10 votes

I'm starting a small business: any advice?

Posted by doors_cannot_stop_me
Tags: business.small, ask.advice, finance.personal, work, jobs

Hi all! I'm starting a (very) small business in the near future, and I am looking for some advice (or just encouragement or reality checks, anything helps). For clarity, I'm in the US and want to make/sell products of my own design without screwing myself over through lack of planning.

More details for those who want them

I've come up with a primary product idea, and the first prototypes have been made and are being tested by trusted friends in my industry. I work for a company who is willing to buy the finished product from me and market/sell it as a distributor, and there is already precedent for employees having exactly this relationship with my employer, where they make things "off the clock" and sell them to the company for distribution.

My main concerns are:

  1. Liability - I don't want to get sued and lose my house. I plan to make my business an LLC to help with this.
  2. Privacy - I would rather not have my personal address out there for anyone to find if they decide they don't like my product. I've heard that paying a company to be my registered agent can help with this, but I don't know how easy/safe/expensive this is.
  3. Financial sustainability - I don't want to lock myself into really expensive overhead issues by having other companies handle administrative tasks (like getting my tax ID and filing my LLC application) that are easy enough for me to do myself, however -
  4. Time investment sustainability - I don't want to spend so much time chasing down paperwork issues that I come to hate/not have time for making my products.
  5. Keeping options open - I'm not sure at this stage if I will end up continuing to make these products myself long-term, or if I will eventually try to sell the product design to a third party. I already have a third party in mind, and I think I have a good chance of getting them on board if I choose to. I've assumed that I'll need to patent my product to have even a chance of selling the idea later, but -
  6. Patents - they're expensive! Or so I've heard. Is it really that bad, and do I have to deal with a lawyer? Are there lower cost resources that won't end up stealing my idea or giving me a pittance in exchange for it? I'm new and dumb and exactly the kind of first-timer that I can imagine getting a lump-sum that feels very high, only to find that I undervalued my product. Or, on the other hand, I could over-value the idea to the point that I foolishly turn down a good offer and never get it sold.

I also plan to make additional products that don't pertain to my industry in the same way, which I might sell on etsy or something. I've done this a bit before, and it went just fine. This is just the first time that I've had the potential to make enough money to matter for tax purposes, and the first time that I'm selling a tool that costs enough and could be distributed widely enough for there to be an increased chance of someone becoming upset if they break something with it and try to sue me or some such nonsense.

Has anyone here ever tried to start a small business like this? Or interacted with the US patent system?

Any advice or anecdotes are welcome!

2 comments

  1. Zorind
    Link
    This is definitely a good plan, might be worth checking with a CPA to determine how taxes would work since I think rules surrounding LLCs are state-dependent.

    I plan to make my business an LLC to help with this.

    This is definitely a good plan, might be worth checking with a CPA to determine how taxes would work since I think rules surrounding LLCs are state-dependent.

    3 votes
  2. crialpaca
    Link
    I'm in the process of starting a small business! I'm planning to do set up in January. I used to work for an attorney who did business formation, so I'm somewhat familiar with the process. Here's...

    I'm in the process of starting a small business! I'm planning to do set up in January. I used to work for an attorney who did business formation, so I'm somewhat familiar with the process. Here's my list of stuff to do:

    1. Line up any vendors I need so I can spend money on them after LLC formation. Includes CPA, graphic designer, manufacturers, web stuff. Set up email address to receive confirmations for everything below. My pre-formation work includes doing small time testing of some stuff that I'm just going to eat as a personal cost. This includes formulating per-product costs to determine financial and time feasibility. It's not worth pulling the trigger if the per-product cost is too high for a customer to contemplate paying. (I know how much I'd be willing to pay and I'm going to need to keep it under that.)
    2. LLC formation. My advice here is that it's crucial to have an operating agreement, as that will be an important document that outlines what needs to happen in various situations.
    3. Business licenses for my state and city.
    4. Business bank account(s).
    5. Business insurance. For me this will include specific stuff related to making my products and liability for them (cosmetics).
    6. EIN - will discuss with my CPA if I need one. It varies depending on your business structure.
    7. Figure out when I need to file taxes/estimated taxes.
    8. Buy all the supplies I need. Keep receipts obviously. Talk with CPA about start up costs and how those factor into taxes BEFORE filing your LLC.
    9. Set up website and whatever. Social media etc.
    10. Put products together.
    11. Scream and hit the launch button.
      The good news is that most of these are renewable yearly or you only need to do them once, so you can hopefully focus on making your stuff and getting it out the door! I suggest learning about shipping well in advance.