how to start a (small) company?

[bluemoon]

I usually take a lot more pleasure programming sounds than actually making songs with them. I think that 95% of the time I spend on music is on tweaking synths and making patches. So I'm thinking of setting up a small web/paypal based company to sell my patches and sample libraries online. This would hopefully make some money to feed my incurable GAS.

but...and it's a big but...I've been reading a bit on how to setup a small company and it sounds like a lot of work and potential headaches. It seems that the easiest way to do it is through a DBA (doing business as) but this can create all sorts of liability problems that I certainly would like to avoid at this moment in my life.

Another option is to setup a LCC but that will probably cost money than whatever profit this may ever create...I mean I don't have a business plan but if I'd make $1000 a year on this I'd already be happy...This would be more like a learning experience into the business world, and it'd probably be fun to set up a website + create a logo etc...sounds like a way to have fun while learning something useful and making some money in the process.

So what are my real options here? How would you guys do this? I see some people selling sound banks on ebay...is this legal at all? If you knit a pair of socks and sell them on ebay do you have to pay taxes on it? What about a sample set?

Should I just set up a website and accept paypal payments directly into my personal account. I'm sure this is illegal but if I do 3 or 4 $25 sales a month is this really an issue?

[ignatius]

there are ways to become an LCC on the cheap you just need to look around. local legal aid type agencies etc. a friend of mine did it for her label but have no idea what she did. i think it only costs a few hundred dollars or so.

as far as taxes go... you just have to file a schedule b,c,d or whatever to show your corporate earnings or losses. in many states if your company (in whatever form.. DBA LCC etc) will be exempt from many taxes if your profits are under a certain amount. here in portland there is a county tax but only if you make more than $25K. so, that way, if you are just doing a small thing it is less complicated. doing your federal/state taxes every year will probably get more expensive/time consuming since there are more forms..

i think if you are gonna do something simple then a DBA is fine. especially if you have no employees other than yourself and aren't going to be involving many 3rd parties w/your business. but peace of mind is always a good thing. so if you are worried about someone trying to take you to court or whatever then go for the LCC or whatever. there's a lot of info you can find out on line if you look around.

good luck w/whatever venture you embark on!

[ignatius]

Originally Posted by bluemoon

Should I just set up a website and accept paypal payments directly into my personal account. I'm sure this is illegal but if I do 3 or 4 $25 sales a month is this really an issue?

re: paypal.. just add another email to your account for the business stuff. that's what i did. as long as you report the income there is nothing illegal about it. it's just exchanging goods/services for a fee.. and you can write off any expense you encounter in this process.. web hosting fees, advertising, paypal fees etc.

[Brickman]

Originally Posted by bluemoon

but...and it's a big but...I've been reading a bit on how to setup a small company and it sounds like a lot of work and potential headaches. It seems that the easiest way to do it is through a DBA (doing business as) but this can create all sorts of liability problems that I certainly would like to avoid at this moment in my life.

Another option is to setup a LCC but that will probably cost money than whatever profit this may ever create...I mean I don't have a business plan but if I'd make $1000 a year on this I'd already be happy...This would be more like a learning experience into the business world, and it'd probably be fun to set up a website + create a logo etc...sounds like a way to have fun while learning something useful and making some money in the process.

So what are my real options here? How would you guys do this? I see some people selling sound banks on ebay...is this legal at all? If you knit a pair of socks and sell them on ebay do you have to pay taxes on it? What about a sample set?

Should I just set up a website and accept paypal payments directly into my personal account. I'm sure this is illegal but if I do 3 or 4 $25 sales a month is this really an issue?

Setting up a website and accepting payments directly into your personal account is definitely the easiest way to go and it shouldn't be illegal if u declare it , of course u will need to check that out for yourself .

I set up a website doing exactly what u have in mind , if u need any help / advice , pm me

[iksrazal]

I'm assuming you are in the USA. I set up an LLC for my business five years ago. Its very easy. The steps in this article is about what I did - it differs slightly from state to state.

Set Up a Limited Liability Company (LLC)

From there you just need to show your docs to a bank and open an account. You can then transfer paypal funds to your bank.

Every year I fill out a secretary of state form that takes about 30 seconds to that confirms my address and then I pay them $10 - pretty much a quick formality. My state (Colorado) then lists me on their site as in "good standing" .

I'm an expatriate so my taxes are little more complicated, so I have an accountant now. However, the first few years I did my own taxes - all federal in my case. That's probably the hardest part, but its really not that hard.

If you program sounds for any of my gear listed let me know, I might be interested :-) .

[MarvinDog]

One of the biggest red flags that the IRS has is co-mingled finances. That is, if your business revenue is going into your personal bank accounts, and you're paying your bills with personal credit cards, the IRS is more likely going to classify your business a hobby, and deny your business deductions.

And add interest and penalties.

[timbreman]

Originally Posted by MarvinDog

One of the biggest red flags that the IRS has is co-mingled finances. That is, if your business revenue is going into your personal bank accounts, and you're paying your bills with personal credit cards, the IRS is more likely going to classify your business a hobby, and deny your business deductions.

And add interest and penalties.

Yes definitely get a business bank account. Having an LLC also differentiates your personal from your business if you were to ever be sued for anything.

Cost me roughly $200 to get my articles of incorporation. You can actually then further any other excursions you have under the LLC as a DBA (Doing Business As)

Funny thing is the hardest thing for me was setting up my business bank account as the lady kept asking me for documentation that the state no longer provides. So you may be in for a hassle depending on the bank you use.

Good Luck!

[bluemoon]

thanks folks! You're giving me the little push I was looking for. I'm currently in North Carolina but I'm moving for sure next year (to California or Massachusetts most probably). Do you guys think it's better to wait for that or should I just go ahead and transfer everything then? I could use the time to polish the material, prepare the website etc. I'm envisioning offering some good stuff (imho) but I still don't have any thing close to completion.

@iksrazal: I may program more sounds for the TI but I still need to think a bit about it. You already have some of my sounds in the ROMs that come with OS3. There are two full banks available for download in the download section though (Rui Peixoto banks). If you find the time to take a look at them let me know what you think.

[Clonkified]

What about a sole proprietorship? Seems ideal for this scenario.

[bluemoon]

Originally Posted by Clonkified

What about a sole proprietorship? Seems ideal for this scenario.

I think this is the same as a DBA (doing business as). The main problem with this kind of business is that there's no distinction between the proprietor and the company so if anything goes wrong your finances are tied to the company (if you're sued for some reason).

I think in principle there should be no problem with this but i've read a couple of horror stories on the internet...of course that is probably not representative but i just want to check out my options.

[iksrazal]

Originally Posted by bluemoon

thanks folks! You're giving me the little push I was looking for. I'm currently in North Carolina but I'm moving for sure next year (to California or Massachusetts most probably). Do you guys think it's better to wait for that or should I just go ahead and transfer everything then? I could use the time to polish the material, prepare the website etc. I'm envisioning offering some good stuff (imho) but I still don't have any thing close to completion.

IMHO, do it now in North Carolina if you have a permanent address there or anybody you trust like family that has an address there that you can use as an "agent" . A lawyer there would work too. That's at least how Colorado works. I live in Brazil and use my parents as my agent in Colorado.

Doing a website is very easy, and I've seen at least one person selling patches from $.00 on up as a voluntary price to pay, so I see no reason to wait. Updates are typically free anyways. Do it now while you have enthusiasm is my advice.

+1 on getting a business account at your bank.

[crufty]

hmm...sounds like a hobby right now. maybe start a nice blog and sell them on ebay.

Once you make enough money to pay for an accountant and start up fees, convert. if you don't, little lost.

Any money earned contributes to your taxable income. whether or not it is taxed depends on how much you make. There are tax advantages to running a business over a hobby, and if you have the startup scratch thats a route to take right off the bat.