[byzantium]

Ok, I'm nearing the completion stage of my internet business, and I've spent quite a bit of money, $9,000 or so. For all you morons who think that you can start a business with $8 for your domain name, and then make millions, this is for you. Here's the breakdown of what I spent, all numbers rounded. Note that I had to form a California LLC because California wants to make SURE that they extract as much money from you as they can, therefore it is a felony to incorporate in another state. I am moving to Nevada soon hopefully.

$500 incorporation filing
$800 2007 California franchise tax
$1,400 attorney's fees to write employment contract
$200 accountant to prepare 2007 tax return
$800 2008 California franchise tax
$200 to open business checking and savings accounts ($100 minimum deposit)
$130 various municipal taxes and fees (the city of Sacramento doesn't issue business licenses, instead they charge you a tax on profits)
$3,200 website building fees (includes domain name, secure site license, professional design, and a few other things)

Then there's all the extraneous stuff:
$70 fax machine
$250 copier
$250 Access 2007
$200 QuickBooks 2008

Not to mention the $1,700 new computer I bought so I could run Access and Word and QuickBooks. (I built it myself; I'm not about to pay $500 for some Dell made in China hunk of junk. My dad did that, and the computer died a year later after he put thousands into fixing problems caused when you have slave labor building computers.)

So there you go. I put it all on credit cards. So now I HAVE to succeed to pay off my debts. Don't think that you can make millions without at least a LITTLE money spent. Most "no money down work at home businesses" are in fact network marketing, which few people succeed at. Actually, network marketing DOES require an upfront investment in most cases, but you're so busy listening to them lying to you that you don't realize that you're spending lots of money.

And then there's seminars, which exist to sell you the next level seminar. This is Russ Whitney's gig, some of you may have heard of him. It's telling that your first "homework assignment" in most of the introductory seminars is to amass as many credit cards with sky high limits as you can, and convince your current cards to drastically up your limits. This is so the seminar guru will get rich off YOUR good credit. In the end, your credit is ruined, and some other guy is rich because of it.

If I'm gonna wreck my credit, *I* want to be the one with the possibility of getting rich. You don't need a guru to motivate you, and real mentors don't sell their mentoring for thousands of dollars an hour on websites. If you're not sure you're gonna get rich, you need to either change your business plan or go flip burgers for the rest of your life, and use your credit to pay for Spanish classes so you can talk with your co-workers.

[rogercbryan]

You could have left out the 'moron' comment. I commend you on what you are doing... but don't get cocky.. that is a recipe for failure.

I'm not sure what business you are starting but here are a few things you may have forgotten:
1- Phone Service
2- Internet Service
3- Ongoing Legal & Accounting Fees
4- Ongoing Office Supplies
5- I didn't see any money budgeted for advertising and marketing
6- Secondary web design (the site is never the same 6 months after you start)

Better yet... here is a chart of accounts from my P/L Statement. This might give you a better idea of what the 'operational expense categories' are for running a business.

1280J • Escrow Expense
1288 • Payroll Expense
2210 • Fed Tax
2220 • FICA Tax
2230 • Md State Tax
2270 • D.C. Income Tax
7100 • Accounting
7110 • Advert.
7130 • Auto Work
7135 • Auto Expense
7140 • Auto Gas
7150 • Bank Charges
7180 • Casual Labor
7200 • Cleaning supplies & Expense
7210 • Commission
7215 • Consult
7240 • Equipment Rental
7280 • Dues & Subcrp
7300 • Emp. Benefits
7310 • Entertainment 100%
7320 • Enter 50%
7360 • Ins. Gen.
7365 • Auto Ins
7370 • Ins-Hlth
7410 • Legal Fees
7420 • Licenses & Permits
7440 • Comp. Maint
7460 • Office Supplies
7500 • Payroll Taxes
7510 • Company Specific Exp.
7565 • Postage
7600 • Rent
7650 • Salary Staff
7700 • Supp. Gen.
7750 • Taxes - general
7751 • Corporate Taxes
7770 • Telephone
7790 • Travel
7820 • Utilities

[byzantium]

Originally Posted by rogercbryan

You could have left out the 'moron' comment. I commend you on what you are doing... but don't get cocky.. that is a recipe for failure.

Sorry, I'm not arrogant, just fed up with the legions of smooth talking scammers who prey on the ignorant and gullible. Just because somebody's gullible doesn't mean that they deserve to get ripped off. Money doesn't grow on trees, after all.

I'm not sure what business you are starting but here are a few things you may have forgotten:
1- Phone Service
2- Internet Service
3- Ongoing Legal & Accounting Fees
4- Ongoing Office Supplies
5- I didn't see any money budgeted for advertising and marketing
6- Secondary web design (the site is never the same 6 months after you start)

1. Covered. I have a landline, a cell phone line, and a fax line. I've been paying for them for so long out of my personal budget that I don't count them as business expenses.
2. Same thing with internet service. I pay for it out of my personal income. $100 a month, I believe.
3. Accountant charges $250/hr. I mainly need him around tax time. Some people suck at record keeping; I don't. I agree that if you suck at financial stuff, you need to sit down with your accountant every few weeks. I can keep track of all that with Quickbooks. I also will contract for the lawyer in case of litigation. I've structured this so that the chances of revenge litigation or suits from people who sue for a living is small, but it is still there.
4. Office supplies shouldn't cost too much. I spent $40 on a box of paper. I have a crapload of blank CDs too.
5. Marketing for this will be word of mouth mostly. To get myself out there, I will use Craigslist and posting on forums. The site will encourage customers to tell their friends.
6. Included in the web design package deal I bought. I get once a month update chances. Network Solutions is the best in the business, and when your business relies on the internet, you want to pay for the best.

I wish I could tell you exactly what this is, but for now I can't. I will reveal it soon.

Better yet... here is a chart of accounts from my P/L Statement. This might give you a better idea of what the 'operational expense categories' are for running a business.

1280J • Escrow Expense
1288 • Payroll Expense
2210 • Fed Tax
2220 • FICA Tax
2230 • Md State Tax
2270 • D.C. Income Tax
7100 • Accounting
7110 • Advert.
7130 • Auto Work
7135 • Auto Expense
7140 • Auto Gas
7150 • Bank Charges
7180 • Casual Labor
7200 • Cleaning supplies & Expense
7210 • Commission
7215 • Consult
7240 • Equipment Rental
7280 • Dues & Subcrp
7300 • Emp. Benefits
7310 • Entertainment 100%
7320 • Enter 50%
7360 • Ins. Gen.
7365 • Auto Ins
7370 • Ins-Hlth
7410 • Legal Fees
7420 • Licenses & Permits
7440 • Comp. Maint
7460 • Office Supplies
7500 • Payroll Taxes
7510 • Company Specific Exp.
7565 • Postage
7600 • Rent
7650 • Salary Staff
7700 • Supp. Gen.
7750 • Taxes - general
7751 • Corporate Taxes
7770 • Telephone
7790 • Travel
7820 • Utilities

My office is at home, so much of the office related stuff is included in personal expenses. I'll have independent contractors instead of "employees" per se; my lawyer says that under California law contractors are responsible for their taxes. If one doesn't pay, I can shift blame and send the IRS/Franchise Tax Board after him. I'm not sure what my fed taxes will be; California charges $800 a year for an LLC plus a profits tax which schedule I don't have handy right now. City of Sacramento charges a flat profits tax (not necessarily income, but profit) of $30 plus $.0004 per dollar up to $5,000. I hope to avoid many lower level taxes via a move to a more business friendly state-eventually. Federal can't be escaped, of course, but CA is unusually punitive when it comes to taxes, unlike the rest of the Western US. I'm not sure why you would pay both Maryland and DC tax unless you have stores or something in both areas.

[mbolton2181]

Interesting to see how your expenses broke down. Though I really think it sounds like you are overestimating the effectiveness of "tell-a-friend" links. I would have made some serious allocations for Marketing.

Marketing and Sales are the most vital piece of your business because without revenue coming in, it dosen't matter how much paper, cd's you have or if you have a lawyer or accountant.

[rogercbryan]

Originally Posted by byzantium

Sorry, I'm not arrogant

You come across as very arrogant in your post... just try to tone it down a bit

1. Covered. I have a landline, a cell phone line, and a fax line. I've been paying for them for so long out of my personal budget that I don't count them as business expenses.
2. Same thing with internet service. I pay for it out of my personal income. $100 a month, I believe.

If you are going to use it for your business you need to put it in the budget. First off there are tax benefits and second if you ever try to sell your business or if you try to get financing to grow your business you are going to need these expenses to show up on your accounting reports to be taken serious.

3. Accountant charges $250/hr. I mainly need him around tax time. Some people suck at record keeping; I don't. I agree that if you suck at financial stuff, you need to sit down with your accountant every few weeks. I can keep track of all that with Quickbooks. I also will contract for the lawyer in case of litigation. I've structured this so that the chances of revenge litigation or suits from people who sue for a living is small, but it is still there.

This is a very common (and unfortunate) mistake that people make when starting a business. A CPA does not just do your taxes. This is a person you need to work closely with all the time (especially in your first year). You can usually get a CPA on retainer to answer questions for $1000-$2000 a year.

4. Office supplies shouldn't cost too much. I spent $40 on a box of paper. I have a crapload of blank CDs too.

When I started my company I thought the same thing. Wait till you hire your first employee and then watch you expenses start to climb. I spend about $1500 a month on office supplies. You need to work this into the budget. Don't write your expenses only for today. You need to create a system that you can grow in to which will include budgeting for office supplies.

5. Marketing for this will be word of mouth mostly. To get myself out there, I will use Craigslist and posting on forums. The site will encourage customers to tell their friends.

You are the second person this week who thinks they are going to grow a business solely on word of mouth. While this can get you some business it is not going to get you all your business. It makes me real nervous when I see a person starting a business without having alloted a significant part of their resources to marketing. I'll tell you the same thing I told the other person. In six months when you are flat broke let me know and I'll show you how a strong marketing plan could have saved you. The best of luck on this one.

6. Included in the web design package deal I bought. I get once a month update chances. Network Solutions is the best in the business, and when your business relies on the Internet, you want to pay for the best.

That's not going to include major coding changes or user interaction changes. Just budget a few dollars for this and you'll be safe. This has been one of my biggest shortcomings in business. I've spent over $5K on my site now and most of that has been wasted because I was doing my designing for today and not properly planning for what I would need in 6 months.

I wish I could tell you exactly what this is, but for now I can't. I will reveal it soon.

Ahhh the myth of the original idea. We can help you more if you are more realistic about what you are doing. I don't need to know what your business is for the above statements to be accurate.

My office is at home, so much of the office related stuff is included in personal expenses. I'll have independent contractors instead of "employees" per se; my lawyer says that under California law contractors are responsible for their taxes. If one doesn't pay, I can shift blame and send the IRS/Franchise Tax Board after him. I'm not sure what my fed taxes will be; California charges $800 a year for an LLC plus a profits tax which schedule I don't have handy right now. City of Sacramento charges a flat profits tax (not necessarily income, but profit) of $30 plus $.0004 per dollar up to $5,000. I hope to avoid many lower level taxes via a move to a more business friendly state-eventually. Federal can't be escaped, of course, but CA is unusually punitive when it comes to taxes, unlike the rest of the Western US. I'm not sure why you would pay both Maryland and DC tax unless you have stores or something in both areas.

There will come a day when you have a full time secretary or a assistant and while CA taxes will be different then DC/MD/VA taxes you should be prepared to collect them at some point. Don't plan your business just for today... you want to grow don't you? I left those in there just to give you a full feel for what it takes to run a company. I'll do well over $1M USD in sales this year so I hope you will at least consider what I've posted.

Again I commend you on what you are doing, but you are still being a little short sighted. An extra few expense allocations will make your life a lot easier in the future. Also, look at it this way if you allot the money the way I said and then don't use it... in essence you will make more then you originally planned (which is great). If you don't allot extra and then you do not have the money to pay your bills... well then... you are out of business my friend.

Best of luck!

[mbolton2181]

nice post roger

[TravelGuy]

Very informative thread, thanks for the post.

[forextrader]

I am new here. But I can already see that this site is really helpful. Roger you have very good points.

[brownbob06]

wow, really good and informative post roger!

But byzantium, I may not know A LOT about running a business...but I do realize how "Moronic" it is to spend about 9k on a startup and not have money set aside for advertising. Good luck with the site, I hope you succeed so you don't end up "Flipping burgers with mexicans" the rest of your life.