My Web 2.0 Company - Do I need to incorporate asap? get a tax ID #? What do I need??

[Caliny222]

Hello!

I'm so glad I found this forum....I was browsing through it and there seems to be some very knowledgeable people here, so hopefully someone can give me some advice!

My partner and I just launched a FREE website, focused on providing a networking platform for small businesses, independent contractors and such. We are still in the process of updating the site and making it more user friendly. This site is not really considered e-commerce because its FREE - we charge our users nothing to post and network...and they find each other and do transactions on their own. There is nothing to be made...our goal is to just build a user base and provide help to small business owners and such.

With that said, I'm not sure whether I really need a tax ID number or not? Do I need to incorporate as an LLC asap? Would I be wasting my money hiring an attorney to help me figure out the legality side of my website? Trademark or copyright the site? I'm not sure what is the best thing to do to claim OWNERSHIP of this site (legally) for tax purposes and generally.

I guess I'm trying to think of how sites like Digg.com, myspace.com, friendster.com, etc..."did business" when they first started out? Any thoughts? Thanks, ahead of time, for your help!!

[MsNadi]

Entirely word of mouth and viral marketing.

MySpace was hardly a new idea, based admittedly off sites like www.blackplanet.net and www.asianavenue.net. What they did was first cater to a VERY specific market niche - independent musicians and artists looking for a place to showcase their art in any medium, that put all artists on an equal footing. While marketing and advertising are all important aspects of business ventures, nothing can supplant word of mouth - which is far more effective, free of cost and successful IF the right information is transmitted about your business.

You need to figure out EXACTLY who your target market is. Is it small businesses or independent contractors?? Which niche of the market would it better serve you to target (keep in mind that because you target one sector of the market does not mean that your service can not be well utilized by other market sectors). You can not market yourself as trying to be "everything to everyone" or you will simply not be successful at any of it.

What about your site makes it Web 2.0, aside from the fact that use of the "buzzword" will conjur certain images in people's minds?

As for the taxID, I don't see why you'd need it unless you plan on hiring or dolling out funds in some manner. How do you plan on making money?! If you plan on this become a tax-reporting source of income, you will need a taxID. TAXID's cost you nothing to acquire....what costs is the type of incorporation you opt to pursuit in your state and/or county (DBA). You may want to consider incorporating to provide yourself with some liabiltiy protection (personal liability - you're dealing with network - to protect yourself from liability should any of the networking relationships hatched on your website go bad, and folks try and blame you as the intermediairy).

[Caliny222]

I would say that my focused target market would be Small Businesses...such as home businesses, web businesses, local boutique shops, etc....

Second, I consider my site to be Web 2.0 because it has a gravitational core, rather than a hard boundary - offering a networking platform for small businesses to communicate with other small businesses and users...being able to locally outsource for find partnerships or business opportunities. The site is focused on building user-base and providing a place for these people to network rather than worrying about revenue.

Well, so here's the thing that I completely confused about - people say I should incorporate as LLC, some say I shouldn't if I dont plan on seeing revenue. Some say I should have a laywer...others say its a waste of money. I figured I didn't need a tax ID because I am not charging anyone on this site and not planning to make money off of this (until I build a solid user base...but even then, I would probably not charge).

Ultimately, I just want to to OWN this website (legally)....as well as being able to write off my business expenses when it comes tax season. What is the best way to do this? Thanks so much!

[dre]

I would save that money and spend it on marketing, you can do the legal stuff when the site starts to go somewhere.

[Caliny222]

So...I guess my question is...WHEN would it be a wise time to incorporate and do all that legal stuff? I don't want to get caught up in it and get in trouble. How much later down the line? And what would be considered "up and running"? I own property...shouldnt I be scared that someone might sue? Thanks

[MsNadi]

No Lawyer. People make incorporating sound so difficult - its not...and it's pretty hard to screw up. What's difficult is the taxation side of different types of incorporation (LLCs vs LLPs vs CORPs vs INC vs S CORPs etc).

If you're really truly not planning on earning revenue (which is odd to me) I wouldn't incorporate. Set yourself as a DBA (you are doing business as www.mybusinessnetwork.com or whatever) to make it legal (you'll have to run a notice in a local newspaper. Should cost you $30 at most), make a copy - now you're a legal entity.

Like another poster said, if you're not planning on making money and you're not shelling out any money - don't sweat it.

[Caliny222]

Thanks so much for your thoughtful responses - I truly appreciate it.

Yes! That is exactly what I'm looking for....to be a legal entity and to be able to write off my business expenses...because ultimately, I do use my money for marketing, servers, graphic designers, as well as go to business dinners with various knowledgable business owners that I can get advice from. So I want to be able to write this off...so would filing for a DBA and posting in a newspaper allow me to do this?

Also, I'm not planning to make money because I'm trying to build value by building user base. That is my main goal. I would like to make this a successful, and great site where people will find reliability and trust within the site. Then...my plan is sell it for what it would be worth.

Appreciate any other thoughts....

[MsNadi]

Pump the breaks. In order to right off your business expenses you WILL need a tax payer ID, as a source to which those business expenses should be attributed.

You're changing up on me - generating value through user base DOES MEAN that you intend on making money off of this - I'm assuming ad revenue or targeted advertising/email blasts? When this occurs, you will need to set up some sort of legal entity that will be responsible for the $$$ you take in (a federal tax id is necessary to set up a Internet Merchant Account and Business Bank Account at almost any financial institution). So you're going to eventually need a Federal Tax ID, and if you are puruising advertising revenue, I'd recommend establishing yourself IN SOME WAY other than a fictitious name statement (the DBA). The fictitious name statement simply says that "Caliny222 is operating as MyBusinessNetwork.com". It provides a link between the business name and the business proprietor(s) - in your case, YOU.

My recommendation - file the DBA. Then sit back and figure out exactly what you want to do with the site and what service you want to provide your customers. THen figure out a phased approached as to how you're going to accomplish this (think - techcrunch - although being a san francisco based blog that is used globally, they throw quarterly parties for people to come together face to face OFF the blog). Based on this phased approach and what you plan to accomplish - it will become obvious when you'll need to incorporate (if necessary) and establish your federal tax id.

[Caliny222]

Thanks again, MsNadi. Very wise advice and I'm greatful for it. As you can already tell, there's a lot of learning (in that aspect) that I need to do. It's quite a confusing process....and i was almost close to hiring on a lawyer...!! I was going to pay him so much to incorporate, or file a dba... thank goodness I didn't.

On another note, we updated the site last night to make it more user friendly. I would love your opinion and support of the site.

www.Smallbuzz.net.

Thanks, again!

[MsNadi]

I dig the site!! Great work - and I see the potential.

What I don't like: the logo - it's hard to read, and the bee is a bit distracting, as he is part of the namesake - Small Buzz. But I like the bee as it incorporates to the essence of the site and the name.

Have you thought about eventually moving towards events?! Networking events for small buzz members in areas - where people can come together and meet each other - similar to what Garage venture capital does for the Venture Seekers?

[Caliny222]

I'm so happy to hear that you dig it! It's not easy being a woman entrepreneur. I mean, I am out there constantly trying to promote the site and most people underestimate me until I start talking about it in great detail and show that I know what I'm doing...and that this site has a purpose.

Yup, I've thought about events like that, as I get emails to a lot of these type of events (I work at a venture bank currently). Good thoughts!!... I figure that it would eventually roll out once the receives credibility and we start attracting some great users!