How do you start a business?

My wife is unhappy with the politics of her job, and has decided she wants to go off and do it on her own.

The idea for now is that we will work to get it set up, then for the first few weeks/months/years it will be nights and weekends only; in a perfect world she would go part time at her current position and full time with the company after we have a baby (1-4 years away).

We've started to write a business plan, and would appreciate any insight and advice as far as advertising, how to figure out how much to charge, how to pay/write things off, etc.

Some background facts:

• we can do fine on my salary alone. Eating Rice and beans every night, but fine
• the business would be, in short, dietetic and nutritional services.
• she's identified a few services that are specifically underserved in the market
• there would be no office, it would be all house calls/office calls/meeting at a coffee shop or grocery store.
• we want to know what we can and cannot write off.
• there would be minimal startup costs. I'm figuring about $2k for a computer/printer/presentation materials, $1k for legal incorporation fees, and $2k for initial advertising.

Any thoughts? Advice? Words of warning?

IMHO, you should see if there are any classes offered by a local community college or something like that.

I know the messages that you will get here are going to be great- but having some local contacts will be invaluable. And they would help direct what kind of business to form. My wife did that, and had a company for about a year as a side job. Didn't last, as her real work got better. But she learned a lot in the class.

alfadriver wrote: IMHO, you should see if there are any classes offered by a local community college or something like that. I know the messages that you will get here are going to be great- but having some local contacts will be invaluable. And they would help direct what kind of business to form. My wife did that, and had a company for about a year as a side job. Didn't last, as her real work got better. But she learned a lot in the class.

We will check. Already been on sba.gov quite a bit.

following

What does she do now? Would the new business be doing essentially the same work? Is there a potential non-compete or conflict of interest when dealing with getting clients?

For example, I work for a consulting (architectural) engineering firm. Moonlighting and taking side jobs is generally frowned upon, but it's a big industry and my company focuses mainly on pharmaceutical work. As long as the side projects are more in the retail or residential areas (and kept discreet), then we are generally allowed.

Combo of no no-compete, and the things that she would be doing are the things her current hospital has cut.

That and people who aren't covered by insurance.

Starting a business as a side job is not too difficult. Starting a successful business as a side job is almost impossible. You're either self employed or you're not, anything else is a hobby.

You can't write off much unless it's a full time effort, the IRS sees it as a hobby, not a business, unless it's closer to a full time gig.

Everyone is good at the thing they want to do - the deliverable part - but managing the office, scheduling, invoicing, record keeping, doing the math, prepping the quarterlies and so on is where the money is won or lost. Talk to an accountant during setup or a year from now you will be thrashing around without the right stuff at hand.

First thing to do is go to your town/city hall and find out what you can legally do in a residence, licenses required, permit fees, city/state taxes, etc. There are old laws still on the books in many places with stipulations that require weird things you wouldn't think apply like posting legal notices in newspapers or a dedicated land line phone line before you can apply for the legal "trade name". The folks at the city services will bring you up to speed on whats current in your city county etc.

Do not start random internet searching names you want to use for the company by googling them. Every time I've done this in the past several years the companies like Go Daddy somehow seem to know and lock up that name. Then when you try to buy the WWW name they try to sell you a service to help you buy the name because it's locked up already for an additional $XX.XX for the service. I like namecheap.com to purchase web addresses and have used them about 10 years for various businesses I set up with no problems.

NOT A TA wrote: First thing to do is go to your town/city hall and find out what you can legally do in a residence, licenses required, permit fees, city/state taxes, etc. There are old laws still on the books in many places with stipulations that require weird things you wouldn't think apply like posting legal notices in newspapers or a dedicated land line phone line before you can apply for the legal "trade name". The folks at the city services will bring you up to speed on whats current in your city county etc. Do not start random internet searching names you want to use for the company by googling them. Every time I've done this in the past several years the companies like Go Daddy somehow seem to know and lock up that name. Then when you try to buy the WWW name they try to sell you a service to help you buy the name because it's locked up already for an additional $XX.XX for the service. I like namecheap.com to purchase web addresses and have used them about 10 years for various businesses I set up with no problems.

Ok, so for right now the first step might be purchasing (not searching, but purchasing) a few domains until we figure out what we want?

Datsun1500 wrote: Starting a business as a side job is not too difficult. Starting a successful business as a side job is almost impossible. You're either self employed or you're not, anything else is a hobby. You can't write off much unless it's a full time effort, the IRS sees it as a hobby, not a business, unless it's closer to a full time gig.

I thought the hobby part of it came when you had 3 years of not showing any profit after writing off expenses, and had another full time job?

In reply to mtn:

There's not really a written timeline as far as the IRS is concerned, the 3 year no profit is just a guideline people like to throw out. There are specific rules as in, are you devoting enough time to the business? Do you depend on the income?

In your case, weekends and not needing the money leans towards hobby.

NOT A TA wrote: First thing to do is go to your town/city hall and find out what you can legally do in a residence, licenses required, permit fees, city/state taxes, etc. There are old laws still on the books in many places with stipulations that require weird things you wouldn't think apply like posting legal notices in newspapers or a dedicated land line phone line before you can apply for the legal "trade name". The folks at the city services will bring you up to speed on whats current in your city county etc.

To add to this- check your home owners insurance, too. We had to change companies, as our original did not cover the home being used partly as a business. I forgot about that part.

Good news on that front, my in laws run a business out of their house that is 5 blocks away. They have the same insurance agency as us. We will check for sure though.

(And yes, we've been talking with my FIL about his experiences)

Datsun1500 wrote: In reply to mtn: There's not really a written timeline as far as the IRS is concerned, the 3 year no profit is just a guideline people like to throw out. There are specific rules as in, are you devoting enough time to the business? Do you depend on the income? In your case, weekends and not needing the money leans towards hobby.

I don't think that's quite right... but i will look into it. I need to, because if that is the case I may have been filing my taxes wrong for awhile.

(I have a side job as an independent contractor; it's never been hobby income when done by a CPA or turbotax)

mtn wrote:

NOT A TA wrote: First thing to do is go to your town/city hall and find out what you can legally do in a residence, licenses required, permit fees, city/state taxes, etc. There are old laws still on the books in many places with stipulations that require weird things you wouldn't think apply like posting legal notices in newspapers or a dedicated land line phone line before you can apply for the legal "trade name". The folks at the city services will bring you up to speed on whats current in your city county etc. Do not start random internet searching names you want to use for the company by googling them. Every time I've done this in the past several years the companies like Go Daddy somehow seem to know and lock up that name. Then when you try to buy the WWW name they try to sell you a service to help you buy the name because it's locked up already for an additional $XX.XX for the service. I like namecheap.com to purchase web addresses and have used them about 10 years for various businesses I set up with no problems.

Ok, so for right now the first step might be purchasing (not searching, but purchasing) a few domains until we figure out what we want?

Yes, buy the names you may want as well as misspellings or variations you may want to use as redirects. They're about 10 bucks each and you can drop ones you decide you don't need/want when they expire in a year. I currently have 17 domain names that cover 2 businesses. Try to make the company name short and easy to remember.

In reply to mtn:

Find a good accountant. Seriously. I know one in IL, though he's a couple hours south of you - that wouldn't matter much though since it could pretty much be handled through email/phone.

Huckleberry wrote: Everyone is good at the thing they want to do - the deliverable part - but managing the office, scheduling, invoicing, record keeping, doing the math, prepping the quarterlies and so on is where the money is won or lost. Talk to an accountant during setup or a year from now you will be thrashing around without the right stuff at hand.

This is excellent advice. I was shocked when I ran my engineering consulting business how much time running the business took.

As far as taxes are concerned pretty much everything that you legitimately spend in the course of running your business is deductible at one level or another. That includes the cost of an accountant and an attorney. As far as the hobby vs. business thing is concerned, that really only becomes an issue when you try and do something like amortize the cost of your new race car over several years because you're claiming that your racing is a business. If you're really trying to run a business you're likely to decide on your own that it's a bad idea before the IRS tells you it's a hobby.

In addition to finding out what your homeowners insurance thinks about your home based business you should at least investigate what professional liability is going to cost and cover and talk to an attorney about the best way to structure your business to minimize personal liability in her field.

mtn wrote: Good news on that front, my in laws run a business out of their house that is 5 blocks away. They have the same insurance agency as us. We will check for sure though. (And yes, we've been talking with my FIL about his experiences)

You probably won't have an issue getting coverage for the house as long as you don't have clients coming to the house. If by some chance you have a theft, fire etc. and try to claim the business computer, inventory, property through your homeowners insurance it will probably not be covered.

In reply to APEowner:

So true. My ex had a small business making and selling various things. She loved the making money part. Hated the bookkeeping and filing the quarterly forms (she had a sales tax number).

The irony was I totally love doing that sort of stuff - setting up spreadsheets and looking at trending numbers - but her control-freak nature would never allow her to give me that much information.

1. Find customers.
2. Then worry about setting up a company.

A lot of people go to a lot of effort and expense to end up with few/no customers. First find the customers and go from there.

I know the correct procedure, but here is the reality most often followed:

Jump in an swim like a motherberkeleyer and see if after 5 years you made any money and are still married to the same person and get to keep the house. Odds are you wont do well at your first enterprise. But I promise you will learn a lot of stuff that is important to know about being an entrepreneur.

The next time you will be a lot wiser and know what works for you.It is not easy, but it can be rewarding.

Robbie wrote: 1. Find customers. 2. Then worry about setting up a company. A lot of people go to a lot of effort and expense to end up with few/no customers. First find the customers and go from there.

Right. I had a buddy who started a business, but he more or less just took his dad's business and moved it 2 hours north. The reason he did so is because his dad was already taking business from that region, and it made sense for him to not only cover that area, but pursue additional clients there.

Despite relative growth of the business and customer base, they are hesitant to move into other states or other areas because they just don't know those markets.

Start as cheap as possible then add website, cards, etc once you've got the paying clientele.

Robbie wrote: 1. Find customers. 2. Then worry about setting up a company. A lot of people go to a lot of effort and expense to end up with few/no customers. First find the customers and go from there.

There's definitely truth to this, but you potentially miss out on a lot of tax breaks if you wait to officially start your business after the fact.

Even if you're only producing a few hundred per month in revenue, your tax breaks can far exceed that.

FlightService wrote: following

Following you, following him.