QUESTION.
I am a volunteer paralegal with a non profit organization in Mass. We help inmates and their families. I was told I need to register here in NY since this the state I volunteer in. The organization is made up of only volunteers and we use our own funds to run it-do not recieve any funding. What do I have to do to register here in NY? Also is it true that the organization should have insurance? If not am I covered under the volunteer law? I was asked to be on the board of directors of the organization would I be liable for any type of claims against the organization if they don't have insurance?
ANSWER.
Sounds like you are a volunteer for a Massachusetts nonprofit that provides services in New York. If services are truly delivered in New York, then your nonprofit has to register as a nonprofit in New York, too. Since you are merely a volunteer for the organization, you shouldn't have to do anything. The people that manage the nonprofit have to do the paperwork and pay the appropriate fees. You see, a nonprofit is a separate legal entity from the the people who run it. State law is how a nonprofit is recognized from a legal standpoint. As long as a nonprofit does it business in the state where it is incorporated, then all is well. But if it goes outside of the its original jurisdiction, then it has to register itself as a foreign entity in the new state in which it provides services. In this case that means it has to register as a foreign nonprofit in NY. Yes, the organization should have some insurance if the services it provides could cause injury to someone. 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, May 28, 2007
When you have a question about an IRS tax form, then visit the IRS Web site and get the instruction guide for the form.
QUESTION.
I am the Treasurer for a non-profit, 501 (c) (3) organization here in California. Our federal exempt letter states that we must file a form 990, although we do not bring in enough money per the IRS guidelines on the 990 instructions. Are there resources to help complete the form? I am very confused about the breakdowns of events, revenue vs. total receipts, etc., and I don't want to complete this in error.
ANSWER.
The instruction booklet for filling out the Form 990 can be downloaded by using the following link. See http://www.irs.gov/pub/irs-pdf/i990-ez.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 the Treasurer for a non-profit, 501 (c) (3) organization here in California. Our federal exempt letter states that we must file a form 990, although we do not bring in enough money per the IRS guidelines on the 990 instructions. Are there resources to help complete the form? I am very confused about the breakdowns of events, revenue vs. total receipts, etc., and I don't want to complete this in error.
ANSWER.
The instruction booklet for filling out the Form 990 can be downloaded by using the following link. See http://www.irs.gov/pub/irs-pdf/i990-ez.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
Don't expect to create an LLC or a corporation to establish credit separate and apart from your own personal credit history. It won't work!
QUESTION.
I heard a radio program on which a gentleman promoting his own "incorporate in Nevada" company made some assertions which got me curious. He claimed that one may purchase real estate under a company or LLC name for liability protection.
He also mentioned that one may apply for credit as a corp and get better credit as a corp than one has accumulated personally. My credit score is just under 700 and I'm told that since I have so many mortgages on investment properties [paid promptly and up to date, of course], it will be difficult for me to break the 700 level.
Also wondered how I can purchase property in a corp name without suffering some percentage increase or an "absolutely NOT." As of yet, I'm unaware of how I might transfer ownership to my LLC - I imagine my lenders [GMAC, Countrywide, etc] will stop that immediately. yet, I hear this is the thing to do. How can I actually do it?
Also, should a company be formed by an associate of mine, may I have one of the LLC's be a member of his LLC?
The radio pundit claimed one should put everything he owns in his corporations so that he is personally protected in case of lawsuits, etc. What's your take on this?
Thank you for taking the time. This is a marvelous service you provide.
ANSWER.
You've asked me to provide too much information in your email. I'm a business coach in my SCORE capacity. I'm not a mere free service for asking questions that MIGHT relate to starting or running a business when there is no business in the picture. Your questions sound like you don't have a business, but instead just want to know how you might be able to get your credit rating up.
Corporations are separate legal entities from their owners. While it is true they can get a better credit rating than their owners, this truism can be misleading. Only well-established corporations that have developed a cash flow and good credit history can do this. You cannot simply form a corporation which does not have a credit history of its own and expect it to be able to get credit for you. It just doesn't work that way.
And yes, LLCs can be stacked. An LLC can own an LLC which in turn can own another LLC. But putting property in an LLC or corporation will not protect that property from your creditors. You still own the LLC or the stock in the corporation and your creditors can get an interest in your stock and thus an interest in any property that your corporation owns.
Make it a great day! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I heard a radio program on which a gentleman promoting his own "incorporate in Nevada" company made some assertions which got me curious. He claimed that one may purchase real estate under a company or LLC name for liability protection.
He also mentioned that one may apply for credit as a corp and get better credit as a corp than one has accumulated personally. My credit score is just under 700 and I'm told that since I have so many mortgages on investment properties [paid promptly and up to date, of course], it will be difficult for me to break the 700 level.
Also wondered how I can purchase property in a corp name without suffering some percentage increase or an "absolutely NOT." As of yet, I'm unaware of how I might transfer ownership to my LLC - I imagine my lenders [GMAC, Countrywide, etc] will stop that immediately. yet, I hear this is the thing to do. How can I actually do it?
Also, should a company be formed by an associate of mine, may I have one of the LLC's be a member of his LLC?
The radio pundit claimed one should put everything he owns in his corporations so that he is personally protected in case of lawsuits, etc. What's your take on this?
Thank you for taking the time. This is a marvelous service you provide.
ANSWER.
You've asked me to provide too much information in your email. I'm a business coach in my SCORE capacity. I'm not a mere free service for asking questions that MIGHT relate to starting or running a business when there is no business in the picture. Your questions sound like you don't have a business, but instead just want to know how you might be able to get your credit rating up.
Corporations are separate legal entities from their owners. While it is true they can get a better credit rating than their owners, this truism can be misleading. Only well-established corporations that have developed a cash flow and good credit history can do this. You cannot simply form a corporation which does not have a credit history of its own and expect it to be able to get credit for you. It just doesn't work that way.
And yes, LLCs can be stacked. An LLC can own an LLC which in turn can own another LLC. But putting property in an LLC or corporation will not protect that property from your creditors. You still own the LLC or the stock in the corporation and your creditors can get an interest in your stock and thus an interest in any property that your corporation owns.
Make it a great day! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
It's always a good idea to study the different options you have for your small business' legal entity.
QUESTION.
I just started a business in which I offer my services (freelance), which include choreography, music consulting and project management, image and artist development and dance instruction. I have not completed my business plan, however I am currently working on it. I would like to get your advice on the best type of business structure I should focus on as it relates to incorporating and taxes. Although I have researched various options, I am slightly unclear as to which would be best suited for me. Your help is greatly appreciated.
ANSWER.
The choice of legal entity you choose really doesn't have much to do with paying taxes or saving on taxes. The choice you make will only determine which tax forms you have to file with the IRS and whether you are likely to get audited by the IRS. I typically advise SCORE clients there really are only two options: LLC or C-Corporation.
In your case, based on the facts you have provided me, I recommend you go the LLC route. A limited liability company will give your small business a fictitious name, limit liability exposure to you in providing your services, and probably more credibility than merely being a sole proprietorship.
You can have your LLC taxed as a sole proprietorship or as a C-Corporation. If you go the sole proprietorship route for tax purposes, then all your LLC's revenues and expenses will be reported on your personal tax return's Schedule C. This could possibly increase your chances for an IRS audit. If you go the C-corp route for tax purposes, then you will have to file a Form 1120 for the corporation and give yourself a W-2 for the income you will claim from your corporation. Don't worry about the double tax problem with C-corps because you will nodoubt give yourself a bonus at year-end which will effective zero out the income your "corporaton" would owe taxes on.
You may want to take a look at the following link? See LEARN A LITTLE ABOUT CHOICE OF LEGAL ENTITY.
I think I have answered your question. If you have a more specific question about this that you need answering, then feel free to send me follow-ons via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I just started a business in which I offer my services (freelance), which include choreography, music consulting and project management, image and artist development and dance instruction. I have not completed my business plan, however I am currently working on it. I would like to get your advice on the best type of business structure I should focus on as it relates to incorporating and taxes. Although I have researched various options, I am slightly unclear as to which would be best suited for me. Your help is greatly appreciated.
ANSWER.
The choice of legal entity you choose really doesn't have much to do with paying taxes or saving on taxes. The choice you make will only determine which tax forms you have to file with the IRS and whether you are likely to get audited by the IRS. I typically advise SCORE clients there really are only two options: LLC or C-Corporation.
In your case, based on the facts you have provided me, I recommend you go the LLC route. A limited liability company will give your small business a fictitious name, limit liability exposure to you in providing your services, and probably more credibility than merely being a sole proprietorship.
You can have your LLC taxed as a sole proprietorship or as a C-Corporation. If you go the sole proprietorship route for tax purposes, then all your LLC's revenues and expenses will be reported on your personal tax return's Schedule C. This could possibly increase your chances for an IRS audit. If you go the C-corp route for tax purposes, then you will have to file a Form 1120 for the corporation and give yourself a W-2 for the income you will claim from your corporation. Don't worry about the double tax problem with C-corps because you will nodoubt give yourself a bonus at year-end which will effective zero out the income your "corporaton" would owe taxes on.
You may want to take a look at the following link? See LEARN A LITTLE ABOUT CHOICE OF LEGAL ENTITY.
I think I have answered your question. If you have a more specific question about this that you need answering, then feel free to send me follow-ons via email. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
It's always nice to hear from someone who built a business and then sold it for a profit!
QUESTION.
I have a minority ownership in a small company. We have been in business for two years. A competitor has approached us about selling the company to them. They would like to pay an amount upfront and the remainder would be an "earn-out," which I believe is typical. The earn out would likely be over a 6 month period. We are in a services based business. Also, I would likely be employed by the new company for at least six months. I would like your advice and any thoughts you have concerning what to be cautious of and any "pitfalls" to avoid. This has been "fast-tracked" because our busy season will start in mid-May, so this transaction would likely be complete before the end of April, so any expedited advice would be greatly appreciated. Thank you.
ANSWER.
There are books written on the subject of your email. I highly recommend you get a copy of the following book and read it cover to cover. See BUYING AND SELLING A BUSINESS.
Read the book review I wrote for it. I thought it was a wonderful book. And it is written by an attorney. When you are done reading the book and still have questions, then feel free to send me an email with pointed questions. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I have a minority ownership in a small company. We have been in business for two years. A competitor has approached us about selling the company to them. They would like to pay an amount upfront and the remainder would be an "earn-out," which I believe is typical. The earn out would likely be over a 6 month period. We are in a services based business. Also, I would likely be employed by the new company for at least six months. I would like your advice and any thoughts you have concerning what to be cautious of and any "pitfalls" to avoid. This has been "fast-tracked" because our busy season will start in mid-May, so this transaction would likely be complete before the end of April, so any expedited advice would be greatly appreciated. Thank you.
ANSWER.
There are books written on the subject of your email. I highly recommend you get a copy of the following book and read it cover to cover. See BUYING AND SELLING A BUSINESS.
Read the book review I wrote for it. I thought it was a wonderful book. And it is written by an attorney. When you are done reading the book and still have questions, then feel free to send me an email with pointed questions. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
SCORE is not set up to be a free tax planning service. The nerve of some people!
QUESTION.
I am subject to AMT and I am wondering if real estate invetsment makes any sense. I understand that because of AMT, any deductions would be lost. Is setting up a C Corporation or an LLC an option that would allow me the benefit of the deductions? Thanks.
ANSWER.
SCORE helps people who want to start a business, run a small business, found a nonprofit, or run a nonprofit. Your questions don't seem to fit any of those four topics. Sorry I can't help you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
I am subject to AMT and I am wondering if real estate invetsment makes any sense. I understand that because of AMT, any deductions would be lost. Is setting up a C Corporation or an LLC an option that would allow me the benefit of the deductions? Thanks.
ANSWER.
SCORE helps people who want to start a business, run a small business, found a nonprofit, or run a nonprofit. Your questions don't seem to fit any of those four topics. Sorry I can't help you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
It's always a mess when partners or co-owners of a closely-held company don't document up front how they will buy each other out down the road.
QUESTION.
Two friends and I started a small home-based business in August of 2005. We design, make and sell costume jewelry. We originally started as an LLC, and then gained approval to operate as an s-corporation and filed our taxes as such for 2006. We incorporated online with the boilplate articles of incorporation, but never drew up any further operating agreements or articles. Two of us are doing 95% of the design, manufacture and sales and the third partner, who was supposed to assist with that while managing the books, has fallen very short of her responsibilities and is not pulling her weight. Not only has she not done much in terms of the jewelry, I have had to do a good portion of the bookkeeping as well. Up to this point, she has received a full third of any profits, although she has not technically earned it.
At the end of 2006, we had a meeting in which we discussed this and offered her a few months to improve her performance and value to the company. We explained we would need to eliminate her from the "partnership" if she didn't come up to speed. This past week, we had a review meeting and have mutally agreed to end our 3-way partnership and go forward as a 2-way partnership without her.
We have the following questions we hope you can help us with. In the absence of any partnership agreements, what exactly is she entitled to? We believe she's already earned more than she deserved. Must we pay her one third of our assets? (Our assets basically consist of an inventory of finished goods and raw materials.) Or, is she entitled to one third of the value of our company, and if so, how is that determined? If the latter is so, should we just dissolve this company and start anew so there is no future value to pay her? This is a small business, not yet very profitable, but we have gotten out our initial investments and a small profit as well. It would be a hardship for us to have to pay her anything at this point.
Thank you in advance for any comments you offer us. It is greatly appreciated.
ANSWER.
I'm not sure I have all the facts I need from you. But I will attempt to make some relevant comments just the same. You say you started out as an LLC. Did you have an operating agreement for your LLC which described how the partners would share profits? Did it include any provisions about how to terminate a member (partner)? I suspect it did not.
Then the three of you converted the LLC into a corporation? Or did you choose to just have it taxed as a corporation? Sounds like you actually formed a corporation. But did you ever dissolve the LLC? Or do you have an LLC and a corporation now? And if you have a corporation, then did you issue each other a share of stock to evidence ownership interest held by each?
If your partner is willing to bow out with a fuss, then let her bow out. She doesn't have to get paid for her interest in the business if she chooses not to press the issue. Hopefully the three of you can come to some mutually beneficial arrangement as to what it will take to buy out the third owner. If not, then she technically is entitled to a one third cut in the value of the existing company. The value of the inventory is one thing. But I suspect there is some goodwill that had come into existence.
Consider taking a look at the following book to learn how to value a business. See BUYING AND SELLING A BUSINESS.
If you never issued stock, then how are you going to work that out? Are you going to issue three shares and then take one back? Or are you going to issue just two shares and let the underproducer just leave without ever holding a share?
Typically when you run an LLC you operate much like a partnership. However, when you run a corporation the concept of partnership goes out the window. You become co-owners and you own in the same relationship as the percent of shares you own in the company. It is not a good idea to run a corporation with two owners each owning 50% of the stock. One should own 51% and the other 49%. This way disagreements will not happen - or are less likely to happen.
Try to be as cordial through all this as possible. Any tempers and you'll likely find yourself in court and dealing with legal fees and wasted time. Nobody wants that - especially me.
I think I have answered your question(s). 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
http://www.jlippin.com/
Two friends and I started a small home-based business in August of 2005. We design, make and sell costume jewelry. We originally started as an LLC, and then gained approval to operate as an s-corporation and filed our taxes as such for 2006. We incorporated online with the boilplate articles of incorporation, but never drew up any further operating agreements or articles. Two of us are doing 95% of the design, manufacture and sales and the third partner, who was supposed to assist with that while managing the books, has fallen very short of her responsibilities and is not pulling her weight. Not only has she not done much in terms of the jewelry, I have had to do a good portion of the bookkeeping as well. Up to this point, she has received a full third of any profits, although she has not technically earned it.
At the end of 2006, we had a meeting in which we discussed this and offered her a few months to improve her performance and value to the company. We explained we would need to eliminate her from the "partnership" if she didn't come up to speed. This past week, we had a review meeting and have mutally agreed to end our 3-way partnership and go forward as a 2-way partnership without her.
We have the following questions we hope you can help us with. In the absence of any partnership agreements, what exactly is she entitled to? We believe she's already earned more than she deserved. Must we pay her one third of our assets? (Our assets basically consist of an inventory of finished goods and raw materials.) Or, is she entitled to one third of the value of our company, and if so, how is that determined? If the latter is so, should we just dissolve this company and start anew so there is no future value to pay her? This is a small business, not yet very profitable, but we have gotten out our initial investments and a small profit as well. It would be a hardship for us to have to pay her anything at this point.
Thank you in advance for any comments you offer us. It is greatly appreciated.
ANSWER.
I'm not sure I have all the facts I need from you. But I will attempt to make some relevant comments just the same. You say you started out as an LLC. Did you have an operating agreement for your LLC which described how the partners would share profits? Did it include any provisions about how to terminate a member (partner)? I suspect it did not.
Then the three of you converted the LLC into a corporation? Or did you choose to just have it taxed as a corporation? Sounds like you actually formed a corporation. But did you ever dissolve the LLC? Or do you have an LLC and a corporation now? And if you have a corporation, then did you issue each other a share of stock to evidence ownership interest held by each?
If your partner is willing to bow out with a fuss, then let her bow out. She doesn't have to get paid for her interest in the business if she chooses not to press the issue. Hopefully the three of you can come to some mutually beneficial arrangement as to what it will take to buy out the third owner. If not, then she technically is entitled to a one third cut in the value of the existing company. The value of the inventory is one thing. But I suspect there is some goodwill that had come into existence.
Consider taking a look at the following book to learn how to value a business. See BUYING AND SELLING A BUSINESS.
If you never issued stock, then how are you going to work that out? Are you going to issue three shares and then take one back? Or are you going to issue just two shares and let the underproducer just leave without ever holding a share?
Typically when you run an LLC you operate much like a partnership. However, when you run a corporation the concept of partnership goes out the window. You become co-owners and you own in the same relationship as the percent of shares you own in the company. It is not a good idea to run a corporation with two owners each owning 50% of the stock. One should own 51% and the other 49%. This way disagreements will not happen - or are less likely to happen.
Try to be as cordial through all this as possible. Any tempers and you'll likely find yourself in court and dealing with legal fees and wasted time. Nobody wants that - especially me.
I think I have answered your question(s). 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
http://www.jlippin.com/
Small business owner formed an LLC because she thought she was going to go into partners with someone. It was a good idea to form the LLC in ANY event
QUESTION.
I recently started a small business in NJ as an LLC. I originally thought I would be adding a partner, but that did not materialize. I am the only person in the company - no employees. I have a federal tax ID. Can I change this to a sole proprietorship in NJ using the same federal tax ID?
ANSWER.
You can contact NJ and have your LLC discontinued. However, I recommend you keep it. Using the name with the LLC at the end will make your business more credible. You can call yourself president of your LLC. For tax purposes an LLC is a flow-through entity. So you won't be saving any taxes by discontinuing it. And you will limit liability for yourself if you keep the LLC. LLCs can be single member or multi member. You happen to have a single member one at present. I recommend to all my SCORE clients that they get either an LLC or a C corporation when starting their business. I think you have done just fine to create an LLC.
I think I have answered your questions. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
I recently started a small business in NJ as an LLC. I originally thought I would be adding a partner, but that did not materialize. I am the only person in the company - no employees. I have a federal tax ID. Can I change this to a sole proprietorship in NJ using the same federal tax ID?
ANSWER.
You can contact NJ and have your LLC discontinued. However, I recommend you keep it. Using the name with the LLC at the end will make your business more credible. You can call yourself president of your LLC. For tax purposes an LLC is a flow-through entity. So you won't be saving any taxes by discontinuing it. And you will limit liability for yourself if you keep the LLC. LLCs can be single member or multi member. You happen to have a single member one at present. I recommend to all my SCORE clients that they get either an LLC or a C corporation when starting their business. I think you have done just fine to create an LLC.
I think I have answered your questions. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
http://www.jlippin.com/
Here's another wanta-be entrepreneur who wants to mix for-profit with nonprofit. It's a no-no to do so! Do one or the other.
QUESTION.
I'm starting a nonprofit organization that will work hand in hand with a small business that I'm also going to start after I get the nonprofit up and running. I don't have any idea how I go about the legalities of starting a nonprofit. The main focus of the nonprofit is going to be a Web site that helps to educate a certain group of people. It's obviously going to accept donations, and there will be "community site" content including weekly updates and 'messages.'
The for-profit business I will created in the future I will sell memorabilia and other items of interest related to the community members. Also I don't know how to start a business legally, and I need the most cost-effective way to do this. I tried looking through the IRS site and the secretary of state's site but I didn't quite understand it all and they still say to seek legal advice. I'm not sure if the information I'm asking for is really what you do here at SCORE, but I saw that you have experience with non-profits so I'm hoping that you can help me out. Thank you very much for your time.
ANSWER.
Your questions are very broad. Email counseling provided by SCORE exists to help SCORE clients with very pointed questions. Books are written on the topic(s) you have asked about your email to me.
I recommend you contact your local SCORE chapter and schedule a 1-hour face-to-face session with two SCORE volunteers. See http://www.score.org/findscore/chapter_maps.html and type your home zip code in the appropriate blank to find your local SCORE chapter.
I will tell you that it is not a good idea to found a nonprofit that you intend to interrelate with a for-profit that you own. The appearances of impropriety are significant. It will appear that you are trying to profit by involving yourself in a nonprofit cause. That is a no-no.
If you want to start a nonprofit, then start one. You can make a very good living doing nonprofit work. Running a nonprofit does not mean you have to work for free or peanuts. It only means you have to provide a service that allows your company to qualify for nonprofit status in the eyes of the Internal Revenue Code. If you want to start a for-profit, then great! But don't relate it to a nonprofit organization. Consider taking a look at the following links. See
BECOME A FOUNDER OF NONPROFIT ORGANIZATION
PICK A BUSINESS, CREATE A BUSINESS PLAN, AND START IT SOON
HOW TO WRITE A BUSINESS PLAN
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 nonprofit organization that will work hand in hand with a small business that I'm also going to start after I get the nonprofit up and running. I don't have any idea how I go about the legalities of starting a nonprofit. The main focus of the nonprofit is going to be a Web site that helps to educate a certain group of people. It's obviously going to accept donations, and there will be "community site" content including weekly updates and 'messages.'
The for-profit business I will created in the future I will sell memorabilia and other items of interest related to the community members. Also I don't know how to start a business legally, and I need the most cost-effective way to do this. I tried looking through the IRS site and the secretary of state's site but I didn't quite understand it all and they still say to seek legal advice. I'm not sure if the information I'm asking for is really what you do here at SCORE, but I saw that you have experience with non-profits so I'm hoping that you can help me out. Thank you very much for your time.
ANSWER.
Your questions are very broad. Email counseling provided by SCORE exists to help SCORE clients with very pointed questions. Books are written on the topic(s) you have asked about your email to me.
I recommend you contact your local SCORE chapter and schedule a 1-hour face-to-face session with two SCORE volunteers. See http://www.score.org/findscore/chapter_maps.html and type your home zip code in the appropriate blank to find your local SCORE chapter.
I will tell you that it is not a good idea to found a nonprofit that you intend to interrelate with a for-profit that you own. The appearances of impropriety are significant. It will appear that you are trying to profit by involving yourself in a nonprofit cause. That is a no-no.
If you want to start a nonprofit, then start one. You can make a very good living doing nonprofit work. Running a nonprofit does not mean you have to work for free or peanuts. It only means you have to provide a service that allows your company to qualify for nonprofit status in the eyes of the Internal Revenue Code. If you want to start a for-profit, then great! But don't relate it to a nonprofit organization. Consider taking a look at the following links. See
BECOME A FOUNDER OF NONPROFIT ORGANIZATION
PICK A BUSINESS, CREATE A BUSINESS PLAN, AND START IT SOON
HOW TO WRITE A BUSINESS PLAN
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
Why do so many small business owners want to mix their business with a nonprofit entity? Don't do it!
QUESTION.
We are new online retailer of DVDs, mostly mainstream movies from the major studios. We would like to partner with several other companies to create a value-added program that will help us drive our sales while raising funds for a local nonprofit.
If our partner companies donate free merchandise which we offer with every DVD sale, and then we donate $1.00 per sale to the charity, what are the tax advantages to each company?
Can we write off marketing expenses, plus our $1.00 donation per item? Can our partners write off the market value of the goods donated, or just the wholesale costs? Thanks for your help.
ANSWER.
Since your company is a for-profit entity, your partner companies cannot donate free merchandise to your company and get any tax benefit. Donations are only deductible if made to charitable organizations qualifying for tax-exempt status under Section 501(c) in the IRS Tax Code. If your company donates $1 to charity, then it gets a dollar of charitable contribution credit for tax purposes. You can write off any marketing expenses you have. You are a for-profit business and marketing expenses are a legitimate expense of doing business. If you donate to charity, ten you are entitled to get a charitable deduction up to a limit based on your company's taxable income.
You also asked if your partners car write off the market value of the goods donated, or just the wholesale costs. See the following IRS publication for your answer.
http://www.irs.gov/pub/irs-pdf/p526.pdf
I hope my comments are helpful. Good lucks! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
We are new online retailer of DVDs, mostly mainstream movies from the major studios. We would like to partner with several other companies to create a value-added program that will help us drive our sales while raising funds for a local nonprofit.
If our partner companies donate free merchandise which we offer with every DVD sale, and then we donate $1.00 per sale to the charity, what are the tax advantages to each company?
Can we write off marketing expenses, plus our $1.00 donation per item? Can our partners write off the market value of the goods donated, or just the wholesale costs? Thanks for your help.
ANSWER.
Since your company is a for-profit entity, your partner companies cannot donate free merchandise to your company and get any tax benefit. Donations are only deductible if made to charitable organizations qualifying for tax-exempt status under Section 501(c) in the IRS Tax Code. If your company donates $1 to charity, then it gets a dollar of charitable contribution credit for tax purposes. You can write off any marketing expenses you have. You are a for-profit business and marketing expenses are a legitimate expense of doing business. If you donate to charity, ten you are entitled to get a charitable deduction up to a limit based on your company's taxable income.
You also asked if your partners car write off the market value of the goods donated, or just the wholesale costs. See the following IRS publication for your answer.
http://www.irs.gov/pub/irs-pdf/p526.pdf
I hope my comments are helpful. Good lucks! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Online businesses are great! But don't think it is as simple as building a Web site. You need a business plan!
QUESTION.
I am a senior in college and a friend and I plan on creating an online business. We think we have a good idea of what we want to do , and it seems to be a very good idea with profits mainly coming from advertisements. But as of now it is only a idea. Do you have any start up advice or steps we should take to put our idea into action?
ANSWER.
It's very simple: document your idea in the form of a 25-35 page sound business plan. See
PICK A BUSINESS, CREATE A BUSINESS PLAN, AND START IT SOON
HOW TO WRTIE A BUSINESS PLAN.
Consider finding a local library that owns the Business Plans Handbook series. See BUSINESS PLANS HANDBOOK BY THOMSON-GALE.
Read as many of those volumes in order to help you put together a stellar business plan for your idea.
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 a senior in college and a friend and I plan on creating an online business. We think we have a good idea of what we want to do , and it seems to be a very good idea with profits mainly coming from advertisements. But as of now it is only a idea. Do you have any start up advice or steps we should take to put our idea into action?
ANSWER.
It's very simple: document your idea in the form of a 25-35 page sound business plan. See
PICK A BUSINESS, CREATE A BUSINESS PLAN, AND START IT SOON
HOW TO WRTIE A BUSINESS PLAN.
Consider finding a local library that owns the Business Plans Handbook series. See BUSINESS PLANS HANDBOOK BY THOMSON-GALE.
Read as many of those volumes in order to help you put together a stellar business plan for your idea.
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
There's a lot to starting a business. You need a business plan, a Web site, and an ability to market creatively.
QUESTION.
Please critique my Web site. I am starting a transcription company. I would appreciate any feedback on the site, good or bad. My marketing tool is going to be a postcard I am going to mail out. Thank you.
ANSWER.
Since I am a lawyer and have had experience with transcription services I am a little concerned that you have not thought through fully the business idea you have. You MUST prepare a written business plan that is SOUND - meaning one that is destined to make money. I don't think there is a business model that is viable for the concept you are trying to put together. Write a 25-35 page business plan and prove me wrong! See PICK A BUSINESS, WRITE A BUSINESS PLAN, START THE BUSINESS and HOW TO WRITE A BUSINESS PLAN.
Now, for my critique and/or comments...
1. Need a testimonials page.
2. The site is clean and pleasing to the eye.
3. The ABOUT page is not informative enough.
4. The FAQ section is incomplete.
5. You should include your fee schedule on the site. If you think posting your rates will scare away clients, then you don't think you are selling value to clients. And that is not good.
6. The site is too simple.
7. For examples and inspiration, see
www.publishinggame.com
www.surpassyourdreams.com
www.jblockinc.com
8. Get a copy of the following book:
The Web-Savvy Writer
By: Patrice-Anne Rutledge
(c) 2006
ISBN: 0977830403
See also, LEARN ABOUT WEB PAGE AND WEB SITE DESIGN.
A business plan will include a marketing plan. Simply sending out postcards is not going to get you business. And even if that's all you plan to do, then your Web site is going to have to be stellar so it converts visitors into paying customers. I think you need to take a look at the following link. See BOOKS ON SELF PROMOTION.
I've given you a few things to think about. Contact your local SCORE chapter and sign up for a free 1-hour face-to-face counseling session with two volunteers. We excel at helping wanta-be entrepreneurs create sound business plans. I can't help you with that via emails, though. Sorry. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Please critique my Web site. I am starting a transcription company. I would appreciate any feedback on the site, good or bad. My marketing tool is going to be a postcard I am going to mail out. Thank you.
ANSWER.
Since I am a lawyer and have had experience with transcription services I am a little concerned that you have not thought through fully the business idea you have. You MUST prepare a written business plan that is SOUND - meaning one that is destined to make money. I don't think there is a business model that is viable for the concept you are trying to put together. Write a 25-35 page business plan and prove me wrong! See PICK A BUSINESS, WRITE A BUSINESS PLAN, START THE BUSINESS and HOW TO WRITE A BUSINESS PLAN.
Now, for my critique and/or comments...
1. Need a testimonials page.
2. The site is clean and pleasing to the eye.
3. The ABOUT page is not informative enough.
4. The FAQ section is incomplete.
5. You should include your fee schedule on the site. If you think posting your rates will scare away clients, then you don't think you are selling value to clients. And that is not good.
6. The site is too simple.
7. For examples and inspiration, see
www.publishinggame.com
www.surpassyourdreams.com
www.jblockinc.com
8. Get a copy of the following book:
The Web-Savvy Writer
By: Patrice-Anne Rutledge
(c) 2006
ISBN: 0977830403
See also, LEARN ABOUT WEB PAGE AND WEB SITE DESIGN.
A business plan will include a marketing plan. Simply sending out postcards is not going to get you business. And even if that's all you plan to do, then your Web site is going to have to be stellar so it converts visitors into paying customers. I think you need to take a look at the following link. See BOOKS ON SELF PROMOTION.
I've given you a few things to think about. Contact your local SCORE chapter and sign up for a free 1-hour face-to-face counseling session with two volunteers. We excel at helping wanta-be entrepreneurs create sound business plans. I can't help you with that via emails, though. Sorry. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
Smart business people plan as much as possible before they act. That way they don't waste their time chasing illusions.
QUESTION.
I incorporated an NPO by the end of last year. It was incorporated as a Chamber of Commerce in the State of Delaware. I have not made it public yet because I am still working its business plan, the Web site, etc. I have not gotten a bank account for it or any money from any source for its operation. I just applied for the EIN. I already paid the Delaware taxes but I do not know what form I need to fill to pay the 2007 federal taxes? I would appreciate it if you could let me know what to do. Thank you very much for your help.
ANSWER.
Are you from New Jersey? Or from Delaware? Are you forming a nonprofit? Or a for-profit? I'm a little confused what you are up to.
To register a corporation in Delaware you need to have a bona fide office in that state. You can probably hire a law firm or some similar entity to act as your bona fide office, but that usually costs money. If you do that, but you really are doing "business" in New Jersey, then you have to register as a foreign corporation in New Jersey. And if you are really doing business in New Jersey, and not in Delaware, then you would only owe taxes in New Jersey since that is where the revenue would be earned. Delaware might have filing and registration fees, though. New Jersey will definitely have filing and registration fees.
But you say you are forming a nonprofit. You shouldn't owe any taxes if that is really the case. You may owe filing fees and registration fees, but technically those are not taxes.
Without having opened your doors yet there is no way you owe any taxes to Uncle Sam. If you are a for-profit, then you would have to file a Form 1120. But you say you are a nonprofit. In that case you just file an information return called Form 990. See
http://www.irs.gov/pub/irs-pdf/f990.pdf and http://www.irs.gov/pub/irs-pdf/i990-ez.pdf.
See also, http://www.irs.gov/pub/irs-pdf/p557.pdf and, http://www.irs.gov/pub/irs-pdf/p598.pdf.
I suggest you contact your local SCORE chapter and schedule a face-to-face session with two volunteers there to discuss your venture. It doesn't sound like you know what you are getting involved in. The secret of success is to know what you are doing BEFORE you do it. See http://www.score.org/findscore/chapter_maps.html and type your home zip code in the appropriate slot.
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 incorporated an NPO by the end of last year. It was incorporated as a Chamber of Commerce in the State of Delaware. I have not made it public yet because I am still working its business plan, the Web site, etc. I have not gotten a bank account for it or any money from any source for its operation. I just applied for the EIN. I already paid the Delaware taxes but I do not know what form I need to fill to pay the 2007 federal taxes? I would appreciate it if you could let me know what to do. Thank you very much for your help.
ANSWER.
Are you from New Jersey? Or from Delaware? Are you forming a nonprofit? Or a for-profit? I'm a little confused what you are up to.
To register a corporation in Delaware you need to have a bona fide office in that state. You can probably hire a law firm or some similar entity to act as your bona fide office, but that usually costs money. If you do that, but you really are doing "business" in New Jersey, then you have to register as a foreign corporation in New Jersey. And if you are really doing business in New Jersey, and not in Delaware, then you would only owe taxes in New Jersey since that is where the revenue would be earned. Delaware might have filing and registration fees, though. New Jersey will definitely have filing and registration fees.
But you say you are forming a nonprofit. You shouldn't owe any taxes if that is really the case. You may owe filing fees and registration fees, but technically those are not taxes.
Without having opened your doors yet there is no way you owe any taxes to Uncle Sam. If you are a for-profit, then you would have to file a Form 1120. But you say you are a nonprofit. In that case you just file an information return called Form 990. See
http://www.irs.gov/pub/irs-pdf/f990.pdf and http://www.irs.gov/pub/irs-pdf/i990-ez.pdf.
See also, http://www.irs.gov/pub/irs-pdf/p557.pdf and, http://www.irs.gov/pub/irs-pdf/p598.pdf.
I suggest you contact your local SCORE chapter and schedule a face-to-face session with two volunteers there to discuss your venture. It doesn't sound like you know what you are getting involved in. The secret of success is to know what you are doing BEFORE you do it. See http://www.score.org/findscore/chapter_maps.html and type your home zip code in the appropriate slot.
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
Being a woman can help you get government contracts if you own your own business. Don't waste the advantage while it lasts.
QUESTION.
We are setting up a corporation that would deal with automated recyling plants and would like to set up the corporation as a women owned to take advantage of certain government contracts. What percentage of the corporation has to be women owned to be considered for that status? Please advise.
ANSWER.
I honestly don't know the percentage. But I do know of a great resource for you. Take a look at Janet Christy's book entitled CAPITALIZING ON BEING WOMAN OWNED.
My hunch is the answer you seek depends on who you are apply to for contracts. But there are one or two organizations that certify a company as woman owned. So you can visit their Web sites. They are referenced in Christy's book. Read my review of the book, too.
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 are setting up a corporation that would deal with automated recyling plants and would like to set up the corporation as a women owned to take advantage of certain government contracts. What percentage of the corporation has to be women owned to be considered for that status? Please advise.
ANSWER.
I honestly don't know the percentage. But I do know of a great resource for you. Take a look at Janet Christy's book entitled CAPITALIZING ON BEING WOMAN OWNED.
My hunch is the answer you seek depends on who you are apply to for contracts. But there are one or two organizations that certify a company as woman owned. So you can visit their Web sites. They are referenced in Christy's book. Read my review of the book, too.
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
Small business owner wants to let his employee buy into the company. He needs to do a little planning!
QUESTION.
I started a company and a lady that has been working for me as a sub-contractor now wants to buy into the company. She is in the U.S. in a different state than myself and has an HB1 visa. She is also not a qualified investor. How could I structure the agreement to give her a small peace of the company? Thank you very much!
ANSWER.
You don't mention whether your company is incorporated or not. If it is incorporated then you can simply issue her shares. If you are an LLC, then you can write up an operations agreement (very similar to a partnership agreement) and the document will spell out what partnership interest she will own and how profits will be shared. If you are not a corporation or an LLC, then you should become one. If you are going to bring in new owners, and maybe get rid of them, I recommend the corporation route.
Bringing in a "partner" is not like bringing in an investor. The securities laws do not apply to bringing in a "partner." They are written to protect investors. So don't worry about whether this person is or is not a qualified investor.
The same thoughts you would go through if you were forming your company should pass through your head now as you grow. It's all about choice of legal entity and drafting the documents properly so things work well now and they will continue to work well in the future if one of you decides to leave the company.
I recommend you do some studying on the subject and/or hire an attorney for consultation. As a SCORE counselor I am a business coach. I am not a free alternative to hiring legal counsel. See
LEARN A LITTLE ABOUT CHOICE OF LEGAL ENTITY, and consider getting a copy of Michele Cagan's book. See STRUCTURING YOUR BUSINESS.
I've given you a few things to think about. 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 started a company and a lady that has been working for me as a sub-contractor now wants to buy into the company. She is in the U.S. in a different state than myself and has an HB1 visa. She is also not a qualified investor. How could I structure the agreement to give her a small peace of the company? Thank you very much!
ANSWER.
You don't mention whether your company is incorporated or not. If it is incorporated then you can simply issue her shares. If you are an LLC, then you can write up an operations agreement (very similar to a partnership agreement) and the document will spell out what partnership interest she will own and how profits will be shared. If you are not a corporation or an LLC, then you should become one. If you are going to bring in new owners, and maybe get rid of them, I recommend the corporation route.
Bringing in a "partner" is not like bringing in an investor. The securities laws do not apply to bringing in a "partner." They are written to protect investors. So don't worry about whether this person is or is not a qualified investor.
The same thoughts you would go through if you were forming your company should pass through your head now as you grow. It's all about choice of legal entity and drafting the documents properly so things work well now and they will continue to work well in the future if one of you decides to leave the company.
I recommend you do some studying on the subject and/or hire an attorney for consultation. As a SCORE counselor I am a business coach. I am not a free alternative to hiring legal counsel. See
LEARN A LITTLE ABOUT CHOICE OF LEGAL ENTITY, and consider getting a copy of Michele Cagan's book. See STRUCTURING YOUR BUSINESS.
I've given you a few things to think about. 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, May 27, 2007
Some good questions from a person seriously thinking about starting a Web-based business.
A SCORE client sent me the following 10 questions in an email. See my responses in red capital letters.
1. I am wondering what the best way is for me to set up my business to protect myself should there ever be a lawsuit. CREATE AN LLC OR A C-CORPORATION. BUT CALIFORNIA KILLS YOU ON ANNUAL FEES. IT'S SOMETHING LIKE $850.
2. Can someone pay for my online information and then sue me if something goes wrong? YES
2A. Could you help me with this or point me in the direction to gain this information? ie: insurance needs and costs? NO. YOU NEED TO DO YOUR OWN RESEARCH ON THIS. FOR THE MOST PART YOU ONLY CARRY ENOUGH INSURANCE TO COVER WHAT YOU HAVE AT RISK. IF YOUR LLC IS MERELY A SHELL, THEN NO INSURANCE IS NECESSARY. IF YOU GET SUED AND LOSE THE SUIT, THEN YOU JUST FOLD THE LLC AND START A NEW ONE. I CAN'T IMAGINE YOU GETTING SUED REGARDING THE SERVICE YOU ARE GOING TO PROVIDE. BUT YOU NEVER KNOW.
3. Can I protect myself legally without insurance? YES. SEE ANSWER TO #1 ABOVE.
4. And where can I get the wording for a good disclaimer to use on my website? SURF THE NET AND FIND A GOOD ONE. THAT'S THE WAY YOU SHOULD GET MOST OF THE MATERIAL FOR YOUR WEB SITE.
5. Also, I will be running this business by myself without employees. What is the best set up: soul proprietary or limited liability company? IT'S SOLE PROPRIETOR. BUT I SUGGEST YOU FORM A SIMPLE LLC UNLESS IT IS CHEAPER TO FORM A C-CORP IN CALIFORNIA. WHEN I SAY CHEAPER, I MEAN IN THE LONG RUN. NOT SIMPLY THE COST OF FILING THE PAPERS IN THE FIRST PLACE.
6. If it is an online business I do from my home computer with the assistance of a web designer is it considered a home based business in terms of the licensing and permits based in my home town even if someone from another country pays the fee to receive my information? I have found a lot of information on home based businesses but haven't found enough on website only businesses. YES. YOU WILL BE A HOME-BASED BUSINESS. TECHNICALLY YOU PROBABLY SHOULD REGISTER YOUR BUSINESS WITH THE LOCAL MUNICIPALITY. BUT SINCE YOU WILL NOT BE SEEING ANY CUSTOMERS AT YOUR HOME NOBODY IS GOING TO QUESTION YOU. AT LEAST THAT IS MY TAKE ON THE TOPIC. MOST PERMITS ARE REQUIRED SO TRAFFIC AND PARKING PROBLEMS WILL NOT ARISE.
7. So do most people use their online domain name as their registered business name? YES. IT WILL SAVE IN MARKETING COSTS IN THE LONG RUN. BUT SOMETIMES THE REAL NAME IS LONGER THAN THE URL FOR THE WEB SITE. THE URL CAN BE AN ABBREVIATION FOR THE COMPANY'S REAL NAME.
8. And when researching if the “fictitious” name is available am I researching for my county or since it is a website having customers worldwide would I be looking globally? I'M RECOMMENDING THAT YOU DO NOT FILE A FICTITIOUS NAME. YOU WILL FORM EITHER AN LLC OR A C-CORPORATION. YOU WILL HAVE TO DO A SEARCH BEFORE YOU FILE TO SEE IF YOUR BUSINESS' DESIRED NAME IS AVAILABLE.
9. Do I develop my website first or do I receive all these permits/licensing first? WHAT YOU DO FIRST IS WRITE A SOUND 25-35 PAGE BUSINESS PLAN. GET SOME OF THE BOOKS I TOLD YOU ABOUT IN MY FIRST EMAIL. DO SOME READING AND STUDYING! VISIT YOUR LOCAL SCORE CHAPTER. ONLY AFTER YOU HAVE A BUSINESS PLAN AND MARKETING PLAN WILL YOU BE READY TO PUT YOUR WEB SITE TOGETHER. MUCH OF WHAT IS IN THOSE PLANS WILL BE LIFTED AND DROPPED INTO YOUR WEB SITE'S WEB PAGES.
10. I am not clear if my home town requires Zoning. Who do I ask about that? ALL TOWNS HAVE ZONING ORDINANCES. BUT SINCE YOU ARE A HOME BASED BUSINESS AND YOU AREN'T GOING TO BOTHER WITH GETTING A PERMIT, YOU DON'T HAVE TO WORRY ABOUT THAT. NOW, IF YOU EVER PLAN TO SEE CLIENTS AT YOUR HOME, THEN YOU NEED TO GET THE PERMIT.
1. I am wondering what the best way is for me to set up my business to protect myself should there ever be a lawsuit. CREATE AN LLC OR A C-CORPORATION. BUT CALIFORNIA KILLS YOU ON ANNUAL FEES. IT'S SOMETHING LIKE $850.
2. Can someone pay for my online information and then sue me if something goes wrong? YES
2A. Could you help me with this or point me in the direction to gain this information? ie: insurance needs and costs? NO. YOU NEED TO DO YOUR OWN RESEARCH ON THIS. FOR THE MOST PART YOU ONLY CARRY ENOUGH INSURANCE TO COVER WHAT YOU HAVE AT RISK. IF YOUR LLC IS MERELY A SHELL, THEN NO INSURANCE IS NECESSARY. IF YOU GET SUED AND LOSE THE SUIT, THEN YOU JUST FOLD THE LLC AND START A NEW ONE. I CAN'T IMAGINE YOU GETTING SUED REGARDING THE SERVICE YOU ARE GOING TO PROVIDE. BUT YOU NEVER KNOW.
3. Can I protect myself legally without insurance? YES. SEE ANSWER TO #1 ABOVE.
4. And where can I get the wording for a good disclaimer to use on my website? SURF THE NET AND FIND A GOOD ONE. THAT'S THE WAY YOU SHOULD GET MOST OF THE MATERIAL FOR YOUR WEB SITE.
5. Also, I will be running this business by myself without employees. What is the best set up: soul proprietary or limited liability company? IT'S SOLE PROPRIETOR. BUT I SUGGEST YOU FORM A SIMPLE LLC UNLESS IT IS CHEAPER TO FORM A C-CORP IN CALIFORNIA. WHEN I SAY CHEAPER, I MEAN IN THE LONG RUN. NOT SIMPLY THE COST OF FILING THE PAPERS IN THE FIRST PLACE.
6. If it is an online business I do from my home computer with the assistance of a web designer is it considered a home based business in terms of the licensing and permits based in my home town even if someone from another country pays the fee to receive my information? I have found a lot of information on home based businesses but haven't found enough on website only businesses. YES. YOU WILL BE A HOME-BASED BUSINESS. TECHNICALLY YOU PROBABLY SHOULD REGISTER YOUR BUSINESS WITH THE LOCAL MUNICIPALITY. BUT SINCE YOU WILL NOT BE SEEING ANY CUSTOMERS AT YOUR HOME NOBODY IS GOING TO QUESTION YOU. AT LEAST THAT IS MY TAKE ON THE TOPIC. MOST PERMITS ARE REQUIRED SO TRAFFIC AND PARKING PROBLEMS WILL NOT ARISE.
7. So do most people use their online domain name as their registered business name? YES. IT WILL SAVE IN MARKETING COSTS IN THE LONG RUN. BUT SOMETIMES THE REAL NAME IS LONGER THAN THE URL FOR THE WEB SITE. THE URL CAN BE AN ABBREVIATION FOR THE COMPANY'S REAL NAME.
8. And when researching if the “fictitious” name is available am I researching for my county or since it is a website having customers worldwide would I be looking globally? I'M RECOMMENDING THAT YOU DO NOT FILE A FICTITIOUS NAME. YOU WILL FORM EITHER AN LLC OR A C-CORPORATION. YOU WILL HAVE TO DO A SEARCH BEFORE YOU FILE TO SEE IF YOUR BUSINESS' DESIRED NAME IS AVAILABLE.
9. Do I develop my website first or do I receive all these permits/licensing first? WHAT YOU DO FIRST IS WRITE A SOUND 25-35 PAGE BUSINESS PLAN. GET SOME OF THE BOOKS I TOLD YOU ABOUT IN MY FIRST EMAIL. DO SOME READING AND STUDYING! VISIT YOUR LOCAL SCORE CHAPTER. ONLY AFTER YOU HAVE A BUSINESS PLAN AND MARKETING PLAN WILL YOU BE READY TO PUT YOUR WEB SITE TOGETHER. MUCH OF WHAT IS IN THOSE PLANS WILL BE LIFTED AND DROPPED INTO YOUR WEB SITE'S WEB PAGES.
10. I am not clear if my home town requires Zoning. Who do I ask about that? ALL TOWNS HAVE ZONING ORDINANCES. BUT SINCE YOU ARE A HOME BASED BUSINESS AND YOU AREN'T GOING TO BOTHER WITH GETTING A PERMIT, YOU DON'T HAVE TO WORRY ABOUT THAT. NOW, IF YOU EVER PLAN TO SEE CLIENTS AT YOUR HOME, THEN YOU NEED TO GET THE PERMIT.
If you are going into business for yourself, then definitely get a copy of Microsoft Office for you PC. You're going to need that software!
QUESTION.
I'm nearing retirement age and my daughter is around 30. She wants me to help her start a business with her. She says the company she wants to start will need a computer and we'll hve to buy Microsoft Office for it. What do we need Microsoft Office for?
ANSWER.
Microsoft Office has a suite of computer programs (applications) that most businesses use to write memos, letters, datatables, presentations, etc.
The five original applications included in the Office package were:
1. Word - A wordprocessing program. Helps one write letters, memos, etc.
2. Excel - A spreadsheet program. Helps one make calculations, work with numbers, and create datatables.
3. Powerpoint - A presentations program. Helps one create slide shows that can be used during presentations, talks, etc.
4. Access - A relational database program. Helps one create a database of information.
5. Outlook - An email program and also an organizer.
Later I think Microsoft gave users an option to two newer programs: Publisher or Frontpage. Publisher is a page-layout program that enables one to create books and booklets. I don't like it. Frontpage is a Web page builder that enables one to code HTML pages with ease.
About the only thing missing from the Office suite that one might need is a good graphics program. A simple one is included, but don't waste your time learning it if you need a graphics program. Get yourself Adobe Photoshop for that purpose.
I usually recommend to my SCORE clients to get a copy of Adobe Acrobat Writer. That program makes it possible to make and modify PDF files with ease.
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 nearing retirement age and my daughter is around 30. She wants me to help her start a business with her. She says the company she wants to start will need a computer and we'll hve to buy Microsoft Office for it. What do we need Microsoft Office for?
ANSWER.
Microsoft Office has a suite of computer programs (applications) that most businesses use to write memos, letters, datatables, presentations, etc.
The five original applications included in the Office package were:
1. Word - A wordprocessing program. Helps one write letters, memos, etc.
2. Excel - A spreadsheet program. Helps one make calculations, work with numbers, and create datatables.
3. Powerpoint - A presentations program. Helps one create slide shows that can be used during presentations, talks, etc.
4. Access - A relational database program. Helps one create a database of information.
5. Outlook - An email program and also an organizer.
Later I think Microsoft gave users an option to two newer programs: Publisher or Frontpage. Publisher is a page-layout program that enables one to create books and booklets. I don't like it. Frontpage is a Web page builder that enables one to code HTML pages with ease.
About the only thing missing from the Office suite that one might need is a good graphics program. A simple one is included, but don't waste your time learning it if you need a graphics program. Get yourself Adobe Photoshop for that purpose.
I usually recommend to my SCORE clients to get a copy of Adobe Acrobat Writer. That program makes it possible to make and modify PDF files with ease.
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
You're not an accountant, but you sort of want to be. Get Quickbooks Pro and study the program. You'll learn what you need to know!
QUESTION.
I'm going to start my own business shortly. I've written a pretty sound business plan and realize that keeping good financial records will be important to my business' success. I have a college degree, but it's not in accounting. Is there an easy fairly inexpensive way to learn how to keep the books for my business? Please advise.
ANSWER.
Yes. Assuming you are computer literate I recommend you purchase a copy of Quickbooks Pro at an office supply store. Get a few books on the program from Amazon or Barnes and Noble and read them first. Then install the program on your computer and study the layout of the user interface and maybe go through the tutorial built into the program.
If you have really written a great business plan, then you should know the transactions you'll be recording on a daily basis, on a weekly basis, and on a monthly basis. Set the program up so you can record these transactions as needed. Then take the file you create to a CPA firm (or bookkeeping firm) that is expert in using Quickbooks Pro. Have them tweek your file so It will do a good job for you.
When you've done what I describe above, then you will have mastered the bookkeeping function of your 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'm going to start my own business shortly. I've written a pretty sound business plan and realize that keeping good financial records will be important to my business' success. I have a college degree, but it's not in accounting. Is there an easy fairly inexpensive way to learn how to keep the books for my business? Please advise.
ANSWER.
Yes. Assuming you are computer literate I recommend you purchase a copy of Quickbooks Pro at an office supply store. Get a few books on the program from Amazon or Barnes and Noble and read them first. Then install the program on your computer and study the layout of the user interface and maybe go through the tutorial built into the program.
If you have really written a great business plan, then you should know the transactions you'll be recording on a daily basis, on a weekly basis, and on a monthly basis. Set the program up so you can record these transactions as needed. Then take the file you create to a CPA firm (or bookkeeping firm) that is expert in using Quickbooks Pro. Have them tweek your file so It will do a good job for you.
When you've done what I describe above, then you will have mastered the bookkeeping function of your 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
Partnerships suck! If you are considering one, then form an LLC instead.
QUESTION.
I'm probably going to form an LLC when I start my new business. I have a partner who is going to own 40% of the new company. Why should I consider forming an LLC instead of a simple partnership? Please advise.
ANSWER.
The short answer: to limit your liability exposure. Partnerships are very similar to sole proprietorships. If a partnership or sole proprietorship injure someone during the course of business through its negligence or other fault, then it or they can be liable to the injured party to the extent of his injury. Let's say the partnership is worth $25,000 and the two partners each have estates worth $100,000. In such a case, an injured person who has lost $250,000 can recover the full $250,000 from the two partners and the partnership.
If, however, the business were an LLC instead of a partnership, then the same injured person could only recover $25,000 (the value of the partnership).
Both an LLC and a partnership have similar agreements explaining the company and the owners' relationships. In a partnership the document is called a Partnership Agreement. In an LLC the document is called an Operating Agreement. Drafting either one of these documents can be time-consuming. They usually cost a bit to create since lawyers are often hired to write them. It's advisable to write your own after doing some research and then take it to a knowledgeable lawyer for review.
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
http://www.jlippin.com/
I'm probably going to form an LLC when I start my new business. I have a partner who is going to own 40% of the new company. Why should I consider forming an LLC instead of a simple partnership? Please advise.
ANSWER.
The short answer: to limit your liability exposure. Partnerships are very similar to sole proprietorships. If a partnership or sole proprietorship injure someone during the course of business through its negligence or other fault, then it or they can be liable to the injured party to the extent of his injury. Let's say the partnership is worth $25,000 and the two partners each have estates worth $100,000. In such a case, an injured person who has lost $250,000 can recover the full $250,000 from the two partners and the partnership.
If, however, the business were an LLC instead of a partnership, then the same injured person could only recover $25,000 (the value of the partnership).
Both an LLC and a partnership have similar agreements explaining the company and the owners' relationships. In a partnership the document is called a Partnership Agreement. In an LLC the document is called an Operating Agreement. Drafting either one of these documents can be time-consuming. They usually cost a bit to create since lawyers are often hired to write them. It's advisable to write your own after doing some research and then take it to a knowledgeable lawyer for review.
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
http://www.jlippin.com/
So many new entrepreneurs want to get fancy with incorporating. They should stick to the basics and incorporate in their home state.
QUESTION.
I live in Kansas and am going to start a small business here. I think I want to form a corporation. I've heard that Delaware and Nevada are the two favored states in which to form a corporation. Do you recommend I form my corporation in either of those states rather than Kansas? Please advise.
ANSWER.
I recommend you form your corporation in Kansas. You could form it in Delaware or Nevada and have a registered agent accept process for you in the state where you incorporate. But you'd owe an annual fee to the agent and probably some registration fees annually to the state. You also would have to register your out-of-state corporation as a foreign corporation in Kansas. Seems like a lot of hassle for little benefit.
Corporations are creations of state law. The state law of the place a corporation is created is what applies to disputes a corporation may run into. Usually these disputes are between the corporation and its employees. Delaware and Nevada laws seem to favor the corporation instead of the employees. Therefore companies that have lots of employees may benefit from incorporating in Delaware or Nevada even though they don't do business there.
But your company is small and closely held. You have no need for the Delaware or Nevada legal systems. You'll be best off just filing in Kansas.
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 live in Kansas and am going to start a small business here. I think I want to form a corporation. I've heard that Delaware and Nevada are the two favored states in which to form a corporation. Do you recommend I form my corporation in either of those states rather than Kansas? Please advise.
ANSWER.
I recommend you form your corporation in Kansas. You could form it in Delaware or Nevada and have a registered agent accept process for you in the state where you incorporate. But you'd owe an annual fee to the agent and probably some registration fees annually to the state. You also would have to register your out-of-state corporation as a foreign corporation in Kansas. Seems like a lot of hassle for little benefit.
Corporations are creations of state law. The state law of the place a corporation is created is what applies to disputes a corporation may run into. Usually these disputes are between the corporation and its employees. Delaware and Nevada laws seem to favor the corporation instead of the employees. Therefore companies that have lots of employees may benefit from incorporating in Delaware or Nevada even though they don't do business there.
But your company is small and closely held. You have no need for the Delaware or Nevada legal systems. You'll be best off just filing in Kansas.
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
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