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Starting a small business

Started by Justin Walker24 · · 👁 17 views · 1.1K replies

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Participants Justin Walker24AMegan Chavez38Elizabeth Miller8Aaron MendozaRobert KimEric Martinez2Kenneth RobertsSophia Gonzalez6shadowjackal88vividstag31redscout61Robin Rodriguez5Nicole Morales3Chris Ruiz10coastalviper8Dana Miller6John Thomas2Steven Bishop2Jerry Martinez3Kevin White53Emily Ortiz25silentpanther15Dennis Lopez46 …
Gary Watson4 Gary Watson4 Member
29 messages
joined Aug 2004
#81 ·
You can actually own the company while appointing someone else as the director.
From a tax perspective, it’s not always an issue—especially if you have a lot of capital tied up in equipment. You can leverage depreciation and things like that.😉
Chris Ruiz10 Chris Ruiz10 Active Member
52 messages
joined Oct 2005
#82 ·
goldengull3 said:Since we aren't a monarchy, you don't need to bring God into legal arguments...

You don't actually need employees to run a business. I guess the only catch is that if you're the director, you can't claim unemployment benefits after finishing school. Also, running a company with zero staff isn't really worth it from a tax perspective.

I don't get it, why wouldn't it be worth it for taxes? Maybe paying corporate tax and just pulling the cash out costs less than paying a full salary. Or maybe you're thinking about travel expenses or gas money?
wiredjackal7 wiredjackal7 Newcomer
2 messages
joined Jan 2005
#83 ·
I’ll start with this:
😕 😕 😕

I have zero clue how any of this works, but I know exactly what I want to do.
So, I'm asking the veterans here for some guidance on opening a small business—what the requirements are and what my actual options look like.
Or would it make more sense to just incorporate from the jump?

Here's the deal: I want to build custom kitchens, cabinets, and general wood interior work. I don't have a formal degree in woodworking, so I can't register as a licensed master carpenter, but I've heard there are ways to run a service business without those specific credentials.
Also, is it legal to keep working my current job while running my own business on the side? (Mainly looking to keep that steady paycheck coming in while I build this up.)

Please help me out. I've been sitting on this idea for ages, but I finally found the nerve to actually go for it.

Thanks in advance!
Gary Cox72 Gary Cox72 Active Member
54 messages
joined Jan 2005
#84 ·
bdugorep said:To start, I’ll just say this:
😕 😕 😕

I don't have a clue how any of this works—but I certainly have the vision.
So, I'm asking the veterans here to help me out: how do I set up a sole proprietorship, what are the requirements, and what are my actual options?
Or would it be smarter to just incorporate as an LLC or something?

The plan is custom kitchens, cabinets, and basically anything involving high-end woodwork. Now, I didn't graduate from a specific trade school, so I can't call myself a master carpenter, but I've heard there are ways to run a service business without those specific credentials.
Also—can I keep working at my current job while running my own business on the side? (Mainly looking for that steady paycheck while I build things up).

Please, help me out. I've been sitting on this idea for ages, and I've finally worked up the nerve to actually pull the trigger.

Thanks in advance!


You'll find plenty of info over at: www.sba.gov

Generally speaking, if you're planning on sticking to one niche, a sole proprietorship is usually the way to go. Setup costs shouldn't exceed $233. Plus, it's much faster to get off the ground.

If you want to branch out into different types of services—or if you're looking to scale up and hit a larger market—then an LLC is probably more suitable.

For an LLC, you'll need a minimum of $6.75 in capital, and the various fees (notary, registration, etc.) will run you roughly $1.75.
By the way, you can contribute assets instead of cash, but only up to half the amount. You'd also have to pay for an appraisal of those items. It’s worth weighing whether that's actually worth the hassle.

Right now, you can set up an LLC without having employees. But since tax laws and regulations are always shifting, take that with a grain of salt.

Hopefully, that gives you a bit of a roadmap. Since I'm not based in the US full-time—I actually run my business out of Italy—maybe someone else on the forum can jump in if any of this has changed recently.

Best,
Joshua Chavez Joshua Chavez Member
30 messages
joined Mar 2004
#85 ·
Since you’re based in the city, your best bet is to just head down to the Department of Commerce on Broadway, right past Frankopan. There’s a courtyard with public parking on the left side. Just pull in and go inside to have a chat. Honestly, the staff there are really friendly and they'll walk you through the whole process. A few blocks further down on Broadway, you've also got the National Association of Manufacturers; if you head up to the next floor, you can ask them for their free business guides for small contractors. Once you've read through those, I think you'll have most of your questions answered.

PS I’m a little concerned that carpentry is a specialized trade that requires a master's certification. Maybe take a look at the list of available small business licenses first—you might find something else you can register under to fly under the radar. 🙂 If that doesn't work out, I guess you'll eventually have to just set up an LLC.
Gary Cox72 Gary Cox72 Active Member
54 messages
joined Jan 2005
#86 ·
Here is another detail you might find useful:

If your annual revenue stays below $28, you can opt out of collecting sales tax. This means you won't be charging it on your invoices, but you also won't be able to claim any tax credits on business expenses or equipment purchases.

The perks include:
You can issue invoices without being on the hook for that extra 7% or 10%—depending on the state. When you’re part of the sales tax system, the moment you send an invoice, you owe the government that money, even if the client hasn't actually paid you yet. It's a cash flow headache.

The downsides are:
By staying out of the sales tax net, clients will immediately realize your revenue is under
$28, effectively flagging you as a tiny operation. It can make you look less established—though, frankly, that depends entirely on your industry. For a small local handyman or a freelance graphic designer, perhaps it doesn't matter much.
Another issue? Once you do decide to register for sales tax, you'll have to hike your prices by that percentage. Even if your corporate clients eventually get that tax credited back, they still feel the sting of seeing more money leave their bank accounts upfront.
Gary Cox72 Gary Cox72 Active Member
54 messages
joined Jan 2005
#87 ·
You claim you don't know much about business, yet you have a clear vision of what you'd actually do. Fine. Let’s talk briefly about the concept of running a business and entrepreneurship—keeping it general enough that perhaps others might find some utility in these thoughts:

To succeed in business, simply knowing how to produce something high-quality isn't enough. That matters, certainly, but it is only half the battle.

The other half—perhaps even more critical—is knowing how to sell your product or service. In other words, finding clients and, if possible, retaining the ones you already have.

In this regard, you must carefully weigh how much to invest in marketing and how to handle customer support for your operations.

You also need to keep a constant eye on the competition; they aren't sleeping. You must stay informed regarding what products or services they offer and at what price points.

Furthermore, managing finances is vital—having an exact view of your current standing while forecasting what lies ahead. Business plans help immensely here. Every entrepreneur should draft one for their projects and attempt to stick to it. Of course, a plan can be adjusted on the fly, but having one is essential, and clarity is key. Going in blindly is a mistake; maintaining quality communication with your accountant is mandatory.

You need a reliable bookkeeping service. Especially in the beginning, you shouldn't cut corners there. For most entrepreneurs, the second year is brutal. That is when you face the income tax from your first year of operation. I am not entirely sure how the specifics work in America, but in Italy, you have to deal with both the income tax and estimated quarterly payments. Essentially, they hit you twice. This can be split into two parts, and the tax itself can often be paid in installments.

Understanding these payment options and researching them beforehand is crucial. If you don't, running a private business feels a lot like playing Monopoly without knowing the rules.

Assuming you are doing well and reinvesting into production, you can easily find yourself cash-strapped because the government demands those estimated payments upfront. This is why that second year is often such a struggle. Provided you maintain steady growth and consistent revenue, the following year becomes easier; even though you still owe estimated payments, they are offset by what you already paid the previous year.

Even if you are thriving and expanding, without sound advice from an experienced accountant, you will quickly realize your actual profit margin is slim compared to your total revenue. The government takes its cut mercilessly. The higher the revenue, the more they want.
So, a real accountant—one who understands the regulations and shifting laws—can save you a significant amount of money. This is especially true when it comes to structuring smart business expenses to manage your taxable income.

There. I hope this provides a rough outline of what entrepreneurship entails. I hope my perspective hasn't drifted too far from how things work in America, as I am basing this on my experience in Italy. Regardless, the core concept is universal. It is better for anyone considering entrepreneurship to understand these realities beforehand; from there, you can seek specific details from institutions like the Small Business Administration or similar organizations.

Ultimately, those who manage to survive know that it is always better to work for yourself than to be someone else's employee.
Joshua Chavez Joshua Chavez Member
30 messages
joined Mar 2004
#88 ·
I can't stand incomplete or partially accurate information.😁

Gary Cox72 says:
The benefits are:
You can issue invoices without being on the hook for that 22% tax. Once you're in the sales tax system, the moment you send an invoice—regardless of whether you've actually been paid yet—you owe that tax to the government.

That logic applies to a corporation, but it doesn't really work for a sole proprietorship. And it isn't an immediate hit either; it’s usually a 30 to 60-day window depending on when the invoice was issued.

Another downside is that once you register for sales tax, you'll likely have to hike your prices by 22%. Even if they eventually get that tax back as a credit, you still see a much larger chunk of cash leaving your bank account the moment you make a payment.

Actually, you don't necessarily have to raise prices by 22% since part of your revenue is recovered through tax credits.
Sales tax is refundable for those registered in the system, and from what I gather, my colleague seems to be thinking about doing business directly with individual consumers.
Gary Cox72 Gary Cox72 Active Member
54 messages
joined Jan 2005
#89 ·
Joshua Chavez said:I can't stand incomplete information—or the kind that’s only partially accurate. 😁

My apologies if I misstated any facts. That’s exactly why I invited anyone to set the record straight—I certainly wouldn't want to be spreading misinformation here in the States.

Joshua Chavez said:This applies perfectly to an LLC—not so much for a sole proprietorship. And don't expect the funds immediately either; we're looking at a 30 to 60-day window, depending on when you actually issued the invoice.
[/B]

Of course it isn't instantaneous—there’s a gap, usually around 30 to 60 days. That’s when you have to deal with the IRS taking their 22% cut, which requires some caution—especially if your client decides to drag their feet on payment. If they don't pay on time, what exactly are you supposed to use to cover the tax bill?
It’s vital to understand exactly what you might be facing.

Joshua Chavez said:Prices don't necessarily need a 22% hike—not when a chunk of that revenue comes back to you via tax credits.
Sales tax credits only apply to those registered within the system—and if I’m reading my colleague correctly, he seems to think doing business directly with private citizens is the way to go.

Look, if you’re trying to move product, it’s significantly easier to close the deal when you aren't forcing the client to swallow a 22% sales tax upfront—even if they eventually get that money back through credits. On paper, you have the right to demand it. In reality? Things rarely work that way. It changes the entire dynamic of the sale. That’s just how it goes—most buyers either don't have the liquidity or simply refuse to shell out that extra cash right now.
Thomas Williams54 Thomas Williams54 Newcomer
3 messages
joined Jan 2005
#90 ·
Joshua Chavez says:
I have absolutely no clue how any of this works, but I definitely have the idea of what I want to do.
So, I am asking the experienced members here to help me figure out how to start a sole proprietorship, what the requirements are, and what my options look like.
Or would it make more sense to just start an LLC?
Basically, I want to build custom kitchens, cabinets, and all that kind of interior woodwork. I didn't go to trade school for it, so I can't open a formal carpentry business, but I heard there are ways to run a service-based business without those specific credentials.
Also, can I keep working at the company where I am now while running my own business on the side? (Just to ensure I have a steady flow of cash coming in.)
Please help me out because I've been thinking about this for a really long time, and I've finally worked up the nerve to actually go for it.
Thanks in advance to everyone! [/B]

SOLE PROPRIETORSHIP
Setting one up will cost you about $167 and it’s a pretty quick process.
Then there are the fixed costs. Since you don't have the formal training, you would need to hire someone who does, and you'd be looking at a minimum wage of roughly $694 plus payroll taxes $119. On top of that, you'll have to pay your own Social Security and Medicare contributions, which come out to about $1,200.00$500 every month, plus estimated income tax payments ranging from $100 to $500 (that's just a guess since I don't know exactly what the IRS would assess for your specific industry).
You also have to factor in rent if you don't have your own shop, phone bills, bookkeeping, depreciation, and so on. Once you add all that up, you have a total amount you'll be spending whether you're actually working or not.
You can certainly run a sole proprietorship while working another job, but you still have to cover all those personal tax contributions.
With a sole proprietorship, you are limited to just one primary line of business.
LLC / CORPORATION
To get an LLC started, you'll need $3,500.00 and initial capital of $6667. Those $1167 represent your startup costs, and then you put $20,000.00 into the company (you can do this with 50% cash and 50% equipment, though you'd have to pay an appraiser to value the gear). With that $20,000.00, you can buy machinery and cover your overhead like rent, phone, accounting, etc.
Under current regulations, you aren't required to hire employees. As long as the manager or director is covered by some form of health insurance—which you are since you have a job—you're fine. If you quit your job to work for yourself, you'd just need to stay covered, perhaps by staying on a minimum wage setup until things pick up.
An LLC can handle many different types of business activities.

If you eventually decide you want to open a retail storefront, you might run into trouble with a sole proprietorship because that requires specific retail licensing. With an LLC, it isn't a problem; you can register several general business purposes alongside your specific ones right away, and you can always add more later. So, a sole proprietorship is a narrow specialization, whereas an LLC allows for as many different ventures as you want, provided they aren't heavily regulated industries like weapons manufacturing.
A sole proprietorship is faster and cheaper to launch, but it becomes expensive to maintain if you don't have steady work, because you're still stuck paying those personal taxes and contributions.
An LLC is more expensive to start and requires having a chunk of cash ready to go—which you can borrow and pay back later—but once it's established, it's actually cheaper during those months when business is slow. At least that's how it looks in the first year while you're getting settled.
Income for a sole proprietor is taxed at various progressive rates (15%, 25%, 35%, 45%). For an LLC, profits have been taxed at a flat 20% rate since 2005, so the corporation structure usually has the advantage there.

Whatever you choose to do now is a major decision, and you really need to think about the long-term implications. You should probably sit down and put together a solid business plan before making the jump.
Mark Lee65 Mark Lee65 Member
21 messages
joined Jan 2005
#91 ·
gatto 👍 for being such a hard worker
Justin Cox4 Justin Cox4 Newcomer
1 message
joined Jan 2005
#92 ·
wiredjackal7 said:I honestly have no clue how any of this works, even though I’ve got a solid idea of what I want to do.
So, I'm asking you experienced folks here to help me figure out how to start a sole proprietorship—what's required and what my actual options are.
Or would it make more sense to just incorporate as an LLC?

Please help me out; I've been sitting on this for a long time, and I finally feel like I've gathered enough nerve to actually pull the trigger.

Thanks in advance, everyone!

Here is a link to a pretty useful guide... it was put together specifically for the Indianapolis area, but it covers plenty of general stuff you really ought to think about before launching your own business... I'd recommend checking it out... especially the section regarding sole proprietorship vs. an LLC (chapter 6) and the part about taxes/contributions (chapter 10).

Hope this helps...

Good luck... 🙂
wiredjackal7 wiredjackal7 Newcomer
2 messages
joined Jan 2005
#93 ·
Thanks, everyone!

I’m going to dive into all of this and hopefully turn it into a solid plan.

I knew there would be a mountain of prep work ahead, but every new project starts with a grind.

If anyone else thinks of something, just let me know...
Matthew Morris28 Matthew Morris28 Active Member
55 messages
joined Jan 2005
#94 ·
Alright, question from the title.
I know a lot of you will probably tell me to just go talk to some "official" government agency, but I’d much rather hear from someone who actually went through this recently. What does it actually take? What are the requirements, what kind of pay are we talking about, where do I even go, any restrictions or perks I should know about?

Honestly, I'm just done. Five years of grinding away at this company and I'm ready to finally launch my own small business. Professionally, I'm an electrical technician. I basically handle everything—systems engineering, programming, design, electronics... whatever needs doing. I've hit my breaking point. I'm tired of losing sleep over someone else's success; if I'm gonna be stressed out and working late, I might as well be doing it for myself.

So, I'd really appreciate any suggestions, ideas, info, or advice you guys can throw my way.
Matthew Morris28 Matthew Morris28 Active Member
55 messages
joined Jan 2005
#95 ·
My bad, I actually did a deep dive through the forums before starting this thread, but I couldn't find anything useful. Just stumbled upon some stuff way back in the archives by accident.

Anyway, I'd really appreciate it if someone could give me some actual info—like, who specifically has cleared this recently?

Mod, if you think this thread shouldn't be here, just go ahead and delete it. No biggie.
Andrew Wells58 Andrew Wells58 Active Member
58 messages
joined Feb 2005
#96 ·
Matthew Morris28 said:Sorry, I tried searching the forums before starting this thread but couldn't find much. I eventually stumbled onto some info elsewhere by accident.

Anyway, I was hoping someone could give me some specifics—like who actually went through this process recently.

Mod, if you think this thread shouldn't be here, feel free to delete it.

It wasn't super recent, but I don't think the process has changed all that much. You probably need about $1,500-$$600 in savings, and it takes about a month before you can actually start working. Maybe it's faster if you pay someone to handle the paperwork for you.

Basically, if I remember right, you submit the application at the local Small Business Administration office. I did mine in downtown Chicago, near the main municipal building. You just stop by and ask them for the requirements. From what I recall, you'll need:
- A couple of application forms. You can buy them at a local office supply store, but you might spend eight hours just trying to format them correctly in Word. (Alternative: there’s usually a print shop nearby where they can type up the application for a small fee).
- A background check from the court to prove you don't have a criminal record. You can get that at the courthouse over by the Kennedy-EV plaza.
- Proof of medical fitness.
- Proof that you aren't on public assistance. I handled that part at the social services office. Their window is only open on Mondays from 11:00 to 1:00, with a break from 12:00 to 12:30. Total headache.
- Proof of business location, like a property deed or a lease agreement.
- If you're doing something specialized, you'll likely need to provide proof of your certifications or degrees.
- Some cash on hand.

That’s pretty much it. Then you take that pile of papers to the economic development department. They’ll probably send you back once or twice to fix mistakes, but with a little luck, you'll get your business license. After that, you go get a stamp made and then open a business bank account. You also need to notify the city so they can set up your flat tax, and if you aren't working elsewhere, I assume you'll need to sign up for health insurance and Social Security.

That's the gist of it. I might have forgotten something; my brain tends to shut down when I think about past traumas. 😉
Matthew Morris28 Matthew Morris28 Active Member
55 messages
joined Jan 2005
#97 ·
Thanks so much. Sadly I’m out in Columbus, so I really appreciate the detailed breakdown.

Cheers to you. Just gotta land some work first, then maybe I'll finally strike out on my own and start a small business.
Drew Young10 Drew Young10 Member
41 messages
joined Nov 2007
#98 ·
I’m wondering if I actually need to set up an LLC if I want to get into selling wooden goods.
Here’s the gist of it. I’d buy finished wood products, add some value by treating or finishing them myself, and then flip them for a profit. Could I just run that as a sole proprietorship?
One thing though—I’m not a carpenter or a retail specialist by trade; my background is actually in economics. I guess you have to wonder if that’s going to be an issue.
Andrew Wells58 Andrew Wells58 Active Member
58 messages
joined Feb 2005
#99 ·
Drew Young10 said:I'm wondering if I need to set up an LLC if I want to sell wooden products.
To put it this way: I’d buy a finished wood product, refine or finish it myself, and then sell it. Can I do that as a sole proprietor?
Professionally, I’m more of an economist than a carpenter or a merchant, so I guess I wonder if that's an issue.

In the US, business licenses are generally split into regulated and unregulated categories. For certain regulated trades, you definitely need specific professional certifications or licenses related to the work, but for others, you don't. You can usually find a full list of these requirements through the Secretary of State's office or local small business administration websites.

If you can find a category that fits what you're doing and it doesn't require special licensing, then going the sole proprietorship route should be fine. If the regulations seem a bit confusing, maybe it's worth checking in with a CPA or a legal professional to get some solid advice.
A Anonymous Veteran
3.6K messages
joined May 2005
#100 ·
Is it actually possible to register a general trade license that covers everything? Like, I don't just mean the old-school stuff like carpentry, blacksmithing, or being a barber, but maybe something tech-oriented... for instance...

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