Business dilemma

[minnesotacold]

Please help me figure this out. I feel like I finally have a solid business idea and business plan but I am not sure what to do next. I have done my research and there is definitely need for the service, I have found my niche, know my demographics, know the profit margin and there are no competitors in this business but my main dilemma is how to start.

I am trying to start this business on a shoestring and I wanted to test the market first, basically just trying it out first and if the demand is enough to make the business sustainable, I would take the next step. However, I am trying to avoid fixed costs and overhead as much as I can in the beginning. Should I just pass out fliers, do free online advertising and see what kind of response I get and then go for there?

OR

Should I take care of all the legal stuff first (starting a LLC, getting the proper business licenses, etc) and then try to make it work? If I go official right away, I will owe tax to the IRS and the startup/fixed cost will be around $1000 dollars, however, I know you can deduct $5000 of startup costs the first year without having to amortize over 15 years.. I guess, I just do not want to start a company officially before I know 100% that it is a sustainable business model not only for the short term but also in the long term. How would you do this?

[JLeezer]

Why will your legal costs end up being $1000? Also, you owe taxes to your state and the federal government regardless of whether you form an LLC, LP, LLP, or corporation, or you operate as a sole proprietor.

[akula]

"option a" all the way

[DrMoney]

I would agree with Akula, But by starting it legally, you engage yourself and with that in place it almost makes you try your hardest. You might not experience the same results if you try to half ass it, as opposed to giving it 110%.

[minnesotacold]

Thanks for your responses! I am a law abiding person and I like to be in compliance and such but I want to make sure that my idea is sustainable before I go official. I live in Minnesota(a high tax state) and I know business taxes here are very high! In addition, if you file as LLC, you have to pay self employment tax which is also very high. I just do not want to go through all the legalities and in case of failure, have to dissolve the LLC after having spent a lot of money on applications, licenses and such. Correct me if I am wrong, but it seems like a lot of small business have compliance issues. My fiance used to work for a small staffing company and they had employees from India that were out of status with Immigration here in the USA, I know the fines for those type of violations are huge but the owner did not seem to care! By all means, I would like to be 100% compliant from the get go but it appears to me that most business take care of the legalities as they go?

[skyjoe76]

Minimize as much cost as possible when start a business. Make your profit first before starting any official company. You must allow yourself to have a lot of buffer for correction. No matter how well planned your business plan is, there is always a need for heavy correction, especially a start up.

Putting too much money in may limit that correction buffer.

[nate89]

I know in the UK regarding tax issues and such, we are in effect given a 90 day buffer before you must register as either self employed, a company etc etc. If you register you pay the back due taxes, if not the earnings are added to your end of year tax assessment...either way we end up paying the tax man.

Registering a business here is really very easy, only cost £15 if done online and if i remember rightly, add £20 to that original fee and youll be incorporated the same day...

[kimbeckers]

I could not agree more.

I would agree with Akula, But by starting it legally, you engage yourself and with that in place it almost makes you try your hardest. You might not experience the same results if you try to half ass it, as opposed to giving it 110%.

You should be able to minimize your legal costs as much as possible. You can file online for the LLC, Corporation or other entity you choose to open.
Starting an LLC or Corporation will also allow you to deduct more expenses at the end of the year which is rapidly approaching. You should be able to consult a tax consultant for free or low cost and then take all the steps yourself to open the entity, this will keep the costs down as well. It should not cost you more then a few hundred dollars to open the entity. As already has been stated you will be responsible to pay tax regardless

Good luck with whatever way you decide to go.

Kim

[Crysco]

Its a fine line. Make sure you have a plan for forming your company, but first things first you need to make money!

There is a lot of good information posted here. You might even consider contacting your local SBA (Small Business Association) they should have a start up workshop for about $50.00 you may have most of the business structure under control, but they can provide more direction with the legal stuff. Unfortunately sometimes we have to spend a little extra but it goes a long way.

Good Luck!

[hugh009]

Have you heard of SCORE? This is the govt organization of retired executives who KNOW answers to every question you have here. They will be glad to share their years of experience. Look in your local phone book or online.

Hugh

[rogercbryan]

Just start the business... I see way to many people who get caught up applying for licenses... incorporating.. and then never doing anything with it... Start the business TODAY... get off your ass and make it happen.. if it starts to pick-up then worry about all the other BS... there is no need to form a Corporation for an idea (which is what you have until you start making sales)... Not to sound like a Nike Commercial.. BUT JUST DO IT!