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      08-23-2010, 12:52 PM   #1
08rookie
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start up question...llc or sole prop?

i have a pretty simple business idea that i can do i manage in my spare time. i want to distribute a small publication and charge for ad space. i know i know never will work, dumbest idea ever bla bla...please advise if you can offer something constructive...please. maybe the wrong place to ask and if that is the case i apologize.

i have done research and start up cost are minimal. i have most of what is needed to get this off the ground. besides the motivation, i have designers to design the ads and layout the publication, i have the office space, i have a sales team, i have the relationship with a printing company suitable enough to print what i need, i have already contacted distribution points, and i have content. just curious as to the logistics of setting up the business...

i do have an ein number from years ago when i worked as an independent contractor. the ein number never really declared income before because i never used it. i just got the number because i was going to be heavily involved with a business that flopped. again that was some time ago. i still have the number....

in any event...i know there are differences between a sole prop and an llc but on the surface of the idea would i be able to start as sole prop then switch to an llc?? would that be pointless? should i just legal zoom a simple llc and go from there? im asking in terms of banking....after i get a llc formed, then i can open a business account with a bank, and after i open a business account i can get a merchant account that will allow me to accept credit cards...

thank you for reading
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      08-23-2010, 02:45 PM   #2
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Seek some advice from a good CPA... Stat. Preferably one that deals a lot with small businesses.

They can explain the benefits of either option based on your short term and then long term goals... For example: Is it something you are going to stay with for quite a while? Are you going to try to sell in a few years? Do you just want to be a share holder, but not technically operate the company (IE, sit on the beach and collect a check)?


Remember, it's not about how much you make... it's about how much you DON'T give to the government. Good tax planning is key to the success of any small business and your tax planning options start with the type of business filing you'll be doing.

Good luck.
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      08-23-2010, 06:02 PM   #3
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type s corp. Gives you protection and anti-double taxation benefits.
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      08-23-2010, 10:45 PM   #4
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you should talk to an accountant or someone in that field. The main difference between an LLC and sole prietorship is that LLC protects you from unlimited liability. It allows you to run things pretty much like a sole proprietorship. S corporations are a good choice as they are similar to an LLC. However, operating as a corporation requires a bit more work (to file and to run as a business). Basically if you think that you might get sued later then form an LLC. if it's a pretty safe business then a sole proprietorship is fine.
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      08-24-2010, 04:26 AM   #5
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Quote:
Originally Posted by 08rookie View Post
i have a pretty simple business idea that i can do i manage in my spare time. i want to distribute a small publication and charge for ad space. i know i know never will work, dumbest idea ever bla bla...please advise if you can offer something constructive...please. maybe the wrong place to ask and if that is the case i apologize.

i have done research and start up cost are minimal. i have most of what is needed to get this off the ground. besides the motivation
if you want to operate a business, you don't do it in your "spare time"...
It becomes your job and your spare time... especially at the beginning...

your chances of success depend on how much effort you are willing to put into it. If you don't even have the motivation for it now, then perhaps now is not the right time?

also start up cost minimal? I recall printing being very expensive, especially for a publication. Something like 60-70% of your cost if I recall correctly...

not trying to be a dick or discourage you, just waking you up to some points you should perhaps revise before proceeding..
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      08-24-2010, 07:10 AM   #6
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You need to get a business going first before deciding all of that,imo. Start a sole prop and then after business picks up start looking into which one will be better.
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      08-24-2010, 11:52 AM   #7
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Quote:
Originally Posted by Comet View Post
if you want to operate a business, you don't do it in your "spare time"...
It becomes your job and your spare time... especially at the beginning...

your chances of success depend on how much effort you are willing to put into it. If you don't even have the motivation for it now, then perhaps now is not the right time?

also start up cost minimal? I recall printing being very expensive, especially for a publication. Something like 60-70% of your cost if I recall correctly...

not trying to be a dick or discourage you, just waking you up to some points you should perhaps revise before proceeding..

i appreciate the concern. but the reality is a little different. i do have a family business that i run with my brother. the family business was around before i was born and now, 30 years later, the business kinda runs itself...we have flexible schedules and my spare time can be utilized more efficiently....

the term publication is used loosely. there are magazines, bulletins, catalogs, newsletters, newspapers...just to name a few. im sure a full page glossy magazine similar to something you see at barnes and noble require significant start up cost...however thats not my initial agenda. most publications generate revenue from ad space...the advertisers who pay to be in the publication will cover production costs...

and with skype and voip technology i can spend an entire month on the phone with california (im in nj) for around 4 bucks a month! so when i say start up cost are minimal i mean that initial out of pocket expenses are less then other types of ventures.


i already have the sales team, art director, distribution points, office space, relationship with a printer whose printing company spans an entire city block...just need some advice on how to structure the business. pros and cons of sole prop or llc. since it is relatively easy to make the transition from sole prop to llc then i may start as sole prop until the revenue bubbles....
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      08-24-2010, 11:58 AM   #8
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Originally Posted by BMW E90 View Post
you should talk to an accountant or someone in that field. The main difference between an LLC and sole prietorship is that LLC protects you from unlimited liability. It allows you to run things pretty much like a sole proprietorship. S corporations are a good choice as they are similar to an LLC. However, operating as a corporation requires a bit more work (to file and to run as a business). Basically if you think that you might get sued later then form an LLC. if it's a pretty safe business then a sole proprietorship is fine.
i spoke to a cpa....

over the course of the discussion i was explained, in terms of legal situations, the business structure is only as good as the insurance that covers the business....there are financial advantages (and disadvantages) on business structure depending on factors...(number of employees, estimated revenue etc) but whether you are an llc or sole prop or corp, your business insurance will cover you butt in a lawsuit more so then that actually structure....
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      08-25-2010, 02:57 AM   #9
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Quote:
Originally Posted by 08rookie View Post
most publications generate revenue from ad space...the advertisers who pay to be in the publication will cover production costs...
most advertisers want to see distribution numbers before purchasing ad space.
demographics being targeted and actually caught.. be also prepared to support the company without any profits or even revenue for at least 3-4 months...
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      08-25-2010, 07:41 AM   #10
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My ex girlfriend was ready to start a publication with a girlfriend of hers. My ex graduated with a degree in marketing and had the idea to make a magazine which targets college students/ 18-25 year olds in south florida and take pictures of them at popular hot spots. And have articles about local businesses and fashion, etc. They did a test run (which cost a fucking fortune, btw). Turned out to be very popular, at first. When push came to shove, when they needed to start actual production, it would have required them to put up at least $250,000.00.

This is not a school newspaper you are printing on piece of shit paper, and people are not working on it for free. You need to actually pay people to work on it. If you want to do it yourself, well don't plan on doing anything more than an annual or bi-annual publication because the work involved is ridiculous. Previously noted, the idea that you will just find people to advertise in your publication is absurd. Do a little search on how many publications have went out of business over the last 3 years. Major newspapers can't stay in business.

The first thing cut by businesses after the financial collapse was....... You guessed it! Advertising.

I will say one thing.. I am in paper recycling and this whole move away from paper may be great for the environment (i guess..), but not good for my business. So from the bottom of my heart, thank you for wasting paper.
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      08-25-2010, 10:59 AM   #11
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I wouldn't even look into an S-Corp or LLC if you aren't clearing at least $50,000.
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      08-25-2010, 11:55 AM   #12
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Quote:
Originally Posted by NYCGarbagePrince View Post
My ex girlfriend was ready to start a publication with a girlfriend of hers. My ex graduated with a degree in marketing and had the idea to make a magazine which targets college students/ 18-25 year olds in south florida and take pictures of them at popular hot spots. And have articles about local businesses and fashion, etc. They did a test run (which cost a fucking fortune, btw). Turned out to be very popular, at first. When push came to shove, when they needed to start actual production, it would have required them to put up at least $250,000.00.

This is not a school newspaper you are printing on piece of shit paper, and people are not working on it for free. You need to actually pay people to work on it. If you want to do it yourself, well don't plan on doing anything more than an annual or bi-annual publication because the work involved is ridiculous. Previously noted, the idea that you will just find people to advertise in your publication is absurd. Do a little search on how many publications have went out of business over the last 3 years. Major newspapers can't stay in business.

The first thing cut by businesses after the financial collapse was....... You guessed it! Advertising.

I will say one thing.. I am in paper recycling and this whole move away from paper may be great for the environment (i guess..), but not good for my business. So from the bottom of my heart, thank you for wasting paper.

i will help your business strive by throwing my paper away in the recycling bin at work and at home instead of the trash bin
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      08-25-2010, 01:43 PM   #13
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Quote:
Originally Posted by NYCGarbagePrince View Post
Previously noted, the idea that you will just find people to advertise in your publication is absurd.
hard, yes. difficult, yes. absurd, absolutely not. the reason i say the idea is absolutely not absurd is because i have witnessed it work and even have been a part of the sales force in the past. the business didnt flop just relocated and i couldnt take part of the relocation. (two brothers started the mag and ended up fighting all the time) they were high school friends of mine....i gave it a whirl and made a couple phone calls and guess what? i sold over 3k worth of ad space in one week. i was on the phone about 5 hours a day, i made about 900 bucks off the ordeal. their mag was a free lifestyle mag distributed to high end country clubs, golf courses, social clubs, yacht clubs all over the US....the pitch to advertisers (landscapers, chefs, restaurants, plumbers, roofers etc) "why wouldnt you want your business in front of an affluent crowd who has the money to pay for your goods and services?" and its the truth. the people who were exposed to the publication were upscale. the distribution was at upscale locations. and it was free....guy goes into a golf shop, buys a shirt, and the shop owner throws the mag in the bag along with his receipt....

im sure publications have vanished in the past and im not about to say that since i have done it it will always work. im just saying the idea is absolutely not absurd....

just yesterday i went to wawa. there was a mag called celebrations there. it was a 5 inch by 8 inch mag. the publication was 50 pages, full color, and had over 65 advertisers. full page ads ran 600 a month. out of the 75 advertisers maybe 30 were full page ads. there is absolutely no content at all. just a book full of service providers. the book caters to event planning. the magazine is an event planning resource. if you are booking a wedding or sweet 16 etc you would utilize the book. the book was full of djs. catering facilities, banquet halls, photographers, even dentist who have teeth cleaning packages. i added up the amount of ads and ran the numbers....the mag seems to be generating over 15k a month....a month! sure it might flop and not be around in 6 months....but its there now...i have a copy in my office. those advertisers paid and its a relatively new mag...no hard numbers to substantiate its power. the advertisers are probably told the publication is in free and in high traffic local areas and specific to the service they provide...

there is a phone room behind this lol. boiler room style... have 5 trained sales guys in a basement hammering the phones all day will produce results. you pay them 30 percent commission on ads the will be pit bulls. the graphics designers are a joke. get a kid from college who can do photoshop and hes happy with 30 dollars a page for layout....the print cost are the most but still reasonable enough to profit....the trick is to get suitable distribution points!

im bored at work. sorry for the rant. i might open a flower shop...the markup on flowers, now that is absurd!
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      08-25-2010, 02:43 PM   #14
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For legal purposes yes the CPA you spoke to is correct. There is no big difference between a sole proprietor and LLC for tax purposes. Either way you file on Schedule E and the income is treated exactly the same. Now this is in terms of single member LLC. The formation of an LLC would mainly be for liability purposes.

If you're considering other members or unusual events then an LLC can be more beneficial for tax reasons as well.
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