
QUESTION.
I am starting to take a networking group I began last year & turn it into a non-profit organization. Can you assist me with how to get started? I have a board of directors with officers. We have started working on our Mission Statement, By-laws & strategic plan, but it's the IRS paperwork that I am just not sure about. Do we need to hire an accountant? Do we need to get a bank account first? I would appreciate any assistance you can provide! I have started my own business, but the world of Non-profit is very new to me.
ANSWER.
To get started you will need to form a corporation with specific wording it its registration form and bylaws that will qualify it for Internal Revenue Code Section 501(c) status. See
BECOME A FOUNDER OF A NONPROFIT ORGANIZATION.
Also, you mention you are not too sure about the IRS paperwork. See
http://www.irs.gov/pub/irs-pdf/p557.pdf
http://www.irs.gov/pub/irs-pdf/f1023.pdf
http://www.irs.gov/pub/irs-pdf/i1023.pdf
I hope my comments are helpful. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I am starting to take a networking group I began last year & turn it into a non-profit organization. Can you assist me with how to get started? I have a board of directors with officers. We have started working on our Mission Statement, By-laws & strategic plan, but it's the IRS paperwork that I am just not sure about. Do we need to hire an accountant? Do we need to get a bank account first? I would appreciate any assistance you can provide! I have started my own business, but the world of Non-profit is very new to me.
ANSWER.
To get started you will need to form a corporation with specific wording it its registration form and bylaws that will qualify it for Internal Revenue Code Section 501(c) status. See
BECOME A FOUNDER OF A NONPROFIT ORGANIZATION.
Also, you mention you are not too sure about the IRS paperwork. See
http://www.irs.gov/pub/irs-pdf/p557.pdf
http://www.irs.gov/pub/irs-pdf/f1023.pdf
http://www.irs.gov/pub/irs-pdf/i1023.pdf
I hope my comments are helpful. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Sunday, March 18, 2007
Loan application filer wants to know if he has to disclose an old bankruptcy on his application form.
QUESTION.
When applying for a start up loan with my bank, if I have had a personal bankrupcy 10 years ago do I still have to disclose it? My divorce then was horrible enough without reliving it if I do not have to.
ANSWER.
It all depends on the specific loan application form that you are asked to complete. Not all applications ask you if you have EVER filed for bankruptcy. Few banks really care if you have a bankruptcy on your record. What they care about is whether you have the ability to repay your loan NOW and in the foreseeable future. In fact, if you have filed for a bankruptcy in the past 6 years then you are a better loan candidate than someone who hasn't. This is true because bankruptcy filers are foreclosed from filing another bankruptcy for 6 years after being discharged in bankruptcy. That 6 year window allows a bank to go after your assets free of being kept from doing so by a bankruptcy court.
In any event, if a divorce caused you to go bankrupt, then you have a good explanation for the bankruptcy happening. Don't worry about having to disclose the bankruptcy. What you need to worry about is putting together a good business plan so you will qualify for a small business loan. Of course, you may be applying for a home equity loan. In that case, you don't need to put together a business plan to qualify for the loan.
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
When applying for a start up loan with my bank, if I have had a personal bankrupcy 10 years ago do I still have to disclose it? My divorce then was horrible enough without reliving it if I do not have to.
ANSWER.
It all depends on the specific loan application form that you are asked to complete. Not all applications ask you if you have EVER filed for bankruptcy. Few banks really care if you have a bankruptcy on your record. What they care about is whether you have the ability to repay your loan NOW and in the foreseeable future. In fact, if you have filed for a bankruptcy in the past 6 years then you are a better loan candidate than someone who hasn't. This is true because bankruptcy filers are foreclosed from filing another bankruptcy for 6 years after being discharged in bankruptcy. That 6 year window allows a bank to go after your assets free of being kept from doing so by a bankruptcy court.
In any event, if a divorce caused you to go bankrupt, then you have a good explanation for the bankruptcy happening. Don't worry about having to disclose the bankruptcy. What you need to worry about is putting together a good business plan so you will qualify for a small business loan. Of course, you may be applying for a home equity loan. In that case, you don't need to put together a business plan to qualify for the loan.
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Saturday, March 17, 2007
Wanta-be entrepreneur wants to know where to get start-up funds for his business idea.
QUESTION.
I would like to get advice on where a good place to get funds to start a business would be.
ANSWER.
A good place to start would be YOUR bank account. The next best place would be borrowing against the equity in your personal residence. Then, of course, you could borrow funds from family and friends. Another alternative is to find business partners who have funds. One aspect of this is doing a "private placement." These methods of obtaining startup funds are the ways for new businesses to get started.
If you already have a going concern, then your business can hopefully obtain a line of credit from your bank. Your business can apply for a small business loan possibly backed by the SBA. Maybe there are government grants your business might qualify for? You could also seek funds from investors.
Consider doing a private placement or getting a venture capital firm to consider investing in your business. Consider taking a look at the following links. See
FINANCING YOUR SMALL BUSINESS & ANGEL INVESTORS
BOOKS ON VENTURE CAPITAL
GOVERNMENT GRANTS
I hope my comments are helpful to you. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I would like to get advice on where a good place to get funds to start a business would be.
ANSWER.
A good place to start would be YOUR bank account. The next best place would be borrowing against the equity in your personal residence. Then, of course, you could borrow funds from family and friends. Another alternative is to find business partners who have funds. One aspect of this is doing a "private placement." These methods of obtaining startup funds are the ways for new businesses to get started.
If you already have a going concern, then your business can hopefully obtain a line of credit from your bank. Your business can apply for a small business loan possibly backed by the SBA. Maybe there are government grants your business might qualify for? You could also seek funds from investors.
Consider doing a private placement or getting a venture capital firm to consider investing in your business. Consider taking a look at the following links. See
FINANCING YOUR SMALL BUSINESS & ANGEL INVESTORS
BOOKS ON VENTURE CAPITAL
GOVERNMENT GRANTS
I hope my comments are helpful to you. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Friday, March 16, 2007
When does a small business have to charge sales tax? It's not always a straighforward question.
QUESTION.
I just opened an LLC a few months ago as a painter. I just completed my first commercial project, and I'm not sure if I have to charge tax. Any help would be appreciated.
ANSWER.
There are all kinds of taxes businesses owe. The two main ones are income taxes and sales taxes. But sales tax is only collected (and owed) when you sell a product, i.e., a prepared meal at Burger King, a picture from a gallery, or a book from Amazon.com. A service business on the other hand does not collect sales tax because services are taxed under the income tax laws. When a lawyer renders legal services he does not collect sales tax. When a barber performs a haircut for a customer he does not charge sales tax. And when a commercial painter paints a building (he is performing a service) and he does not charge sales tax.
Now if you sell your customers the paint and materials you use to perform your services, you will need to collect sales tax on those items. Paint and materials are products that can be sold. But if you use the paint and materials during the performance of your painting services and do not sell them to the customer, then you collect no sales tax on their value. You will just expense the paint and materials as part of your cost of doing business.
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I just opened an LLC a few months ago as a painter. I just completed my first commercial project, and I'm not sure if I have to charge tax. Any help would be appreciated.
ANSWER.
There are all kinds of taxes businesses owe. The two main ones are income taxes and sales taxes. But sales tax is only collected (and owed) when you sell a product, i.e., a prepared meal at Burger King, a picture from a gallery, or a book from Amazon.com. A service business on the other hand does not collect sales tax because services are taxed under the income tax laws. When a lawyer renders legal services he does not collect sales tax. When a barber performs a haircut for a customer he does not charge sales tax. And when a commercial painter paints a building (he is performing a service) and he does not charge sales tax.
Now if you sell your customers the paint and materials you use to perform your services, you will need to collect sales tax on those items. Paint and materials are products that can be sold. But if you use the paint and materials during the performance of your painting services and do not sell them to the customer, then you collect no sales tax on their value. You will just expense the paint and materials as part of your cost of doing business.
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Thursday, March 15, 2007
When starting a business try to gather as much information from your competitors as possible. Don't reinvent the wheel if you don't have to do so.
QUESTION.
I'm starting a credit repair company and I need to find someone to help me with my contracts. I already have a contract typed up, but I'm not sure of the legal stuff. Any suggestions?
ANSWER.
When you start a new business you are supposed to research your industry and your market so you can prepare a killer business plan to guide your moves in business. Your market includes your competitors and how they do business. Have you written your business plan yet? It doesn't sound like it. If you have researched your competitors, then you would have gotten some of their contracts. Those contracts would show you how they do things, AND they would should you how to consider doing things yourself. Much of starting a business is not about reinventing the wheel. Get their contracts and use them. If you can't find someone to give you theirs just for the asking, then pose as a customer to get them. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I'm starting a credit repair company and I need to find someone to help me with my contracts. I already have a contract typed up, but I'm not sure of the legal stuff. Any suggestions?
ANSWER.
When you start a new business you are supposed to research your industry and your market so you can prepare a killer business plan to guide your moves in business. Your market includes your competitors and how they do business. Have you written your business plan yet? It doesn't sound like it. If you have researched your competitors, then you would have gotten some of their contracts. Those contracts would show you how they do things, AND they would should you how to consider doing things yourself. Much of starting a business is not about reinventing the wheel. Get their contracts and use them. If you can't find someone to give you theirs just for the asking, then pose as a customer to get them. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Wednesday, March 14, 2007
It's important to know the difference between single-member and multi-member LLCs. Forming one when you should have formed the other is not good!
QUESTION.
I started a small family business (husband & wife) last year. It is a service company and organized as an LLC with me listed the primary contact. Next, I requested a TIN with myself as contact once again. Upon receipt of the TIN I noticed that my status was sole member of disregarded entity. My intention was for the two of us to be equal partners and share the income/loss through our annual tax returns. As I reviewed my taxes for 2006, I noticed that there is a statement that I cannot file form 1065 partnership due to my federal tax status.
We started operation the last week of September through December with no salaries paid to either of us. I have calculated a loss of approximately $3,600 for those 3 months which is primarily equipment, renovation, rent, utilities, and supplies. My initial thought is since no salaries were paid and no SE is required this time, I could file 1040 schedule C and roll it to our taxes (we file jointly) this time but I need to fix our filing status as I anticipate salaries being paid to generate SE and taxes by June 07. What forms or actions do I need to take to change the status of this LLC to a joint ownership? Also, will a new TIN be required once the status is changed?
ANSWER.
You say you created an LLC last year. You and your wife are the underlying partnership behind the LLC. Your first mistake was not listing both you and your wife as the partners in the LLC. You should correct that with the State. If you don't, then the State recognizes your LLC as a single-member LLC - and that is not your intention.
Once you have your LLC paperwork in order. Then you need to apply for an EIN for your LLC which is a multi-member LLC, which is usually viewed by Uncle Sam as a partership for tax purposes. I say "usually" because there is such a thing called "check the box" and you could have your LLC treated as a C Corporation. My recommendation is that you want to have it treated at a partnership.
Whether your LLC is a single-member (sole proprietorship) or multi-member (partnership) will dictate which tax forms you have to file with the IRS. You are currently being treated as a single-member because of the way you filed your LLC papers with the State and how you applied for an EIN with the IRS. Fix your problem by getting an EIN for your multi-member LLC as if it is a partnership. Make sure the other EIN you applied for is terminated. If you do that, then you will be able to file a Form 1065 partnership tax return which is what you should be doing.
Sounds like you have your work cut out for you. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
I started a small family business (husband & wife) last year. It is a service company and organized as an LLC with me listed the primary contact. Next, I requested a TIN with myself as contact once again. Upon receipt of the TIN I noticed that my status was sole member of disregarded entity. My intention was for the two of us to be equal partners and share the income/loss through our annual tax returns. As I reviewed my taxes for 2006, I noticed that there is a statement that I cannot file form 1065 partnership due to my federal tax status.
We started operation the last week of September through December with no salaries paid to either of us. I have calculated a loss of approximately $3,600 for those 3 months which is primarily equipment, renovation, rent, utilities, and supplies. My initial thought is since no salaries were paid and no SE is required this time, I could file 1040 schedule C and roll it to our taxes (we file jointly) this time but I need to fix our filing status as I anticipate salaries being paid to generate SE and taxes by June 07. What forms or actions do I need to take to change the status of this LLC to a joint ownership? Also, will a new TIN be required once the status is changed?
ANSWER.
You say you created an LLC last year. You and your wife are the underlying partnership behind the LLC. Your first mistake was not listing both you and your wife as the partners in the LLC. You should correct that with the State. If you don't, then the State recognizes your LLC as a single-member LLC - and that is not your intention.
Once you have your LLC paperwork in order. Then you need to apply for an EIN for your LLC which is a multi-member LLC, which is usually viewed by Uncle Sam as a partership for tax purposes. I say "usually" because there is such a thing called "check the box" and you could have your LLC treated as a C Corporation. My recommendation is that you want to have it treated at a partnership.
Whether your LLC is a single-member (sole proprietorship) or multi-member (partnership) will dictate which tax forms you have to file with the IRS. You are currently being treated as a single-member because of the way you filed your LLC papers with the State and how you applied for an EIN with the IRS. Fix your problem by getting an EIN for your multi-member LLC as if it is a partnership. Make sure the other EIN you applied for is terminated. If you do that, then you will be able to file a Form 1065 partnership tax return which is what you should be doing.
Sounds like you have your work cut out for you. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Tuesday, March 13, 2007
Entrepreneur wants to start a restaurant in the US that is set up like one in Latin America.
QUESTION.
I have been interested in a business venture for about three years now. As a child I remember a very famous restaurant that started in Latin America. Now I only need instructions on start up, property acquisition, which loans are right for me, and much more. The most important step right now is to present a business plan to the franchise that is located in Guatemala. Can you help me present to the franchise that I am the right person for the job?
ANSWER.
It usually takes quite a bit of capital to start a restaurant. This is especially true for a franchise restaurant. I recommend you call us at SCORE to schedule a face-to-face counseling session with two volunteers for an hour. See the following link - http://www.score.org/findscore/chapter_maps.html - and type in your home zip code to find a chapter close to you. If you have what it takes to start a restaurant, then we can help you put together your business plan in 3 or 4 sessions spread out over a period of months. Take a look at the following links. See
Pick a Business, Create a Business Plan, and Start it Soon
Figure Out How to Write a Business Plan
Starting or Running a Restaurant &/or Catering Business
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I have been interested in a business venture for about three years now. As a child I remember a very famous restaurant that started in Latin America. Now I only need instructions on start up, property acquisition, which loans are right for me, and much more. The most important step right now is to present a business plan to the franchise that is located in Guatemala. Can you help me present to the franchise that I am the right person for the job?
ANSWER.
It usually takes quite a bit of capital to start a restaurant. This is especially true for a franchise restaurant. I recommend you call us at SCORE to schedule a face-to-face counseling session with two volunteers for an hour. See the following link - http://www.score.org/findscore/chapter_maps.html - and type in your home zip code to find a chapter close to you. If you have what it takes to start a restaurant, then we can help you put together your business plan in 3 or 4 sessions spread out over a period of months. Take a look at the following links. See
Pick a Business, Create a Business Plan, and Start it Soon
Figure Out How to Write a Business Plan
Starting or Running a Restaurant &/or Catering Business
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Monday, March 12, 2007
Paralegal wants to practice law without a license. She has to go to law school first and pass a bar exam.
QUESTION.
I'm currently a paralegal student. I've held several jobs as a paralegal, but I'm interested in starting my own paralegal venture. I'm trying to decide on a business or not-for-profit organization, or both? I would like to draft legal documents for pro se clients, provide them with information about different forms and when to file them, show them how to research legal information and I would also like to be a mediator. How should I go about getting started? I've just been logging my ideas and researching information.
ANSWER.
I think you need to go to law school and pass a bar exam before you can do what you want to do. What you describe is the practice of law. And there is a crime called the unauthorized practice of law. Now California has a pretty liberal idea of what is the practice of law, and they let people (paralegals) hold out their own shingles to do doc prep and other "barely legal" work. Generally, the only way you are going to do paralegal work as an independent contractor is to work for attorneys. You can form a paralegal business that will only have attorneys as clients, but then you might run into problems with conflict of interest issues. Imagine yourself working on a case where you work for both the plaintiff's attorney and the defendant's attorney. That is a no-no. Sorry I couldn't be more helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I'm currently a paralegal student. I've held several jobs as a paralegal, but I'm interested in starting my own paralegal venture. I'm trying to decide on a business or not-for-profit organization, or both? I would like to draft legal documents for pro se clients, provide them with information about different forms and when to file them, show them how to research legal information and I would also like to be a mediator. How should I go about getting started? I've just been logging my ideas and researching information.
ANSWER.
I think you need to go to law school and pass a bar exam before you can do what you want to do. What you describe is the practice of law. And there is a crime called the unauthorized practice of law. Now California has a pretty liberal idea of what is the practice of law, and they let people (paralegals) hold out their own shingles to do doc prep and other "barely legal" work. Generally, the only way you are going to do paralegal work as an independent contractor is to work for attorneys. You can form a paralegal business that will only have attorneys as clients, but then you might run into problems with conflict of interest issues. Imagine yourself working on a case where you work for both the plaintiff's attorney and the defendant's attorney. That is a no-no. Sorry I couldn't be more helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Sunday, March 11, 2007
Small business owner learns the hard way that starting a small business without a sound written business plan is foolish.
QUESTION.
I own a small business set up as an S corporation. This is my first business and I've been doing it for one year. Most months I have made enough money to pay store expenses but not any salaries. I am past 65 and collecting social security benefits, so I have income and did did not need to earn a living from the store. I had one good month, but I lost about 20,000 dollars for the year. The franchiser now has a Corporate Store about a mile and a half from my store. During Jan and so far in Feb my sales have been almost nothing. I am now looking at what my options are to go out of business. I have about 15,000 in credit card dept. I would like to pay that off myself even if I close my business. My main concern is that I have a year left on my lease. I also have a contract with the phone company and internet service provider. I don't know whether to look at bankruptcy or do I have other options. I can't afford to pay the lease out of my retirement. Any advice you might be able to give me would be greatly appreciated.
ANSWER.
Sounds like your business is in need of some strategic planning. Hopefully you already have a written business plan. But I bet you don't or else you would not be in the situation you have described. SCORE specializes in helping small business owners prepare business plans and/or do strategic planning for an existing business. I recommend you contact your local SCORE chapter and schedule a free confidential face-to-face counseling session with two SCORE.org volunteers. Simply go to http://www.score.org/findscore/chapter_maps.html and type your home zip code to find the chapter nearest you.
I hope my comments are helpful to you. Email counseling at SCORE can be helpful, but try the face-to-face counseling first. Both options are free. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I own a small business set up as an S corporation. This is my first business and I've been doing it for one year. Most months I have made enough money to pay store expenses but not any salaries. I am past 65 and collecting social security benefits, so I have income and did did not need to earn a living from the store. I had one good month, but I lost about 20,000 dollars for the year. The franchiser now has a Corporate Store about a mile and a half from my store. During Jan and so far in Feb my sales have been almost nothing. I am now looking at what my options are to go out of business. I have about 15,000 in credit card dept. I would like to pay that off myself even if I close my business. My main concern is that I have a year left on my lease. I also have a contract with the phone company and internet service provider. I don't know whether to look at bankruptcy or do I have other options. I can't afford to pay the lease out of my retirement. Any advice you might be able to give me would be greatly appreciated.
ANSWER.
Sounds like your business is in need of some strategic planning. Hopefully you already have a written business plan. But I bet you don't or else you would not be in the situation you have described. SCORE specializes in helping small business owners prepare business plans and/or do strategic planning for an existing business. I recommend you contact your local SCORE chapter and schedule a free confidential face-to-face counseling session with two SCORE.org volunteers. Simply go to http://www.score.org/findscore/chapter_maps.html and type your home zip code to find the chapter nearest you.
I hope my comments are helpful to you. Email counseling at SCORE can be helpful, but try the face-to-face counseling first. Both options are free. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Saturday, March 10, 2007
Entrepreneur wants to start a Doggie Day Care operation. Wants to know about business structure and payroll issues.
QUESTION.
I am in the planning stages of a Dog Day Care Center. I have not completed the marketing as yet but at this point I am estimating that the business will require myself plus four part time assistants each working 20 hours per week. The first help I need is on deciding if the business should be set up as a Sole Proprietorship, C Corporation, or a Limited Liability Corporation. The second help is regarding taxes, income and social security. The total gross per year is estimated at $100K to $150K. Thank you very much for your assistance.
ANSWER.
Sounds like your are in the process of putting together a business plan. That's the right thing to do. If you do it correctly, then you will have taken much, if not all, the guesswork out of your new venture. See Pick a Biz, Write a Plan for it, & Start the Biz
and How to Write a Business Plan.
The total gross income per year you quote sounds too low to me. After return on capital, return on your time, and return on ultimate goodwill, and taking out expenses and taxes there isn't going to be much left over for you. But you will figure out what works and worth the effort when you finish the business plan.
One of the elements of your business plan is making a choice of legal entity. If you are planning to created the business to be a job for yourself, and you don't expect to sell the business soon, then the only logical option for you is the LLC. See Choice of Legal Entity.
See also, Structuring Your Business by Michele Cagan. Make sure to read my book review for the book and consider getting a copy of the book.
You will have to pay salaries. And when you do you will have to do withholdings. I recommend you take a look at the various IRS publications that will interest you. See http://www.irs.gov/formspubs/index.html?portlet=3. At a minimum download Publication 505 and Publication 535.
I also recommend you contact your local SCORE chapter and schedule a face-to-face session with two volunteer counselors. The 1-hour session is free, and they will help you greatly polish your business plan.
I think I have answered your questions. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
I am in the planning stages of a Dog Day Care Center. I have not completed the marketing as yet but at this point I am estimating that the business will require myself plus four part time assistants each working 20 hours per week. The first help I need is on deciding if the business should be set up as a Sole Proprietorship, C Corporation, or a Limited Liability Corporation. The second help is regarding taxes, income and social security. The total gross per year is estimated at $100K to $150K. Thank you very much for your assistance.
ANSWER.
Sounds like your are in the process of putting together a business plan. That's the right thing to do. If you do it correctly, then you will have taken much, if not all, the guesswork out of your new venture. See Pick a Biz, Write a Plan for it, & Start the Biz
and How to Write a Business Plan.
The total gross income per year you quote sounds too low to me. After return on capital, return on your time, and return on ultimate goodwill, and taking out expenses and taxes there isn't going to be much left over for you. But you will figure out what works and worth the effort when you finish the business plan.
One of the elements of your business plan is making a choice of legal entity. If you are planning to created the business to be a job for yourself, and you don't expect to sell the business soon, then the only logical option for you is the LLC. See Choice of Legal Entity.
See also, Structuring Your Business by Michele Cagan. Make sure to read my book review for the book and consider getting a copy of the book.
You will have to pay salaries. And when you do you will have to do withholdings. I recommend you take a look at the various IRS publications that will interest you. See http://www.irs.gov/formspubs/index.html?portlet=3. At a minimum download Publication 505 and Publication 535.
I also recommend you contact your local SCORE chapter and schedule a face-to-face session with two volunteer counselors. The 1-hour session is free, and they will help you greatly polish your business plan.
I think I have answered your questions. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Friday, March 9, 2007
If a business is a corporation, then make sure to include INC at the end of its name!
QUESTION.
We are a nonprofit corporation that functions similar to a church. I would like to print up business cards for the priest. These cards will include his name as well as the name of the organization. However, I would like to exclude the designation "Inc." that one traditionally includes after the name of a business corporation. Is there a legal reason why I would want use the "inc" in the organization's name? The reason why I do not want to include "Inc." is that it sounds too legal and more like a for-profit organization. Any advice you can offer would be most appreciated.
ANSWER.
Sounds like you have been talking to someone with a little legal know-how about liability law, but they couldn't fully explain to you what they knew. Your question is very pointed, and not one that many people would pose.
Let me ask you what you think the difference is between the following two businesses: (1) Nonprofit Center and (2) Nonprofit Center, Inc.?
The first is an unincorporated for-profit business using the fictitious name "Nonprofit Center." I know this because a nonprofit has to be incorporated to qualify for Section 503(c) tax-exempt treatment under the Internal Revenue Code. And without the "Inc" after the business' name I know it is not a corporation. And since it is not a corporation it is not a separate legal entity from its owners and the owners can be personally liable for any damages caused me by the business. Let's say that someone slips and falls on the front step of the Nonprofit Center and hurts themselves. They can sue the priest and possible get a judgment against him for everything he owns.
The second is an incorporated organization (for-profit or nonprofit?) using the fictitious name "Nonprofit Center, Inc." I know this because "inc" is used at the end of the name. And if someone slips and falls on the Center's front step their only recourse is to sue the organization since it is the owner of the front step. The priest who runs the center is not personally liable because he does not own the front step of the center. The organizaton is a separate legal entity different an apart from the priest.
So the answer to your question is that the ""inc" should be included on the priest's business card if you want to make sure the Nonprofit Center is recognized as a separate legal entity different and apart from the priest.
I hope my comments are helpful to you. Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
We are a nonprofit corporation that functions similar to a church. I would like to print up business cards for the priest. These cards will include his name as well as the name of the organization. However, I would like to exclude the designation "Inc." that one traditionally includes after the name of a business corporation. Is there a legal reason why I would want use the "inc" in the organization's name? The reason why I do not want to include "Inc." is that it sounds too legal and more like a for-profit organization. Any advice you can offer would be most appreciated.
ANSWER.
Sounds like you have been talking to someone with a little legal know-how about liability law, but they couldn't fully explain to you what they knew. Your question is very pointed, and not one that many people would pose.
Let me ask you what you think the difference is between the following two businesses: (1) Nonprofit Center and (2) Nonprofit Center, Inc.?
The first is an unincorporated for-profit business using the fictitious name "Nonprofit Center." I know this because a nonprofit has to be incorporated to qualify for Section 503(c) tax-exempt treatment under the Internal Revenue Code. And without the "Inc" after the business' name I know it is not a corporation. And since it is not a corporation it is not a separate legal entity from its owners and the owners can be personally liable for any damages caused me by the business. Let's say that someone slips and falls on the front step of the Nonprofit Center and hurts themselves. They can sue the priest and possible get a judgment against him for everything he owns.
The second is an incorporated organization (for-profit or nonprofit?) using the fictitious name "Nonprofit Center, Inc." I know this because "inc" is used at the end of the name. And if someone slips and falls on the Center's front step their only recourse is to sue the organization since it is the owner of the front step. The priest who runs the center is not personally liable because he does not own the front step of the center. The organizaton is a separate legal entity different an apart from the priest.
So the answer to your question is that the ""inc" should be included on the priest's business card if you want to make sure the Nonprofit Center is recognized as a separate legal entity different and apart from the priest.
I hope my comments are helpful to you. Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Thursday, March 8, 2007
Enterprising professional wants to figure out how to structure his various business ventures that all interrelate.
QUESTION.
I am an associate in a startup professional firm and we are seeking advice on business structure options. At present, the firm has two partners. A third partner will be coming on board shortly, so we are considering a general partnership, LLC, PC, S Corp, or other appropriate entity.
In addition to typical professional engagements, we hope to undertake real estate development initiatives, as well as perhaps the design, manufacture, and retailing of products. Furthermore, we are an international concern doing business in the US and China. We could use further information as to how to structure a business or partnership in China so as to be able to receive fees and transfer funds to the U.S. This may affect which entity we choose.
Any other advice that you can give us regarding liablity, taxation, international business, business structure, etc would be very helpful. In addition, any other suggestions or resources that you could share with regards to setting up operations, financing, state &/or small business incentives or benefits would be much appreciated.
RESPONSE.
Apparently the other SCORE counselor has already done his quota of emails for the day and your questions have been routed to me. Your email indicates that you have a very broad vision of what you want to do for a living. I counted at least 4 businesses in your email:
1. Professional Services Firm
2. Real Estate Development Firm
3. Manufacture & Retail Business
4. Consulting in China
I don't know the rules in your state regarding choice of entity allowed for your profession. I never recommend my clients consider becoming a partnership or an S Corp. And a sole proprietorship is not a particularly good option either. Thus, my hunch is your professional services business should be either a Limited Liability Company (LLC) or a Professional Corporation (PC). The real estate development firm should probably be an LLC. The mfg and retail business should probably be a C corporation. And the consulting in China if it generates much in revenues should probably be the equivalent of a C corporation incorporated in China. That way you can shelter income generated in China from US taxes.
You should also form a C corporation to own all four entities I describe above. Thus, it is my recommendation that you form 5 entities. You will need to consult a business lawyer preferably with an advanced tax law degree, i.e., LLM in taxation. I recommend you read the following link. See Learn a Little about Choice of Legal Entity.
And possibly get a copy of the following book? See STRUCTURING YOUR BUSINESS.
I've given you a few things to think about. And a few things to read. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
I am an associate in a startup professional firm and we are seeking advice on business structure options. At present, the firm has two partners. A third partner will be coming on board shortly, so we are considering a general partnership, LLC, PC, S Corp, or other appropriate entity.
In addition to typical professional engagements, we hope to undertake real estate development initiatives, as well as perhaps the design, manufacture, and retailing of products. Furthermore, we are an international concern doing business in the US and China. We could use further information as to how to structure a business or partnership in China so as to be able to receive fees and transfer funds to the U.S. This may affect which entity we choose.
Any other advice that you can give us regarding liablity, taxation, international business, business structure, etc would be very helpful. In addition, any other suggestions or resources that you could share with regards to setting up operations, financing, state &/or small business incentives or benefits would be much appreciated.
RESPONSE.
Apparently the other SCORE counselor has already done his quota of emails for the day and your questions have been routed to me. Your email indicates that you have a very broad vision of what you want to do for a living. I counted at least 4 businesses in your email:
1. Professional Services Firm
2. Real Estate Development Firm
3. Manufacture & Retail Business
4. Consulting in China
I don't know the rules in your state regarding choice of entity allowed for your profession. I never recommend my clients consider becoming a partnership or an S Corp. And a sole proprietorship is not a particularly good option either. Thus, my hunch is your professional services business should be either a Limited Liability Company (LLC) or a Professional Corporation (PC). The real estate development firm should probably be an LLC. The mfg and retail business should probably be a C corporation. And the consulting in China if it generates much in revenues should probably be the equivalent of a C corporation incorporated in China. That way you can shelter income generated in China from US taxes.
You should also form a C corporation to own all four entities I describe above. Thus, it is my recommendation that you form 5 entities. You will need to consult a business lawyer preferably with an advanced tax law degree, i.e., LLM in taxation. I recommend you read the following link. See Learn a Little about Choice of Legal Entity.
And possibly get a copy of the following book? See STRUCTURING YOUR BUSINESS.
I've given you a few things to think about. And a few things to read. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Wednesday, March 7, 2007
Entrepreneurs want to know if they need one or two corporations. It all depends!
QUESTION.
We sell a product under an S Corp we co-founded. Recently we recorded an audio book that relates to the product, and we are about to sell it. However, my business partner wants to sell it under the name of another corporation. She wants me to receive commission from it and I could have shares in the other corporation. She said that if someone were to sue our first company over the product, it wouldn't affect our income with the audio book. We have product insurance for the product. Does this sound like a smart thing to do?
AND part two: Do you know how we can find venture capitalists/investors?
ANSWER.
SCORE counselors are not supposed to dispense free legal advice as part of our counseling. We are more coaches than consultants. I have no problem taking a stab at your questions. But I'm just telling you for future reference.
Most of your questions involve "Choice of Legal Entity" issues. There is nothing wrong with having two corporations in order to limit liability. In fact, it is done all the time. For example, a taxi cab company might have 10 taxi cabs in its fleet. Each cab is a separate corporation or LLC. If one cab gets in an accident and gets sued for negligence, then only that one cab is at risk. The other 9 have no exposure. I'm not sure your business partner is setting up her corporation to minimize exposure. I bet she is setting it up so she can get more of the profits for herself. That's fine, but she doesn't have to set up a separate corporation to accomplish that. If you don't need a corporation, then it is cheaper to do without it. Most businesses don't qualify for venture capital. And the ones that do have to put together a stellar business plan in written form that will convince a venture capital firm that the business will make A LOT OF MONEY in a short amount of time given the proper capital infusion. See
Books on Venture Capital
Financing Your Small Business & Angel Investors
Figure Out How to Write a Business Plan
If you want to learn more about Choice of Legal Entity, then see
Learn a Little about Choice of Legal Entity
I recommend you contact your local SCORE chapter and set up a face-to-face counseling session with two volunteer SCORE counselors. Those meetings are free and very helpful to people trying to get a business started. They are great for troubleshooting a business plan. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
We sell a product under an S Corp we co-founded. Recently we recorded an audio book that relates to the product, and we are about to sell it. However, my business partner wants to sell it under the name of another corporation. She wants me to receive commission from it and I could have shares in the other corporation. She said that if someone were to sue our first company over the product, it wouldn't affect our income with the audio book. We have product insurance for the product. Does this sound like a smart thing to do?
AND part two: Do you know how we can find venture capitalists/investors?
ANSWER.
SCORE counselors are not supposed to dispense free legal advice as part of our counseling. We are more coaches than consultants. I have no problem taking a stab at your questions. But I'm just telling you for future reference.
Most of your questions involve "Choice of Legal Entity" issues. There is nothing wrong with having two corporations in order to limit liability. In fact, it is done all the time. For example, a taxi cab company might have 10 taxi cabs in its fleet. Each cab is a separate corporation or LLC. If one cab gets in an accident and gets sued for negligence, then only that one cab is at risk. The other 9 have no exposure. I'm not sure your business partner is setting up her corporation to minimize exposure. I bet she is setting it up so she can get more of the profits for herself. That's fine, but she doesn't have to set up a separate corporation to accomplish that. If you don't need a corporation, then it is cheaper to do without it. Most businesses don't qualify for venture capital. And the ones that do have to put together a stellar business plan in written form that will convince a venture capital firm that the business will make A LOT OF MONEY in a short amount of time given the proper capital infusion. See
Books on Venture Capital
Financing Your Small Business & Angel Investors
Figure Out How to Write a Business Plan
If you want to learn more about Choice of Legal Entity, then see
Learn a Little about Choice of Legal Entity
I recommend you contact your local SCORE chapter and set up a face-to-face counseling session with two volunteer SCORE counselors. Those meetings are free and very helpful to people trying to get a business started. They are great for troubleshooting a business plan. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Tuesday, March 6, 2007
Small business owner is scared he's going to fail and wants to know exit strategy possibilities.
QUESTION.
If my new health club venture does not pan out like I anticipate, how can I get out without losing my home? How does the bankruptcy toward the business work?
ANSWER.
Your email is not a very cheery one. I'm not sure you have provided me enough information to answer your question. If you formed an LLC or a corporation as the choice of legal entity for your business, then you can dissolve your business when it tanks. You can walk away from any BUSINESS obligation without any liability for business debts if you formed an LLC or a corporation.
However, any debts you incurred PERSONALLY you will still owe even after your business is gone. For example, if you took out a home equity loan against your personal residence and contributed the borrowed funds to your business, then you will still have to repay your loan or the bank can foreclose on your residence.
If you are married, and the house is in your wife's name, then your house may be protected from any debts you personally owe.
You will have no need for a bankruptcy for the business if you made your business a separate legal entity, i.e., an LLC or a corporation. If you didn't, and you operate as a sole proprietorship, then you may have to file a personal bankruptcy to get out of some of your business debts. That's because as a sole proprietorship you are your business and your business is you. Bankruptcy will not protect your home since the lender will have a security interest in your home assuming you signed a mortgage when you borrowed from the bank.
If you don't already have a business plan in place, then I recommend you write one ASAP. Most businesses that have a sound written business plan do not fail. Consider calling your local SCORE chapter and scheduling a 1-hour face-to-face session to discuss writing a business plan. That is SCORE's expertise if you ask me - business plans.
I hope my comments are helpful. But beware that SCORE counselors are not supposed to give out free legal advice. I crossed the line a little in responding to you this time. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
If my new health club venture does not pan out like I anticipate, how can I get out without losing my home? How does the bankruptcy toward the business work?
ANSWER.
Your email is not a very cheery one. I'm not sure you have provided me enough information to answer your question. If you formed an LLC or a corporation as the choice of legal entity for your business, then you can dissolve your business when it tanks. You can walk away from any BUSINESS obligation without any liability for business debts if you formed an LLC or a corporation.
However, any debts you incurred PERSONALLY you will still owe even after your business is gone. For example, if you took out a home equity loan against your personal residence and contributed the borrowed funds to your business, then you will still have to repay your loan or the bank can foreclose on your residence.
If you are married, and the house is in your wife's name, then your house may be protected from any debts you personally owe.
You will have no need for a bankruptcy for the business if you made your business a separate legal entity, i.e., an LLC or a corporation. If you didn't, and you operate as a sole proprietorship, then you may have to file a personal bankruptcy to get out of some of your business debts. That's because as a sole proprietorship you are your business and your business is you. Bankruptcy will not protect your home since the lender will have a security interest in your home assuming you signed a mortgage when you borrowed from the bank.
If you don't already have a business plan in place, then I recommend you write one ASAP. Most businesses that have a sound written business plan do not fail. Consider calling your local SCORE chapter and scheduling a 1-hour face-to-face session to discuss writing a business plan. That is SCORE's expertise if you ask me - business plans.
I hope my comments are helpful. But beware that SCORE counselors are not supposed to give out free legal advice. I crossed the line a little in responding to you this time. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Monday, March 5, 2007
Contractor didn't get his contract in writing. Now customer doesn't want to pay what is owed. Ouch!
QUESTION.
I have recently started a construction consulting business and am having difficulty collecting payment from a client. We do not have a written contract but did verbally agree to terms prior to my engagement. He has paid a portion of December's billing and originally agreed to pay me in full for my services by the end of January. However, he has since renegged in our agreement and now states that he will not pay what is owed but will settle for a fraction of the amount.
Please advise of my options at this point. Note that there are additional business owners who witnessed the verbal agreements mentioned above. Thank you in advance for your assistance.
ANSWER.
Your question is legal in nature and generally SCORE counselors are not supposed to answer legal questions. Instead we are supposed to refer you to an attorney to get an answer. Of course, I cross the line from time to time if the answer is fairly easy to provide. The general rule is that a contract for more than $500 of product or services is required to be in writing to be enforceable. Sounds like your client knew the law and took advantage of your ignorance. However, you can sue him for unjust enrichment which is a way to sue for what you are owed "off the contract." If you bring your witnesses to court, I suspect the judge will award you pretty much what you listed on the written contract that the client did not sign. You probably should chaulk this fiasco up as a learning experience. Never do more than $500 of work without first getting a signed written contract. Also, never let the client get ahead of you. If you do work on installments, then only do work that you have already been paid for. Then when a client refuses to make more payments, you just quit working for her. That way you only work for compensation! If your client paid a bill which includes many, most or all the terms of your contract, then that payment can be used as written evidence of a contact that existed. You do not specifically need a formal written contract on which to sue. Does this client care about his reputation in the local business community? His failure to pay you what you are owed can cause him to damage his reputation. You can tell whoever you like what he did to you (as long as it does not appear to be done maliciously). And over time his reputation will go down. Of course, that assumes you have a good reputation yourself. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I have recently started a construction consulting business and am having difficulty collecting payment from a client. We do not have a written contract but did verbally agree to terms prior to my engagement. He has paid a portion of December's billing and originally agreed to pay me in full for my services by the end of January. However, he has since renegged in our agreement and now states that he will not pay what is owed but will settle for a fraction of the amount.
Please advise of my options at this point. Note that there are additional business owners who witnessed the verbal agreements mentioned above. Thank you in advance for your assistance.
ANSWER.
Your question is legal in nature and generally SCORE counselors are not supposed to answer legal questions. Instead we are supposed to refer you to an attorney to get an answer. Of course, I cross the line from time to time if the answer is fairly easy to provide. The general rule is that a contract for more than $500 of product or services is required to be in writing to be enforceable. Sounds like your client knew the law and took advantage of your ignorance. However, you can sue him for unjust enrichment which is a way to sue for what you are owed "off the contract." If you bring your witnesses to court, I suspect the judge will award you pretty much what you listed on the written contract that the client did not sign. You probably should chaulk this fiasco up as a learning experience. Never do more than $500 of work without first getting a signed written contract. Also, never let the client get ahead of you. If you do work on installments, then only do work that you have already been paid for. Then when a client refuses to make more payments, you just quit working for her. That way you only work for compensation! If your client paid a bill which includes many, most or all the terms of your contract, then that payment can be used as written evidence of a contact that existed. You do not specifically need a formal written contract on which to sue. Does this client care about his reputation in the local business community? His failure to pay you what you are owed can cause him to damage his reputation. You can tell whoever you like what he did to you (as long as it does not appear to be done maliciously). And over time his reputation will go down. Of course, that assumes you have a good reputation yourself. I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Sunday, March 4, 2007
My rent is costing my business too much. Is it time to do some strategic planning?
QUESTION.
I don't know if you can help me. I need to keep my business alive; it's about to go under. Where can I find financing to enable me to move to a smaller leased building? There will be costs required to renovate retail space to accomodate a laundrymat. Can you help?
ANSWER.
I can only make comments. Your question is a bit cryptic. My take on it is that you have a laundry business that is failing and has been failing for some time. You think the rent obligations are killing you and you want to move to another location, but don't have the cash to pay for the move. Am I correct?
If so, then you need to put together a business plan regarding your laundry business. You should have written a business plan a long time ago. If you had, then you probably wouldn't be having your current problems. But that's something that is in the past. You need to move forward. Write a business plan for your business. One of the costs of doing business is moving your business to a new location. Your business plan will document how much your "new business" will make over the next three years. Those revenues will justify the move. The plan will hopefully convince a bank to loan you the money necessary to make the move. Funny thing is, if it won't, then your business deserves to tank anyway.
By the way, when you write your business plan you might discover that you don't need to move. Instead, you need to start marketing so more business comes your way. It is quite costly to move a laundry business. So I suspect that is not the best alternative for you to consider.
If a bank won't help, then you might consider taking on a partner who can sink the necessary cash into the business so it will stay afloat. You still need a business plan so you will have something to show the potential partner when you try to talk her into joining you.
Take a look at the following links on business plan writing. See
Pick a Business
Write a Business Plan
I highly recommend you contact your local SCORE chapter and schedule an appointment for a face-to-face counseling session with two SCORE volunteers. See
http://www.score.org/findscore/chapter_maps.html
and type your zip code into the appropriate slot. Those sessions are free, and you will get some good comments on your situation from the counselors. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
I don't know if you can help me. I need to keep my business alive; it's about to go under. Where can I find financing to enable me to move to a smaller leased building? There will be costs required to renovate retail space to accomodate a laundrymat. Can you help?
ANSWER.
I can only make comments. Your question is a bit cryptic. My take on it is that you have a laundry business that is failing and has been failing for some time. You think the rent obligations are killing you and you want to move to another location, but don't have the cash to pay for the move. Am I correct?
If so, then you need to put together a business plan regarding your laundry business. You should have written a business plan a long time ago. If you had, then you probably wouldn't be having your current problems. But that's something that is in the past. You need to move forward. Write a business plan for your business. One of the costs of doing business is moving your business to a new location. Your business plan will document how much your "new business" will make over the next three years. Those revenues will justify the move. The plan will hopefully convince a bank to loan you the money necessary to make the move. Funny thing is, if it won't, then your business deserves to tank anyway.
By the way, when you write your business plan you might discover that you don't need to move. Instead, you need to start marketing so more business comes your way. It is quite costly to move a laundry business. So I suspect that is not the best alternative for you to consider.
If a bank won't help, then you might consider taking on a partner who can sink the necessary cash into the business so it will stay afloat. You still need a business plan so you will have something to show the potential partner when you try to talk her into joining you.
Take a look at the following links on business plan writing. See
Pick a Business
Write a Business Plan
I highly recommend you contact your local SCORE chapter and schedule an appointment for a face-to-face counseling session with two SCORE volunteers. See
http://www.score.org/findscore/chapter_maps.html
and type your zip code into the appropriate slot. Those sessions are free, and you will get some good comments on your situation from the counselors. I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Saturday, March 3, 2007
One of the things an entrepreneur has to cover in her business plan is Choice of Legal Entity.
QUESTION.
I'm starting an online job search engine. How can I cover myself legally until I can afford a lawyer?
ANSWER.
A lawyer will not cover you legally. You can form an LLC (limited liability company) for starters. Visit your county court house's law library (free) and ask the law librarian there to show you the book on forming LLCs. Then log online to your state's business filing site and register your LLC.
You may want to take out some liability insurance, but you don't need a lawyer for that.
I hope my comments are helpful. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I'm starting an online job search engine. How can I cover myself legally until I can afford a lawyer?
ANSWER.
A lawyer will not cover you legally. You can form an LLC (limited liability company) for starters. Visit your county court house's law library (free) and ask the law librarian there to show you the book on forming LLCs. Then log online to your state's business filing site and register your LLC.
You may want to take out some liability insurance, but you don't need a lawyer for that.
I hope my comments are helpful. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Friday, March 2, 2007
Steps one should take to start an eBusiness.
QUESTION.
I am interested in finding out if an ebusiness idea is legal or not? Is contacting a small business lawyer the first step in starting an ebusiness? Any feedback on the steps I need to take to start an ebusiness would be helpful, and of course how to find out if our idea is legal?
ANSWER.
If a non-eBusiness is legal, then its eBusiness counterpart is legal. There is nothing special about a business being conducted over the Internet. The first step of starting a business is to have an idea and then write a sound business plan. See
PICK A BUSINESS
http://www.amazon.com/gp/richpub/syltguides/fullview/RRPPY20QOM8NV/ref=cm_sylt_byauthor_title_full_3
WRITE A BUSINESS PLAN
http://www.amazon.com/gp/richpub/syltguides/fullview/3K0GZALNJ9Z77/ref=cm_sylt_byauthor_title_full_15
I hope my comments are helpful. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I am interested in finding out if an ebusiness idea is legal or not? Is contacting a small business lawyer the first step in starting an ebusiness? Any feedback on the steps I need to take to start an ebusiness would be helpful, and of course how to find out if our idea is legal?
ANSWER.
If a non-eBusiness is legal, then its eBusiness counterpart is legal. There is nothing special about a business being conducted over the Internet. The first step of starting a business is to have an idea and then write a sound business plan. See
PICK A BUSINESS
http://www.amazon.com/gp/richpub/syltguides/fullview/RRPPY20QOM8NV/ref=cm_sylt_byauthor_title_full_3
WRITE A BUSINESS PLAN
http://www.amazon.com/gp/richpub/syltguides/fullview/3K0GZALNJ9Z77/ref=cm_sylt_byauthor_title_full_15
I hope my comments are helpful. Feel free to send me follow-on questions via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Thursday, March 1, 2007
Can we write-off business expenses when we don't have business income?
QUESTION.
We decided to incorporate our business before getting too far into the process and before making any sales. Incorporation was effective 10/5/06. We have not started to do business yet - still building Web site that will be our "store." Do I have to file a Form 1120S with the IRS for 2006 since we didn't do any business in that year? Also, can we write off the $$ we spent on books, software, etc., that we spent in 2006 before we incorporated, on a Schedule C?
ANSWER.
You do not have to file a tax return unless you have business income. Therefore you do not have to file an 1120S for 2006. You can capitalize the costs you paid for books, software, etc in 2006 and write them off in 2007 assuming you expect to have income then.
You cannot write off the books, software etc on your personal Schedule C because you can't offset business expenses against W-2 income.
I hope you have written a sound business plan. I say this because normally I advise my SCORE clients to finish the plan before forming their legal entity. If you had a plan, then you would be making money right out of the blocks. And you would only have incorporated after you had the plan in place. See
PICK A BUSINESS
WRITE A BUSINESS PLAN
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
We decided to incorporate our business before getting too far into the process and before making any sales. Incorporation was effective 10/5/06. We have not started to do business yet - still building Web site that will be our "store." Do I have to file a Form 1120S with the IRS for 2006 since we didn't do any business in that year? Also, can we write off the $$ we spent on books, software, etc., that we spent in 2006 before we incorporated, on a Schedule C?
ANSWER.
You do not have to file a tax return unless you have business income. Therefore you do not have to file an 1120S for 2006. You can capitalize the costs you paid for books, software, etc in 2006 and write them off in 2007 assuming you expect to have income then.
You cannot write off the books, software etc on your personal Schedule C because you can't offset business expenses against W-2 income.
I hope you have written a sound business plan. I say this because normally I advise my SCORE clients to finish the plan before forming their legal entity. If you had a plan, then you would be making money right out of the blocks. And you would only have incorporated after you had the plan in place. See
PICK A BUSINESS
WRITE A BUSINESS PLAN
I hope my comments are helpful. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
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