T-Shirt Forums banner
Cancel

Beyond the basics, legalities and various accounting principals. VERSION: I'm stuck

4908 Views 22 Replies 9 Participants Last post by  Rodney, 
G
Alright, so I have the concept, the ideas (ranging from marketing to how to run the back end of the business), and the contacts necessary to get it moving (the designer, and potential leads on contributing artists), but I'm getting caught up on a few various things. I've searched through the forums and have seen many posts covering parts of this thread, but not as a whole. Thus my questions.

Quick summary of my to-be business: Run, owned, and funded by myself (in Minnesota), run out of the home, no employees, website for ecommerce, shipping through USPS, no tax on clothing here in MN.

P.S. - I realize prices vary, I'm looking for VERY rough estimates. Thanks!

---------------------------------------

Onto the questions / am I correct topics:

1. STATE LEGALITIES
- Business Fictitious Name... where can I obtain this? How much? What does it provide me with / do?
- Business License... Required? Where can I obtain this? How much? What does it provide me with / do?
- State Tax ID... Required? Where can I obtain this? How much? What does it provide me with / do?
- Seller's Permit... Required? Where can I obtain this? How much? What does it provide me with / do?
- Anything else I'm forgetting about? Please advise me!

2. FEDERAL LEGALITIES
- Federal Tax ID... Required? Where can I obtain this? How much? What does it provide me with / do?

3. ACCOUNTING / TAXES
- Any special treatment? If I'm not incorporated, and not required to file State or Federal Tax ID's, what changes? Is filing any different (can I still use Turbo Tax is the question :p)? Can I still deduct / expense business purchases? Is there a limit to such deductions? Any benefits or negatives? Higher / lower taxes?
- Recording Finances? Is Excel okay? How difficult does this have to be? Though I'm not sure whether it's soley for my own use or not yet, how complicated? A balance sheet, cash flow, and specific asset(s) sheet, anything else?
- Seperate bank account / checking necessary? What kind of records do I have to be sure to keep? Any important do's or don'ts?
- PayPal? I'll be using them as my merchant. Will they send my records to the state / federal agencies. Is this something to be careful of? Will I get audited / taxed for this extra income?

4. EVERYTHING ELSE
- Someone else or myself? I'm juggling between using a screen printing company (such as CustomInk.com) or buying my own equipment. If I went with my own equipment, is there a certain route that would be <$1000? Limitations / advantages?
- Protecting creative work. What protection do I have? If someone steals a design that is obviously mine (and chances are it will be obvious, because this will be a pretty clean cut niche market), do I have recourse?
- Protecting my brands identity, such as logo, name, and branding. Similiar to above, if someone attempts to use my identity, do I have any recourse?
- Contracts for designer, artists, and contributers. I've seen various links floating around. Would I be okay to compile what I see fit and write them out in plain english? Are contracts signed and transmitted by fax true legal documents? Do they need to be certified, stamped, or oversaw by a third party?
- Lastly, incorporate or not? Since I'm essentially testing the waters, wouldn't it be much cheaper to not incorporate / not have to pay federal and state taxes? Can I incorporate 1.5 years down the road if I feel it's necessary?

---------------------------------------

Thanks everyone in advance. I really don't have anyone to bounce ideas off of (my parents are very supportive, but will obviously agree or just tell me what I want to hear). I'm not nervous about marketing the company, as that's my natural talent / what I go to school for specifically. It's the legalities that I'm getting caught up in, and I want to be protected (enough to be beneficial at least). Please E-mail me at [email protected] if you wish to talk via e-mail. Thanks! :D

EDIT: Yes, I know I have to setup a meeting with the SBA. But I don't want to go in there empty handed... or maybe their used to such a thing. Advice on who I should meet, what I should ask, and how to prepare?
See less See more
Save
Like
Status
Not open for further replies.
1 - 20 of 23 Posts
T
wow! you are serious.

What I have done in the past is start with a to do list to set up a business.

Here in Ontario Canada things are a little different but over all it should be more or less the same as in the USA.

Start up main points:

1. Company, Government, Licenses.
2. Banking and POS accounts. Accountant, Legal.
3. Start up Inventory, store setup, Equipment.
4. Promo and advertising plan.
5. Management/Staff (you alone in this case)

....I'll stop here and let other members jump in.
See less See more
Save
Like
G
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

T-BOT said:
wow! you are serious.
Click to expand...
I have a very OCD personality (OCPD if you prefer), I feel very uncomfortable if I don't know exactly what is going on at all times. You have no idea how much it's bugging me to not know the answers to all of the above questions. I'm going crazy. Luckily I set a target date of Jan. 1, 2007 for opening, so I have the necessary time to iron all of this out! :eek:
Save
Like
T
ok, then start with one thing at a time.

My opinion only.

Start up date ?

Jan/1/2007 is a dull date (the party is over) and everyone has spent all their cash by then, peeps will be paying off credit cards for a few months.

I would push it ahead ( cause it may be too late to cash in on the holiday selling season ), Valentines is not the greatest cash-in-day (its ok but), Perhaps March.

St. Patricks day is a good Date, peeps will remember when you advertise it as your opening date, you can also have a big bash on that day to kick start the opening.

Opening in March, This will give you lots of time to set up all other business stuff.


...I'll stop now. :)
See less See more
Save
Like
G
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

I figured 4 months (from now that is) is more than enough time to have everything ready. If it isn't reasonable at the time, then I'll postpone it, it was more of a "having a date down" issue than anything.

The site along, along with integration of a view various things (merchant, shopping cart, etc.), will take a good deal of time themselves.
Save
Like
T
yes, you are right. 4 months is enough time. it can be done in a month also.

I just though that opening at a low time of the year when retailers are clearing out goods at cost ( Cashing-out ) is a bad time to compete with full price goods. You're in the middle of winter too.

Fine, so you have your start-up date.

What is your sales revenue projection for the first year ?
How much of a capital investment will you be making (owners equity) ?

.... i know, im not answering any of your questions yet. :)
Save
Like
G
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

T-BOT said:
yes, you are right. 4 months is enough time. it can be done in a month also.

I just though that opening at a low time of the year when retailers are clearing out goods at cost ( Cashing-out ) is a bad time to compete with full price goods. You're in the middle of winter too.

Fine, so you have your start-up date.

What is your sales revenue projection for the first year ?
How much of a capital investment will you be making ?

.... i know, im not answering any of your questions yet. :)
Click to expand...
Depends if I'm talking to a bank (which I won't need too) or a real person. :D

Without fluffing it, I figure I can sell somewhere in the neighborhood of 1000 shirts my first fiscal year (Jan. 1, 2007 - Jan. 1, 2008). But of course my idea doesn't rotate around a standard selling strategy either. Enthusiasts come into play here (think Clubs, etc.). Actual revenue, well, I really think a $14.99 price point would be much more effective than a $19.99 price point with my market (16-30 or so), but this depends on how I take it. But I'm willing to bet I could sell 2x as many shirts at $15, than $20. Young adults are poor, I know how it is (I'm almost 22 myself, college, insurance, etc. is expensive).

Capital investment is sketchy at the moment as much of the cost is or can be associated with the legalities. So anywhere from $2000 - $3000. This also depends on whether or not I'm gonig to be doing my own plastisol transfers. Which oddly enough is looking more and more attractive at the moment. I'd rather have a heat press to show for it, then simply preprinted shirts, but maybe that's a personal thing. :)
See less See more
Save
Like
T
...you are moving to fast for me.

Projected sales for 1 year = 1000 shirts x $15/shirt = $ 15,000

you know that to make a living in retail you need to bring in at least $ 100,000 for the year. Take home $ 20k to $ 50k.

Does that sound right ? (more or less).
Save
Like
G
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

T-BOT said:
...you are moving to fast for me.

Projected sales for 1 year = 1000 shirts x $15/shirt = $ 15,000

you know that to make a living in retail you need to bring in at least $ 100,000 for the year. Take home $ 20k to $ 50k.

Does that sound right ? (more or less).
Click to expand...
Oh, I'm not trying to make a living, I'm doing something I enjoy, something I'm interested in. If I'm able to make it big time (and I'll plan as if I will either way of course), fantastic. As long as it's an enjoyable experience I'll be happy. I wish I could be a little more open with the subject, but its big factor in its sucess in the moment.

From what I can gather, and approximate my own costs, somewhere around 30-40% take home would be right. Of course this can vary greatly, but for this scenario it'll work.
Save
Like
T
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

error426 said:
I wish I could be a little more open with the subject, but its big factor in its sucess in the moment.
Click to expand...
no need to open up, we are simply talking numbers at the moment.

Ok, to increase your projection of $ 15,000 in sales to $ 100,000 in order to earn a retail living, its not hard to do.

One way, is to do ADD-ON-SALES to your original projection of 1000 shirt sales @ $15/ea. for the year.

so, for every shirt you sell, you need to add-on sales. In other words, your average sale $ amount need to increase to meet the year end projection of $ 100,000.

sorry for not answering any of your questions yet about legalities etc,. but i think that it is important to have a look at the numbers before you go forward with all the business set up stuff.

Do you agree ?
See less See more
Save
Like
G
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

Are you referring to increasing the average amount spent per purchase? Meaning, instead of pushing for 1 shirt, have an incentive such as savings on combined shipping, and push for 2 shirts? Or increasing the turnover ratio (click through ratio... it has a proper name I can't remember it)? Or increasing the amount of purchases a customer or potential customer might make by using a selling / promotion strategy? Or all of the above?

Hey, personally I'd love to do $100,000 in a year. But that would be 6667 shirts... 19 shirts a day. Possible? Certainly, I believe my target market could support it. Realistic, maybe not. Either way though, planning as if you're going to sell that many is the best approach... right?

Sadly I have to hit the sack (I work at 5am), if everything pans out I won't have to continue to do these early mornings while in school. Here's to hopnig! :D

P.S. - Thanks for the replies / conversation thus far, I'll check back tomorrow afternoon when I get home.
See less See more
Save
Like
T
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

error426 said:
Hey, personally I'd love to do $100,000 in a year. But that would be 6667 shirts... 19 shirts a day. Possible?
Click to expand...
yes.

...and that is the target sales you need to aim at.

To earn a living at retailing t-shirts anyways.

yeah, chill-out time.
Save
Like
binki
My answers are for California but it should be similar there.

1. STATE LEGALITIES
- Business Fictitious Name... where can I obtain this? How much? What does it provide me with / do?
A: Register with your county, place classified ad in local paper for 4 weeks. If no one objects to your fictitious business name, it is yours. This is referred to as a DBA or Doing Business As. You will need this to open a bank account in your business name.

- Business License... Required? Where can I obtain this? How much? What does it provide me with / do?
A: Check with your city or other local government on the rules for this. If they say it is required it is required. It is a tax, nothing more.

- State Tax ID... Required? Where can I obtain this? How much? What does it provide me with / do?
A: Only if you have employees (In California) There is also a business registration if you incorporate or form an LLC or LLP.

- Seller's Permit... Required? Where can I obtain this? How much? What does it provide me with / do?
A: Allows you to purchase items that you will resell in your business without paying sales tax. This will go for any consumable or other item that will be part of your product. You vendors may require this to not charge you sales taxes on your purchases.
- Anything else I'm forgetting about? Please advise me!

2. FEDERAL LEGALITIES
- Federal Tax ID... Required? Where can I obtain this? How much? What does it provide me with / do?
A: This is free. You can apply online or over the phone, check out http://www.irs.gov/taxtopics/tc755.html for details. Use this number with your business, you probably don't need it if you only file a DBA and you will need it if you form a corporation or LLC.

3. ACCOUNTING / TAXES
- Any special treatment? If I'm not incorporated, and not required to file State or Federal Tax ID's, what changes? Is filing any different (can I still use Turbo Tax is the question :p)? Can I still deduct / expense business purchases? Is there a limit to such deductions? Any benefits or negatives? Higher / lower taxes?
A: Find a CPA and talk with him. A lot of them will talk to you for free the first time and even if you have to pay for an hour it is well worth your time.

- Recording Finances? Is Excel okay? How difficult does this have to be? Though I'm not sure whether it's soley for my own use or not yet, how complicated? A balance sheet, cash flow, and specific asset(s) sheet, anything else?
A: The more detailed and organized you are the better off you will be.

- Seperate bank account / checking necessary? What kind of records do I have to be sure to keep? Any important do's or don'ts?
A: If it walks like a duck and talks like a duck, it's a duck. Mixing personal and business transactions will get you into hot water in an audit by any taxing authority and can possibly create personal liabilities. Keep your business finances separate from your personal ones. Check out your local credit unions for bank accounts. They are free or less expensive than consumer banks for business accounts. Ours is free while the consumer banks charge all kinds of fees including monthly fees, transaction fees, balance fees, talking to them fees, you get the point.

- PayPal? I'll be using them as my merchant. Will they send my records to the state / federal agencies. Is this something to be careful of? Will I get audited / taxed for this extra income?
A: Check under your bed for monsters too.

4. EVERYTHING ELSE
- Someone else or myself? I'm juggling between using a screen printing company (such as CustomInk.com) or buying my own equipment. If I went with my own equipment, is there a certain route that would be <$1000? Limitations / advantages?
A: I can't imaging purchasing everything you need for under $1K. We used vendors for our first 2 years and just purchased the equipment this year. It was more that $1K by a lot.


- Protecting creative work. What protection do I have? If someone steals a design that is obviously mine (and chances are it will be obvious, because this will be a pretty clean cut niche market), do I have recourse?
A: File a copyright on your work. Get a lawyer and be aggressive with the thieves.

- Protecting my brands identity, such as logo, name, and branding. Similiar to above, if someone attempts to use my identity, do I have any recourse?
A: Trademark your marks and the filing of your DBA will help protect you.

- Contracts for designer, artists, and contributers. I've seen various links floating around. Would I be okay to compile what I see fit and write them out in plain english? Are contracts signed and transmitted by fax true legal documents? Do they need to be certified, stamped, or oversaw by a third party?
A: Get an lawyer. No sense in signing something that you don't understand or don't know you don't understand until it is too late.

- Lastly, incorporate or not? Since I'm essentially testing the waters, wouldn't it be much cheaper to not incorporate / not have to pay federal and state taxes? Can I incorporate 1.5 years down the road if I feel it's necessary?
A: Incorporating or not, you will have tax liabilities. The cost to incorporate is the same now or then except for conversion of your DBA to a corporate form. See a CPA who can advise you on the best form of company before you start. Check out taxguru.net, there is a lot of good stuff there.


Good Luck
See less See more
Save
Like
T
Very good Binki. :)

From your professional opinion, what would be the things a New To Be Part Time t-shirt business who's sale revenue projection for the year around $ 15,000, what do you recommend as the basic required do's to keep the start-up cost as low as possible ?


Also, would it be ok for the first year to show the income with your personal income ?
Save
Like
binki
From your professional opinion, what would be the things a New To Be Part Time t-shirt business who's sale revenue projection for the year around $ 15,000, what do you recommend as the basic required do's to keep the start-up cost as low as possible ?
We started up with virtually no cost by using a local screen printer to print and embroider our orders. He has low minimums, in some cases he will do 1 item and we printed some samples and took those to places we wanted to sell and picked up business that way. After a couple of years of that we spent about $20,000 on equipment/supplies/setup to cut out the middle man.


Also, would it be ok for the first year to show the income with your personal income ?

Hmm, you shouldn't mix personal and business funds or accounting. It has nothing to do with where the income finally ends up on a tax form.
See less See more
Save
Like
  • Like
Reactions: 1
Twinge
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

error426 said:
Hey, personally I'd love to do $100,000 in a year. But that would be 6667 shirts... 19 shirts a day. Possible? Certainly, I believe my target market could support it. Realistic, maybe not.
Click to expand...
Not really realistic, no - especially when it's your first year you're talking about. It takes time to build up a business. An agressive advertising campaign could theoretically pull it off, but especially when you're looking at doing this more part-time (from the sound of it) at first anyway, your goal of 1,000 is probably a good one (reasonable, not too high, but high enough that you'll have to be doing at least fairly well).

The 100k mark seems high to me anyway; I think I could live comfortably off about $40k gross income/year from ~2500 shirts. Of course, everyone's individual wage-for-living will vary - depending on family, location, lifestyle, etc.

error426+binki said:
- Someone else or myself? I'm juggling between using a screen printing company (such as CustomInk.com) or buying my own equipment. If I went with my own equipment, is there a certain route that would be <$1000? Limitations / advantages?
A: I can't imaging purchasing everything you need for under $1K. We used vendors for our first 2 years and just purchased the equipment this year. It was more that $1K by a lot.
Click to expand...
1K is probably a bit low, but it could be enough depending on what you get. If you can find a decent used heat press locally, you could likely buy a large one for under $500. $150 for some plastisol orders, $150 for blank shirts, $200 for advertising/misc expenses... and you've got a reasonable start-up for $1k. Alternatively, you could get a printer + inks + transfer paper instead of plastisol.

If you want to get a new press, it'll probably cost $1k-$1.5k by itself, but buying a used press does incur certain risks of course.
See less See more
Save
Like
G
Thanks for the responses guys, I appreciate it.

I guess I'm really still juggling incorporating or not -- based on the subject / grey area of the market I'll be entering.

When I threw out the $1000, I meant just for a heatpress and any other little goodies that go with it. No inventory, or plastisols or anything like that.
Save
Like
3leches
This is a great topic. Thanks for all the answers, and thanks to Error, for asking the questions :)
Save
Like
P
yUP, really great topic, helpul for everyone. pretty good questions & answers... hello to everyone by the way :)
Save
Like
monkeylantern
Re: Beyond the basics, legalities and various accounting principals. VERSION: I'm stu

Twinge said:
Not really realistic, no - especially when it's your first year you're talking about.
Click to expand...

Although there are dozens and dozens of eBay stores that sell over 6667 shirts a year (and quadruple that), and are little over a year old. Not that I'd recommend eBay in the current climate, but large bucks isn't entirely pipe-dreaming (especially if you branch into wholesale).
Save
Like
1 - 20 of 23 Posts
Status
Not open for further replies.
T-Shirt Forums
A forum community dedicated to T-shirt merchants, professionals and enthusiasts. Come join the discussion about graphics, commerce, dyes, prints, collections, guides, displays, styles, scales, equipment, accessories, reviews, classifieds, and more!
Full Forum Listing
Explore Our Forums
Screen Printing General T-Shirt Selling Discussion Graphics and Design Help Member Introductions Heat Press and Heat Transfers
Top