Ask the group: How to start a small business?

Chris In Cincinnati says on January 26th, 2007 at 8:27 am

When I set up my 2 LLCs (and my DBA) I just used LegalZoom.com. I think it was around $500 and that included state fees.

They have a simple wizard you fill out (nothing you wouldn’t know the answer to) and they keep in touch with emails to let you know the progress.

They do tend to keep sending you emails after the fact for stuff like wills and logo design though.

Boris says on January 26th, 2007 at 8:31 am

Use a professional services for the LLC filling, rates differ, but you should be able to get it done for about $360-$500. There are many things that are tedious in the process, such as doing the name availability research, filling etc etc.
I can recommend a company I have used and i am very pleased with usa-corporate.com.
One thing that is a bit different with LLCs is the you have to run an ad in a paper for several weeks. If you are like me in NYC that alone can cost you $1400. Other counties are much cheaper and it may be worth considering to file in a different county to lower that price and later “move”the business location. A professional service should be able to offer you better insight in this. Also make sure to discuss the LLC with your accountant. There are several advantages in having an LLC, , but there are also disadvantages, it really depends on your business plan and what you want to do.
Hope this helps.

fil says on January 26th, 2007 at 8:59 am

Requirements for forming LLCs can be found on your State’s Secretary of State website. In many states there is a very simple document and form required. In my state of Georgia, it costs $150 and can easily be done without lawyers or other services.

Jenny says on January 26th, 2007 at 9:15 am

An invaluable small business resource is Entrepreneur.com. Not only do they have articles on running a small business, they also have resources that describe the pros and cons of all forms of business (sole prop, partnerships, one-person corps, etc.). Another great resource for info is the SBA (natch) for financing. Perhaps the best resource, though, is the Office of Economic (or Business) Development for the state in which Reader Steve lives (assuming he’s in the US). There he’ll find info on all the reqs for setting up a business including permits, notifications, rules, etc. Most if not all states also provide some sort of public small biz dev resource center where people can contact mentors, network with other entrepreneurs, and take classes on different aspects of keeping a business going (e.g., biz planning, hiring employees, etc.).

DM says on January 26th, 2007 at 10:36 am

I highly recommend books from Nolo Press. They have one or two specifically on forming LLCs. I was able to find copies of the book at my local library in the reference section and of course you can buy them from Amazon or any other place.

BillOGoods says on January 26th, 2007 at 10:46 am

I’m an attorney with a lot of experience (over 30 years). Swallow hard and believe me when I say there is usually no substitute for seeing an experienced and knowledgeable attorney on these matters. The cost, in relation to the time you will spend reading articles to educate yourself in the area of selecting a form of entity to do business and all the related issues, tax and otherwise, will be well worth it.

Also, and I’m not knocking CPAs, they are essential, but it is the unusual, indeed rare, CPA that has seen enough of all the issues that can arise from faulty business entity choice, incomplete or half-*** operating agreements or bylaws, lacking or poorly thought out buy-sell agreements, or employee “at will,” or otherwise, policies. CPAs can be great at commenting on these various issues, particularly on the tax questions, but rarely are experienced enough in properly guiding you through proper formation and establishment of the business, by him/herself.

For under $1,000 and, probably, for under $500, you can get everything done and complete explanations given about your options. Otherwise, you’re putting your head in the sand about the best form of entity to choose and the ramifications of it. Are you selling a product or service? Real estate? Do you have a partner? Employees or independent contractors? How many? Trade secrets or other proprietary interests to protect? What if payroll taxes aren’t paid? Are you a national or local business? What’s your income from other sources versus profits or losses you expect in your business? Should you pay yourself a salary or dividend? What assets or liabilities are you transferring from your business to the new entity, if any? How do you maintain your entity separate from yourself to insure you won’t be personally labile for debts and if that’s even possible?

On and on. Just an example, which I think is typical, at least for my practice, I will probably meet a total of one to two and a half hours from first discussion to formation of the entity and the typical charge is $400 to $750, plus filing or franchise fees and such charged by the state. There’s no publication requirement in Michigan for an LLC or any other entity, so I don’t understand that one commented on above.

Compare those fees to the value of your time in trying to read up on all these issues and make smart decisions versus trying to pretend you’re an attorney and doing it yourself and, later down the road, possibly paying for mistakes that could have been avoided.

Michael Langford says on January 26th, 2007 at 11:17 am

If you start with the first entry of my blog you’ll see all the steps I did to get my LLC running filed, etc.

I only had to pay 100 to the state (GA) in my case. I’ve *also* paid 176 to a cpa, but that was for consultation on how to file my LLC with the IRS (you can pretend your LCC is several things when filing federal taxes). If you read the blog, it will explain the choice and tradeoff.

I’m sitting here getting all the expense into quickbooks, so I’ll have another entry on there soon, possibly today.

–Michael

Michael Langford says on January 26th, 2007 at 12:27 pm

Also, I will *also* point out the attorney is right: its “cheaper” time wise to hire someone to explain much of this stuff than to find out yourself. I’ve read for endless hours about this stuff, and looking at my hourly rate, it would have been more profitable to hire an attorney and just do some work for a client in that time.

Then again, my goal right now is to learn as much about how to do the business part of the business, so that was an easy tradeoff for me.

–Michael

Marty says on January 31st, 2007 at 9:44 am

Are you sure that you want to turn your business into an LLC? After years of listening to Dave Ramsey on the radio/Internet (www.daveramsey.com) I’ve learned that the assumptions small business operators make about their businesses (and the conventional advice they follow) has everything to do with the horrendous failure rate of said small businesses. Whether you need an LLC or not may fall into this category.

Ramsey is a huge proponent of entrepreneurial activities, but advocates a bedrock common sense approach — and he has a lot to say about unnecessary steps a small business owner doesn’t need to take. It might be worth taking a good look at what he has to say before moving forward.

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