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Old 04-18-2007, 10:28 AM
 
Location: Hamden
51 posts, read 305,290 times
Reputation: 47

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I would like to be able to stay at home with my child. I currently make jewelry, organic skincare products, and, handbags. I've been told to set up an LLC.

Questions
1. Since I will be the only owner, is this the right way to go.
2. What kind of insurance if any will I need?
3. I hear alot about taxes (this makes my very nervous) can someone explain the tax issues of owning your business.
4. How does the wholesale/resellers license work? I heard that you have to pay huge taxes at end of year on items purchased. But what if I don't sell anything?

Help...very nervous but would love to raise my baby instead of daycare.
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Old 04-18-2007, 12:47 PM
 
Location: Weston, FL and Vero Beach, Fl
2,945 posts, read 11,937,729 times
Reputation: 2057
We have our own business, but in fear of giving you inaccurate information, please seek out a CPA or go to your local SBA (Small Business Association) - local universities have branches of same at no cost to you.

You want to get the most accurate information possible which will work best for you. Good luck to you - hope this helps.
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Old 04-19-2007, 03:14 AM
 
17,159 posts, read 22,175,230 times
Reputation: 31232
jh,,,good advice, some states are different
you can find many answers by searching on the internet,,within your own state website.
and sba and score are great resources.

tionne,,good luck,,,dont lose focus,,,,or get lost in the details, we all start out new and asking questions,, keep asking questions,,,we learn more from listening than talking!
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Old 04-19-2007, 07:39 AM
 
10,870 posts, read 41,150,426 times
Reputation: 14009
Setting up a corporate identity to shelter what is essentially a sole proprietor business is not a good economic move.

There's a whole new world of tax compliance, record keeping, and reporting to deal with.

On craft merchandise, such as jewelry and handbags, where you have little exposure to liability, an LLC doesn't make much sense.

However, on personal products, such as skin care ... where you may have liability exposure (allergies, skin reaction, etc.) ... you may want to have the protection of the corporate shell. Keep in mind that this protection will cost you a bit of money ... perhaps a good deal of money ... and will not be anything more than a "hurdle" for a determined lawyer retained by a damaged customer (or one who asserts they've been damaged by your product) to overcome. In that case, the only ones who generally win are the lawyers out doing business as usual. As a business venture, you must weigh the potential costs of corporate business vs the potential for profits of your operations.

As a wholesale purchaser, you would be exempt from paying sales taxes on the materials you use to make your end product. Tools and equipment that you use to make the products are not tax exempt, but you will have access to buying them wholesale. You must keep good records showing that the materials you buy tax exempt are either in inventory, sold to wholesale accounts, sold at retail, on consignment, or otherwise discarded (damaged, out of date, written off, etc.).

If you sell your merchandise retail, then you must have the appropriate retail sale tax licenses for where you do business and report your sales and remit the taxes you collected in each time period. Depending upon your sales volume, you may be making tax reports/deposits weekly, monthly, quarterly, or annually. It varies from tax authority to tax authority.

For a sole proprietor, you may be able to get adequate insurance coverage under your homeowner's policy, as an umbrella coverage. Or possibly, a business policy for a nominal amount through your agent. Tell your agent what you want to do and follow their advice, it doesn't cost you to ask.

You may be able to take tax deductions for your home based business. Check with your accountant about what steps you must take to qualify a production/office area and what records you must keep to satisfy the feds about your deductions.

Don't forget to check on your local zoning or covenants regarding home based business. You may be in for a surprise about doing business from home ... even if the neighbors don't have an issue, the zoning may prevent you from obtaining a tax license for your business.

Good luck with your venture.
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Old 04-22-2007, 03:16 PM
 
Location: Tampa Bay`·.¸¸ ><((((º>.·´¯`·><((((º>
4,478 posts, read 6,350,585 times
Reputation: 13461
For all these questions you have check on SCORE.org , look for a counsellor in your area and write an email asking these questions. They are pretty good answering questions on business and its all free.
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Old 04-24-2007, 11:35 PM
 
2 posts, read 7,005 times
Reputation: 10
I personally would start out as a sole proprietor to start out with. This will be the most inexpensive and easiest way to go. Once your business starts to grow and your making more money then you might want to consider becoming a corporation to help protect your assets.

Now insurance really depends on many aspects. Jewelry and handbags it seems like you don’t really need insurance. Once you start getting into skincare products I really don’t know what kind of insurance you may need. Now if you are planning to run the business out of your home then you don’t need to worry about insurance for people that might get hurt at your location. Now if you have a store front it is always good to have some sort of insurance that will protect you if someone was to get hurt at your location. If you are planning to have inventory it is also a good idea to have insurance from theft or products that might get damaged from fire or other causes.

Now taxes suck. I basically feel as if I just work just to pay tax. Every quarter you will have to pay taxes. That means every 4 months you are sending a check to the government. If you have inventory you usually have to pay tax on the inventory that is on hand. Regardless you are going to be paying out your butt for taxes. I would highly suggest hiring an accountant to handle this. Every month I print out the checks I deposits the checks that I write, along with all my taxable sales. Then I send it out to the accountant. Since my company is internet bases I only charge sales tax to the customers that are inside the same state I am in. All customers outside of my state I do not have to apply sales tax. Taxable sales basically are only the customers I’m charging sales tax too. The tax that I charge these customers basically go directly towards taxes. Now at the end of the year I also get hit with sales tax for the total amount of sales. This hurts a lot, so basically you have to pay taxes 4 times a year and then another time towards the end of the year. If you get setup as a corp. then there are a lot more taxes you have to pay. And honestly even though the accountant handles it, it still confuses me. One more note…don’t ever be late on taxes or you will end up paying a lot in fees. This even counts if you are a day late. I would highly recommend hiring and accountant where you basically just pay $100-$200 a month, just so they can handle the taxes for you. Also you can talk to them about tricks and write offs to help you in lowing your taxes.

Now a reseller license basically means you can purchase goods and avoid sales tax if they are inside of the same state as you. It also means that you can purchase goods at a wholesale or jobber level. However some manufactures will make you purchase in bulk and some manufactures require a buy in, which means you have to purchase at least XXX dollar amount to be established with them. If you do not sell anything you will get hit with tax because it is consider inventory.

Hopefully this helps out a little.
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Old 04-30-2007, 03:14 PM
 
Location: Maple Valley, WA
980 posts, read 2,956,415 times
Reputation: 416
I think everyone's advice here is great. Regardless of how you decide to set up your business (LLC or sole proprietor), take the time to write a well thought-out business plan before you get started.

Here's a site that can help you out with that: http://www.regions.com/business_resource_center/online_workshops.shtml?source=ga&lc=all&kw=busines s+plan (broken link)
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Old 05-01-2007, 02:27 PM
 
Location: Charlotte,NC, US, North America, Earth, Alpha Quadrant,Milky Way Galaxy
3,769 posts, read 6,615,793 times
Reputation: 2108
Quote:
Originally Posted by tionne317 View Post
I would like to be able to stay at home with my child. I currently make jewelry, organic skincare products, and, handbags. I've been told to set up an LLC.

Questions
1. Since I will be the only owner, is this the right way to go.
2. What kind of insurance if any will I need?
3. I hear alot about taxes (this makes my very nervous) can someone explain the tax issues of owning your business.
4. How does the wholesale/resellers license work? I heard that you have to pay huge taxes at end of year on items purchased. But what if I don't sell anything?

Help...very nervous but would love to raise my baby instead of daycare.

You can setup a DBA (Doing Business As) bank account to get going. Incorporating is not as hard as it used to be and there are kits you can use- although many perfer to seek out a lawyer to do this, I've found I could have gotten the same paper work done for a fraction of the price with an online service. With the LLC you company profits are taxed, and then money you pull out as payment to yourself is taxed at your personal rate. You will need to pay quarterly estimates. It's not hard if you are organized- it will become an IRS nightmare if you are not. While I wouldn't engage a lawyer (now) I would find a good CPA who can help with the organization of your paperwork and documents- or even a friend who can setup some accounts for you.

The best thing to do is keep your personal expenses and business expenses seperate. This is probably the #1 problem small bizzes make. They don't have any bookkeeping (it's all in their head). They intermingle personal expenses and business expenses and it's a headache to sort it out. Just get Quickbooks or even a simple pen and paper and become diligent about tracking expenses.

The wholesale license just means you don't pay sales tax on items you buy for resale (you must collect the sales tax for your state) when you do sell your product to a consumer.

Set aside the portion of your home that will be for business use.

Contrary to popular opinion do not borrow or borrow heavily to start your business.
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Old 05-01-2007, 11:34 PM
 
Location: Orlando
2 posts, read 16,091 times
Reputation: 12
Exclamation Good advice...but you need the legal side

Hi, I'm not an attorney and I doubt that some of the other posters are. Many of the areas they are addressing will depend on the state you are in...what may work in one state could be illegal in another.

Again, some of the previous posters had good points, but I would take those questions to a local attorney in your jurisdiction. I would also find the business consultants money can buy. If you want to stay small, so be it. If you eventually want to get big, let me know. I know of investors that are looking for opportunities if they are big enough.

If you want to make a hobby of selling a few items, no need to go into business; selling on Ebay is pretty simple and fun. If you need to make a few hundred or thousands in profit (which is very possible) get the best possible advice now so in the future you won't lose. I know of individuals that lost everything for not having a good foundation in their business and did not have a plan B, C, D....

I am bias, because I do work in this industy and can help you get the assistance that you need. Call or email me and I can tell you more, of visit my website under business legal for more information.

Sincererely,
Rachel M. J. Ray
www.RachelMJRay.com
321-946-5295
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