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Starting Up A New Freelance Business
Posted 01 October 2003 - 01:19 PM
so I'll be in there making silly faces all day, you can bet.
You're right about the branding, bwelford. I'll definitely look into that. I'm thinking about it... my current domain name's not much to go by. :/
Posted 01 October 2003 - 05:50 PM
Just read this thread. In a past life, I used to do quite a lot of advice work with startups here in the UK. The no.1 mistake that most startups make is...
... setting their rates too low in an attempt to buy their way into the market. BIG mistake. As Old Welsh Guy said, you just end up with the wrong sort of cheapskate client - not fun.
Other than that, just do it - with your evident intelligence and abilities (yes, I mean that), you'll never look back.
Posted 01 October 2003 - 07:31 PM
Aww, you're sweet. Thanks.
I had a whole bunch written in this quick reply thingy and then as I was scrolling back up through the thread, like an idiot I hit 'refresh' absentmindedly to see if any more replies had been added, and I lost everything I'd written. Don't
'cha just hate it when you do something that stupid?
Anyhow, I was saying, after yet another marveling session at the smilies on this board (which I couldn't look at so much while at work, due to wanting to at least *look* busy), um, I forget what I was saying. Uh...
Right. Setting my rates. You're right, that is *the* most important thing. I work for cheapskates now and it's horribly frustrating. My boss goes mad for free things, and is always trying to squeeze more out of what he can. He's a decent guy really but he just grates on me so much trying to get something for nothing whenever he can. It's maddening, and I do *not* want to encourage that sort.
So, the secret is to find the sweet spot between "she's awfully cheap, I bet she's no good" and "good heavens, who would pay that?" The HTML writer's guild FAQ had a good one-- the guy said he generally set his rates at a little more than half what his attorney charged hourly, and a little more than twice what his auto mechanic charged hourly. But that was just a kind of rule-of-thumb reality check; there was lots of math in it really. I'm sure I'll get the hang of it.
I run a Mac.
Does Quickbooks run on a Mac?
I have Quicken but don't know what it is.
I also hear that there's a product called MYOB for a Mac that's pretty good. (Witty name, too.) My boyfriend works for a small (10-person) company run entirely on Macs, so I've instructed him to schmooze with the CFO (she has the hots for him anyway; a little flirting gets me good information and might net him a raise since she likes him so much anyway) and find out what she uses and whether it's hard to learn. And, whether it's expensive to buy!!
>payments to Robert Gladstein
What, the ballet dancer?
Sorry, couldn't resist. I'm so funny.
Anyhow. Yes, this is a lot of advice. I am extremely fortunate in several ways: 1) If I can get this business started, my boyfriend and I are going to relocate to his hometown, Buffalo, where
2) his best friend since preschool lives, who is
3) a corporate/litigation lawyer, and
4) would be very happy if he moved back.
So I'm in a very good way for legal advice.
Also, a high school buddy of his who would likewise be glad to see him back is an accountant.
So I can probably get free advice there, and at the very least be very well-advised as to where I should spend money in either of those two fields. But, have no fear-- I will post about it or write up an article or something, so all of you can share in my good fortune and bounty.
I like the idea of incorporating-- it makes it not just "bridget fiddling around in the corner with her pencils", and more "Bridget, Inc., fiddling around in the corner with her CORPORATION and TAKING OVER THE WORLD" etc. etc. (Not that taking over the world is on the agenda, of course-- I mean, think of the paperwork headaches-- but it's a figure of speech, right?)
So I will look into that.
Hmm... I think I'll have to brainstorm about domain names and brands and corporation names.
At the moment I think my goal will to be a freelancer to raise enough money to afford all of this.
I actually read a thread on WebmasterWorld about a similar thing, and the start-up-ee was advised first of all to monitor his cash flow, and remember that cash flow did not equal profits. Do not spend your revenue to buy yourself a shiny new truck; you need that revenue for your taxes.
So, I'm trying to be as minimalist as I can without being stupid, with an eye to setting a budget and buying the necessities as I can. I think the first necessity is a domain name.
But, equally important is budgeting my time. I can't spend too much of it on silly things. I have to prioritize. I actually have less time now than I have money. I have to prioritize my tasks as much as I prioritize my budget.
So the first necessity is a website.
Those go together well. I should go get started.
OK, I'm going then. Poof!
Posted 01 October 2003 - 08:40 PM
Incorporating: As a rule of thumb, unless you are likely to get sued by someone for a lot of money, incorporating should not be done automatically.
First, EVERYONE could get sued at anytime for almost any reason. So you shouldn't incorporate just because you are doing nothing different from what you are doing anyway. (did that make sense? How about this? Don't panic)
Second, being incorporated does not automatically protect you from everything. It helps, but (for example) at first you will not be able to get any credit of any sort without a personal guarantee (or a lot of money in the bank or a long history - which you don't have) so in cases like this you could get sued anyway.
Third, if you incorporate and then fail to properly manage your corporation's books and accounts, you can end up in a situation called "lifting the coporate veil" where the court says that since you were not treating the corporation as a separately, it's not. This is very common among sole proprietors who start a corporation and then use it like a personal bank account. If you do not have the time and resources to properly organise and maintain the corporation, you are wasting money.
Fourth, if you are not making very much money, you can end up paying MORE taxes than you would otherwise since sometimes your personal tax rate at low levels is lower than the corporate one. Corporations have more deductions, but to get a deduction you have to spend the money in the first place. If you don't have it, the point is moot. And of course if you pay yourself as an employee you have to file tax withholdings and other paperwork. If you are purely a shareholder, then you still have to declare taxes on the money you get (as investment income) AND the corporation has to pay taxes (since it's profits). The point is that a corporation costs time and money. Not just up front, but all the time. An S class corporation is a good way to avoid this double taxation, since it flows through to you.
Having said all of that, I am a sole shareholder in a Nevada "C" corporation. And it works for me. In my case it allows me access to the US market ( the corporation is a US taxpayer) as well as the Canadian one. There are a couple extra benifits, as well. But it costs money and time to run.
My suggestion for you is this: Do not incorporate right now. Get your business running until you have at least $5000 EXTRA in the bank that has come totally from your business. Until you have achieved this, you are likely to lose money by starting the corporation.
My usual rule of thumb is to get at least an S class at around $20 k per year, and a full C at $100k. For Canadians, incorporate at around $60k per year.
Of course, if your business opens you up to the real (not just the normal amount) possibility of a substantial lawsuit, or you are interested in financial privacy, then by all means incorporate right away - if someone could get hurt or killed by your mistakes, then you may want to incorporate before doing anything else. If the worst that can happen to you is that someone will demand their money back, it's kind of overkill.
Lawyers always counsel overprotecting yourself - the belt and suspenders approach. There is nothing wrong with that. But do it intelligently. If the cost of incorporating prevents you from marketing your business or making money, then what exactly are you trying to protect yourself from - non-existing customers?
Think of it as insurance - you should get the right amount of insurance before you need it. But the "right" amount varies throughout your life. You don't need any as a child, you need tons as a parent, and you need very little as a retired person.
In the US, your home state, Nevada, Wyoming and Delaware are generally the preferred places to incorporate, in that order. Nevada has no state personal or corporate income tax (which is why my annual general meetings are in Las Vegas )
Edited by mcanerin, 02 October 2003 - 12:21 AM.
Posted 01 October 2003 - 08:57 PM
Does TurboxTax offer a version for Canadians incorporated in Nevada?
DragonLady7, you might find Seth Godin's book, "If You're Clueless About Starting Your Own Business and Want to Know More (If You're Clueless)" and PDF book, The Bootstrapper's Bible both educational and inspirational.
Posted 02 October 2003 - 08:38 AM
Is is possible to "just do it"--without all this other stuff? I want to be on the up and up and very legal, but to get the DBA and the business license (which, I have recently found out I don't need) and this and that yada yada yada is nickel and diming me to death.
Legally, can I just take a check from Joe Blow and do the work and be done with it and declare it as personal income and have it taxed at the end of the year?
Do I really and truly need ALL this other stuff? I'd like to get started ASAP and all this other stuff is kinda getting in the way. My start up cash is modest, although not necessarily non-existent.
I know this has gotten long so I'll put it in a nutshell. Do I need all this stuff or can I just jump in and do it?
Whew. Too much typing and not enough caffeine.
Posted 02 October 2003 - 08:59 AM
Sure you can just work for different people without the business name but IMO it is better to represent yourself as a company as it will "legitimize" you. Most companies may not want to do business with a single person. I think one has to represent themselves in a manner that they don't appear to be a "fly by night" type of a company, thus assuring their customers they are going to be around for awhile. Now this idea all depends upon what type of work you are doing.
Is is possible to "just do it"--without all this other stuff?
Incorporating protects your personal assets from lawsuits and such. Also if you decide upon some company name and do not get some kind of trade name or trade mark, someone else could steal it right out from under you.
Now I'm in Arizona, and it was not at all difficult to set up a Internet related services business. I first got a trade name from secretary of state, opened a business checking account, incorporated, asked for S-Corp status and received Tax ID #. Services aren't taxed in Arizona so there was no need for a sales tax license. The hardest part was building the initial customer base.
Different states probably work differently but it was not that difficult here in Arizona.
Posted 02 October 2003 - 09:12 AM
Is is possible to "just do it"--without all this other stuff?
Deb, it sure is! And I would suggest that you don't get bogged down with all that other stuff to begin with also.
After all these years, I still haven't done most of that. Not saying it's the perfect way to do business, but so far it works for me.
Just DO IT or you never will.
Posted 02 October 2003 - 09:13 AM
As I go, I'm going to formalize it all, and I'm going to make sure by the time I'm ready to be more serious about it that I have it all done right.
But by all means, jump in and learn as you go!
I didn't know you were thinking of starting a business too. Well then, I'm more timely than I thought.
Posted 02 October 2003 - 09:18 AM
Insofar as "protecting my assets", I'm not all that freaked about it, unless they want my broken VCR and some tired furniture (2 kids will do it every time!). Not to make light of it, but at the stage I'm in now, I'm not all that worried about being sued. I know how to do my job (unlike the idiot Jill is dealing with...seo wizard or some such crap).
Thanks for the "push", y'all!
Posted 02 October 2003 - 09:19 AM
I have a client in the works and a few lined up so I'm right behind ya!
Posted 02 October 2003 - 10:00 AM
So, there's my #1 requirement worked out!
I also got some good language up about how I estimate pricing on jobs, so I was pleased to have that defined. (I need a smiley that's flexing its muscles to show how cool and awesome and pleased with itself it is. Any takers? That might be too complex an emotion for a smiley... )
Now I probably should go do some work at my dayjob, which is seeming increasingly boring compared to how cool independent stuff is. (Exciting things are happening at work, we might be getting our first brand-new client in 3 years, for our brand-new revamped system, but I'm not really involved in that. I already did all my work, and maybe I'll get credit for it and maybe I won't, but I sure won't get blamed, so I don't even have the adrenaline rush. )
Posted 02 October 2003 - 10:08 AM
He's actually a friend of mine, so I don't think too badly of him. He's a start-up too, but even from a friend I want my fee--and not in 72 month installments! :laugh:
Posted 02 October 2003 - 10:30 AM
Deb and DL, please do make sure that you use a good contract with your clients that will make sure you won't have to pay anything more than the money-back that they paid you. I'm comfortable not being incorporated because my contract covers my ass really well.
And NEVER sign a contract your client gives you that says you'll indemnify them.
That's the one thing I learned for sure from my hubby the attorney. Just cross that part right outta there!
Posted 02 October 2003 - 11:10 AM
I forgot to mention this -thanks to Jill for reminding me
A good contract is worth more than incorporating. If you have a good contract then there is very little you could get sued about anyway.
This is why corporations are big on contracts - hey, if incorporating protected you, then why have a contract? Of course, that's not true at all. Sometimes having a corporation is like waving a red flag saying "I have so much money I need to protect it! Sue Me!". Do you think people would have sued Ray Kroc as fast as they would sue McDonalds Operations Company Inc.?
That's an extreme example, but it would be very bad for someone to incorporate and then think they were somehow judgement proof. It doesn't work like that. Nothing in life is that easy. The most judgment proof people I know are working out of their homes and have no real assets. You don't sue them - you'll never get anything.
Take some time to get a good contract. It's probably the most important legal issue to deal with. Don't worry about the rest until you are making enough money TO be worried (within reason).
The bottom line is, there are many advantages to having a corporation. There are also advantages to having a swiss bank account. But you don't need one yet. Focus on your business and get it moving. Plan ahead with the idea that you will have a corporation in the future and don't do anything that would mess it up (like signing a long term contract as yourself without a clause that allows you to assign it) See? Contracts again.
My business was unincorporated from 1985 to 2001, and I'm a lawyer. Never got sued once. I have great contracts and I treat people honestly.
It IS really nice to be able to operate under a company name. There ARE advantages to DBA's and corporations. But get your business up and running. Learn to walk before you run. And have fun! You are not supposed to be scared. This is a great time to start a business. Welcome to the club.
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