This section of the forum is for discussing the business and finance issues of the t-shirt industry. Which business structure to use (sole proprietor, LLC, S Corp, etc), how to handle billing, where to register your business and get the proper licensing, etc.
Hello all just in process of starting up online tee biz and am wondering whether to sole proprietorship it, Or Doing Business As DBA, or something else. Any ideas, thoughts, experiences would be appreciated. Thanks, Thad
How do I thank people on this, sorry, Thanks, thad.
Last edited by Comin'OutSwingin; April 14th, 2009 at 12:47 PM.
Reason: merged posts
What state are you in? I am in NY and had to File a DBA for a sole propriortership business. DBA is for companies using a name other than your OWN to conduct business, a sole proprietorship is the type company. They are basicaly two different things. I learned from a previous thread about SCORE (Rodney recomended it) i suggest you do a search on it, I was able to get some very helpfull information from them.
Actually, if you want to be in business, then you need to do things the proper way from the start.
I think I have to disagree. Businesses make money, and until you're making money, you shouldn't worry about this "legal stuff" that we all seem to get so enamoured about tangling ourselves up in.
Who cares about DBAs, LLC/S Corp/C Corp, licenses, wholesale permits, sales tax forms, when you don't even know if you're going to make any money yet? Plus, if like me you live in NYC and don't have a physical storefront, you actually don't have to do ANY of these things to begin with?
People get very, very wrapped up in the perceived "legal requirements" of their business based on hearsay on forums like these rather than the proper advice of a lawyer or SCORE. These legal things confuse them and stop them from starting a business since they spend too much time and effort trying to figure things out rather than spending time figuring out how to make money.
Make money first, make good with the government when you do.
I think I have to disagree. Businesses make money, and until you're making money, you shouldn't worry about this "legal stuff" that we all seem to get so enamoured about tangling ourselves up in.
Who cares about DBAs, LLC/S Corp/C Corp, licenses, wholesale permits, sales tax forms, when you don't even know if you're going to make any money yet? Plus, if like me you live in NYC and don't have a physical storefront, you actually don't have to do ANY of these things to begin with?
People get very, very wrapped up in the perceived "legal requirements" of their business based on hearsay on forums like these rather than the proper advice of a lawyer or SCORE. These legal things confuse them and stop them from starting a business since they spend too much time and effort trying to figure things out rather than spending time figuring out how to make money.
Make money first, make good with the government when you do.
Well, you can disagree all you want, the fact is that if you don't register as a business, you don't have a business.
Also, there are no "perceived legal requirements". They're real. If you make a certain amount of of money, you are legally required to have a legitimate business structure, and to pay federal income tax on the business income.
Also, if you sell anything in your state and your state has sales tax on clothing, you are legally required to collect that tax and pass it on to the state. And that's regardless of if you have a profit, or not. There's no way around that.
Can you choose not to do this if you wish? Of course. Is it legal? Nope.
There's nothing to be enamored with, it's required. The only hearsay is what you're proposing that someone do. Any lawyer that tells you that you shouldn't collect sales tax and to wait until you "make money" to make good with the government isn't worth the paper their license is printed on.
Quote:
Who cares about DBAs, LLC/S Corp/C Corp, licenses, wholesale permits, sales tax forms, when you don't even know if you're going to make any money yet?
Most business licenses cost very little money. It's a very simple process to get done, and only screams of carelessness and laziness to avoid it.
Having a proper business will make it a lot easier to get set-up with wholesale accounts with many vendors. Most won't give you an account without being a legitimate business. In case you didn't know, wholesale accounts=better pricing.
It doesn't make much sense to pay $2-3 more per shirt, sometimes much more than that, because you wouldn't pay $50 to get a business license.
Also, the point of this thread is to help the OP with their decision about what business structure to go with. Because by their post it's obvious that they want to obey the law and have some business structure.
Telling them to disregard the law doesn't help them, or anyone else reading the thread.
Well, you can disagree all you want, the fact is that if you don't register as a business, you don't have a business.
I think you mean a corporation, not a business. A business covers everything from your grandma selling jewelry on EBay to Microsoft. Corporations are the legal entities created by contract (LLC, S Corp, C Corp). Thus, you don't need to "register" with anyone to fall under the traditional definition of "business." You do have to file with someone to incorporate and be a corporation.
Quote:
Originally Posted by Comin'OutSwingin
Also, there are no "perceived legal requirements". They're real. If you make a certain amount of of money, you are legally required to have a legitimate business structure.
Where are you finding this? There's no law that requires incorporation above a certain revenue point. You can be a sole proprietorship and make millions of dollars. Incorporation occurs for three reasons: to decrease or otherwise manage tax liability, to create shares in the company which investors can buy, and to defer legal liability to the corporation instead of to yourself.
Quote:
Originally Posted by Comin'OutSwingin
Also, if you sell anything in your state and your state has sales tax, you are legally required to collect that tax and pass it on to the state. And that's regardless of if you have a profit, or not. There's no way around that.
I don't know about other states, but in New York, you don't pay sales tax on clothing for purchases of under $110 AND you don't pay sales tax if your business is conducted from a residence or otherwise not from a physical office space (both of these are usually true of most t-shirt businesses).
Don't take legal advice from forums about what or what not to file, because you're going to end up wasting a lot of time and money. That's the gist of what I'm saying here. For what we do - small-scale t-shirt business generally run out of our houses, you don't need to do a lot of things Pop's restaurant down the street does. Ask a lawyer.
__________________
Nate Berkopec, founder of The Factionist
I think you mean a corporation, not a business. A business covers everything from your grandma selling jewelry on EBay to Microsoft. Corporations are the legal entities created by contract (LLC, S Corp, C Corp). Thus, you don't need to "register" with anyone to fall under the traditional definition of "business." You do have to file with someone to incorporate and be a corporation.
No, I don't mean a corporation. Just because you sell stuff jewelry on ebay, doesn't mean you have a legitimate business.
What makes you a business, is registering your business entity with your local/state government. Until you do this, you have no business.
Quote:
Originally Posted by thefactionist
Where are you finding this? There's no law that requires incorporation above a certain revenue point. You can be a sole proprietorship and make millions of dollars. Incorporation occurs for three reasons: to decrease or otherwise manage tax liability, to create shares in the company which investors can buy, and to defer legal liability to the corporation instead of to yourself.
Again, I never said incorporating, I said having a legitimate business structure. This could be a Sole Proprietorship, Partnership, LLC, or Corporation. The requirements will vary by state.
Quote:
Originally Posted by thefactionist
I don't know about other states, but in New York, you don't pay sales tax on clothing for purchases of under $110 AND you don't pay sales tax if your business is conducted from a residence or otherwise not from a physical office space (both of these are usually true of most t-shirt businesses).
Not everyone lives in the state of New York, so this will not apply to most people on the forums.
Quote:
Originally Posted by thefactionist
Don't take legal advice from forums about what or what not to file, because you're going to end up wasting a lot of time and money. That's the gist of what I'm saying here.
That's exactly what I'm saying, too. The difference is that you're telling people on the forums to ignore what the law says. I'm saying find out what the law is in your area, and abide by it.
You're making it much more complicated than it is. If someone wants a simple Sole Proprietorship, they simply need to go down to the county clerks office, fill out a what usually is a 1 page form and pay less than $50.
That's it. You're done, and you're legal. Now you can go get a tax id# from the irs, online in about 2 minutes. Completely free.
You can also get a sales tax exempt license from your state. Most times, completely free.
You can do all of this in less than an hour, and for under $50. You're legal, and no big hassles.
Now you can get set-up with all the vendors you want, and get great wholesale pricing.
What's the point in avoiding it, if it's required and it's so simple?
Quote:
Originally Posted by thefactionist
For what we do - small-scale t-shirt business generally run out of our houses, you don't need to do a lot of things Pop's restaurant down the street does. Ask a lawyer.
That's the point. Depending upon where you live, you just might have to.
Other than the legal issues (which are all very real, and I agree with Greg), there are other reasons to register your business legitimately early on.
For one, it's easier. If you have to backfill everything later, it's going to be a lot harder than if you just did things above board from the start.
For another, it's practice. The larger your business grows, the more paperwork, tax implications, etc. you're going to have to worry about. If you start legitimately, you can ease yourself into it rather than suddenly having to worry about everything at once when you realise you're too big to fit under the radar.
Another benefit is psychological. If you act as a business, you'll be a better business. Professionalism is important. So is treating your business as a job and not just a hobby: understanding that there are downsides (like legal requirements) and facing up to them. Otherwise you're just playing.
Another benefit is legitimacy. To banks, to businesses extending credit, to business incubator groups, to other businesses wishing to carry your product, to media, even to your peers (be they professional or personal).
Like Greg said, you're not a business until you act like one.
Well, you can disagree all you want, the fact is that if you don't register as a business, you don't have a business.
Also, there are no "perceived legal requirements". They're real. If you make a certain amount of of money, you are legally required to have a legitimate business structure, and to pay federal income tax on the business income.
Also, if you sell anything in your state and your state has sales tax on clothing, you are legally required to collect that tax and pass it on to the state. And that's regardless of if you have a profit, or not. There's no way around that.
Can you choose not to do this if you wish? Of course. Is it legal? Nope.
There's nothing to be enamored with, it's required. The only hearsay is what you're proposing that someone do. Any lawyer that tells you that you shouldn't collect sales tax and to wait until you "make money" to make good with the government isn't worth the paper their license is printed on.
Most business licenses cost very little money. It's a very simple process to get done, and only screams of carelessness and laziness to avoid it.
Having a proper business will make it a lot easier to get set-up with wholesale accounts with many vendors. Most won't give you an account without being a legitimate business. In case you didn't know, wholesale accounts=better pricing.
It doesn't make much sense to pay $2-3 more per shirt, sometimes much more than that, because you wouldn't pay $50 to get a business license.
Also, the point of this thread is to help the OP with their decision about what business structure to go with. Because by their post it's obvious that they want to obey the law and have some business structure.
Telling them to disregard the law doesn't help them, or anyone else reading the thread.
I totally agree with you on this, 110%. I am registered as an LLC. It's important to deal with the legal stuff, for example, if I didn't have agreements with my printers and other major markets I affiliate in, I might as well bend over.
Making money is one thing, having a nice certificate to show the parents and the media is another. You need to incorporate to do the latter, not the former.
__________________
Nate Berkopec, founder of The Factionist
I registered my business as a Sole Proprietor as soon as I bought my equipment, and was ready to sell.
All the registration process with the State and the IRS was free and quick.
Even when it was at the beginning just like a hobby, and I had a REAL JOB full time,
I wanted it to look professional.
Again, all the paper work was free, I feel it as a real business, even when the numbers,
in the first year of operation are (what I think is normal for most business the first year) NEGATIVE !!
So I made no money, and spent a lot on it, and I have to pay no taxes on it.
I think the most important thing for me is PEACE OF MIND
__________________
As Jerry used to say : Profit is not a dirty word.
