coach
Member
How many of you have a tax number? If this thing keeps taking off I think I will have to. 2 questions: Is it hard to get? Can you get supplies at wholesale costs?
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Tax ID
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jrc
Member
Call your state tax office and yes.
JimGo
Member
Not hard to get at all. Not sure about the wholesale; I'll take JRC's word for it! BUT, remember, a lot of wholesale pricing is based on volume; as long as you're turning enough, then you're in good shape unless you are going to start selling the supplies too.
Coach--you already have a tax ID. It's your social security number. If what you are looking for is a business tax ID, you should get the information you need by starting here - http://www.txed.state.tx.us/SmallBusiness/ .
As for wholesale discounts, that varies by supplier. It usually involves contracts and volume purchasing. One other thing to count on is sales tax issues. Most states will require that you collect and remit sales taxes on your home-based business. Some suppliers will exempt you from paying sales tax if the products you purchase are for re-sale. Each state has different regulations on this.
Again, there are a number of complexities as your business grows. Your local SBA office and the online services can point you in the right direction.
Also, in answer to your first question, I have tax ID's for all of my businesses. I'm also incorporated as I do not want any potential business liability turning into personal liability.
As for wholesale discounts, that varies by supplier. It usually involves contracts and volume purchasing. One other thing to count on is sales tax issues. Most states will require that you collect and remit sales taxes on your home-based business. Some suppliers will exempt you from paying sales tax if the products you purchase are for re-sale. Each state has different regulations on this.
Again, there are a number of complexities as your business grows. Your local SBA office and the online services can point you in the right direction.
Also, in answer to your first question, I have tax ID's for all of my businesses. I'm also incorporated as I do not want any potential business liability turning into personal liability.
JimGo
Member
To follow up with Lou's suggestions, you might look into other limited liability entity types, like LLC's. There are several tax advantages, the courts are usually more lenient about corporate formalities, and there are typically other advantages to them over corporations for small businesses. I don't know Texas law, nor do I know your situation, so I'm not intending this as advice to actually go form an LLC rather than a corporation, but its something to look into. May be worth taking an attorney or accountant friend out to lunch or dinner to discuss in more detail.
coach
Member
Thanks for the replys!
Could y'all elaborate on the liability stuff? What kind of liability are you speaking of? Am I in danger now?
I have sold some pens to friends at work and people I know for birthdays etc... I have been invited to participate in a hand craft show that sells high end stuff. Could I see some problems there just selling without an actual buisiness?
Could y'all elaborate on the liability stuff? What kind of liability are you speaking of? Am I in danger now?
I have sold some pens to friends at work and people I know for birthdays etc... I have been invited to participate in a hand craft show that sells high end stuff. Could I see some problems there just selling without an actual buisiness?
One concern for me would be a faulty pen might leak and ruin a suit coat. There could also be issues if you accept a large job and are unable to fulfill it. This is a litigious society, unfortunately. There's always one person out there who wants to put their hand in your pocket.
Gary
Member
Originally posted by DCBluesman
<br />Coach--you already have a tax ID. It's your social security number. If what you are looking for is a business tax ID, you should get the information you need by starting here - http://www.txed.state.tx.us/SmallBusiness/ .
As for wholesale discounts, that varies by supplier. It usually involves contracts and volume purchasing. One other thing to count on is sales tax issues. Most states will require that you collect and remit sales taxes on your home-based business. Some suppliers will exempt you from paying sales tax if the products you purchase are for re-sale. Each state has different regulations on this.
Again, there are a number of complexities as your business grows. Your local SBA office and the online services can point you in the right direction.
Also, in answer to your first question, I have tax ID's for all of my businesses. I'm also incorporated as I do not want any potential business liability turning into personal liability.
Incorporating will not prevent "business liabilities from becoming personal liabilities." (Been there done that) The courts will say that if you are a corporation of one, then you are making the decisions, and you can't hide behing the corporate shield. In fact, that applies to small corporations as well, where the decisions are being made by the owners of the corporation. If the corporation is publiclly-owned with an outside board of directors, then that's another matter.
The local SBA is a good place to start, as Lou pointed out.
wayneis
Member
You can't hide behind an LLC either.
JimGo
Member
Gary,
Actually, whether the courts will "pierce the corporate veil" varies with the situation. There are things you can do to prevent the corporpation from being your "alter ego", and where these are done, the courts generally will not "pierce the corporate veil" and allow the corporation's creditors to attach to you personally. This is why, even though it costs money, it is often advantageous to spend an hour or two with an attorney or accountant to make sure things are structured and operated properly.
The problem with traditional corporations, especially for small businesses, is that the statutes require a lot of formalities with such entities, and the courts have been quick to jump on the fact that people are not observing these formalities when the decide the "alter ego" issue. By contrast, the statutes that govern the creation and operation of an LLC or some of the other, newer entity types (PLLC, LLP, LLLP, etc.) are generally much more lenient, and the courts are also more lenient with these entity types. From what I've seen, the big thing to keep in mind is that you and the corporation, LLC, etc., are not the same, and to always maintain a "chinese wall" between you. For example, where people start paying the company's bills directly out of their own pockets, or vice-versa, that's where people have gotten into trouble. The corporation case books that they use in law school have some very good, pretty easy to read and understand cases on these issues if you REALLY want to understand the underlying law (I'd be happy to E-mail anyone the name of the case book we used in my classes). Otherwise, again, if you are concerned enough about the liability, it is probably worth talking to an attorney; think of it as an insurance policy (oh, liability insurance is another way to insulate yourself, too).
FWIW, I hope to get better at my pen making and bowl/box/etc. making, and intend to start my own LLC in a few months just to help insulate myself from liability, because I agree with Lou, we live in a very litigious society. As Gary correctly pointed out, an LLC or corporation isn't an absolute guarantee that I'll be insulated, but for my specific situation, it is better than the direct personal liability associated with a sole proprietorship. And as both Gary and Lou pointed out, the local SBA is a great place to get more information. I know several very seasoned attorneys who volunteer time with our local SBA's to help small business owners get the kind of personalized advice they need to properly address precisely these kinds of issues.
I want to stress that these are just my personal observations and opinions, and are not intended as legal advice for any specific individual, because each person will have different factors impacting the decisions they have to make. Plus each state has slightly different corporation and limited liability entity (i.e. LLP, LLC, etc.) laws, and I am NOT familiar with the subtelties of each state. Sorry, but I have to stress that for two reasons: 1) the VA bar is VERY strict about how and whether attorneys (or those resembling attorneys) can give advice, and 2) although I've recently graduated from law school, I am not licensed to practice in ANY state (so you REALLY want to talk to a professional, rather than rely on my opinions!). Good luck with whatever you decide to do, and may you never have to even deal with the liability issue in the first place!
Actually, whether the courts will "pierce the corporate veil" varies with the situation. There are things you can do to prevent the corporpation from being your "alter ego", and where these are done, the courts generally will not "pierce the corporate veil" and allow the corporation's creditors to attach to you personally. This is why, even though it costs money, it is often advantageous to spend an hour or two with an attorney or accountant to make sure things are structured and operated properly.
The problem with traditional corporations, especially for small businesses, is that the statutes require a lot of formalities with such entities, and the courts have been quick to jump on the fact that people are not observing these formalities when the decide the "alter ego" issue. By contrast, the statutes that govern the creation and operation of an LLC or some of the other, newer entity types (PLLC, LLP, LLLP, etc.) are generally much more lenient, and the courts are also more lenient with these entity types. From what I've seen, the big thing to keep in mind is that you and the corporation, LLC, etc., are not the same, and to always maintain a "chinese wall" between you. For example, where people start paying the company's bills directly out of their own pockets, or vice-versa, that's where people have gotten into trouble. The corporation case books that they use in law school have some very good, pretty easy to read and understand cases on these issues if you REALLY want to understand the underlying law (I'd be happy to E-mail anyone the name of the case book we used in my classes). Otherwise, again, if you are concerned enough about the liability, it is probably worth talking to an attorney; think of it as an insurance policy (oh, liability insurance is another way to insulate yourself, too).
FWIW, I hope to get better at my pen making and bowl/box/etc. making, and intend to start my own LLC in a few months just to help insulate myself from liability, because I agree with Lou, we live in a very litigious society. As Gary correctly pointed out, an LLC or corporation isn't an absolute guarantee that I'll be insulated, but for my specific situation, it is better than the direct personal liability associated with a sole proprietorship. And as both Gary and Lou pointed out, the local SBA is a great place to get more information. I know several very seasoned attorneys who volunteer time with our local SBA's to help small business owners get the kind of personalized advice they need to properly address precisely these kinds of issues.
I want to stress that these are just my personal observations and opinions, and are not intended as legal advice for any specific individual, because each person will have different factors impacting the decisions they have to make. Plus each state has slightly different corporation and limited liability entity (i.e. LLP, LLC, etc.) laws, and I am NOT familiar with the subtelties of each state. Sorry, but I have to stress that for two reasons: 1) the VA bar is VERY strict about how and whether attorneys (or those resembling attorneys) can give advice, and 2) although I've recently graduated from law school, I am not licensed to practice in ANY state (so you REALLY want to talk to a professional, rather than rely on my opinions!). Good luck with whatever you decide to do, and may you never have to even deal with the liability issue in the first place!
Gary
Member
"although I've recently graduated from law school, I am not licensed to practice in ANY state"
You should take a look at my settlement papers...the generalizations you are making are wrong, at least in the state of Texas.
Oh, good luck in your law career, Jimgo.
You should take a look at my settlement papers...the generalizations you are making are wrong, at least in the state of Texas.
Oh, good luck in your law career, Jimgo.
Gary
Member
Originally posted by DCBluesman
<br />Gary--I think Jim gave plenty of disclaimers in his thorough response. Three of my four businesses are incorporated in Delaware and for this reason, taken directly from the State of Delaware's website.I'm sure that incorporating in other states is not as protective, but Delaware has done well for me for 10 years.Business entities that incorporate as Delaware corporations and LLCs are entitled to the advantages of asset protection. This means company's assets or company debts are separated from your personal assets.
Ok...that's fine. Whatever floats your boat, Lou.
jdavis
Member
Check your state comptroller for tax exempt. They have all the laws.
Each state handles this differently.
Each state handles this differently.
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