New to starting a business

[JustStartingUp]

Hello Everyone,

I'm just starting out and want to start buying equipment for product development over the next few weeks. I also am using one of the rooms in my house as an office. I am still trying to see if my ideas are viable and won't be selling anything in the near future.

1. Is the first step I need to do is setup an LLC?
2. What do I need to do purchase I start buying equipment?
3. Can I use equipment, office supplies I currently have without opening myself up to having the LLC veil pierced?
4. How do I setup the home office for tax purposes?

Please let me know if there any other information I need to worry about, etc.

[Fulcrum]

1) Depends, what kind of business are you starting?
2) See #1
3) Depending on answer to #1, speak to a lawyer or accountant for legal answers
4) You need a dedicated space for business use only. See #3 for remainder of answer.

You may have noticed a trend in my answers. Due to the limitation of being able to read our own thoughts, we are not able to read the thoughts in your head (long term this is probably a good thing). Can you tell us what kind of business you are starting?

[Harold Mansfield]

To add to what Fulcrum already said,

1. When you're just starting out especially if you work from home you don't necessarily need an LLC unless you think there's a risk of personal liability for something or some other specific reason. You can easily run as a sole proprietor and just track your expenses and report your income.
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Sole-Proprietorships

2. & 3. As for equipment, of course you can and should use what you already have. No sense in buying new stuff especially if budget is an issue. You can try and account for the value of used equipment, but in my case it wasn't worth it. I started with the computer that I already had and didn't care much about trying to itemize an old computer and basic office supplies. I was more concerned with getting started than a few bucks credit from Uncle Sam.

Not sure if you're asking us what equipment you should buy (We can't answer that. We have no idea what your business is), or when you should buy it.

4. Deducting a home office. See here:
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Home-Office-Deduction

[JustStartingUp]

I'm working on starting an engineering solutions company to write code and design hardware as needed.

I'm looking to buy a nice computer and other electronic equipment.

The office is solely used for this purpose. So will the equipment

[Harold Mansfield]

I'm working on starting an engineering solutions company to write code and design hardware as needed.

I'm looking to buy a nice computer and other electronic equipment.

The office is solely used for this purpose. So will the equipment

Are you borrowing money to buy these things? Using your own money?
My point is that whether or not you need to be an LLC is really up to you and your accountant or lawyer if you have them.

It's not a prerequisite to starting a business, when you can get started, or buying equipment.

Let's start with why you want or think you need an LLC. If you've decided that you need one, then do it. But I don't want you to think whether or not you're an LLC has anything to do with getting started.

Most times starting a business, especially when you're bootstrapping is about just getting started. Most people spend more thought on things like to LLC or to not LLC, and business cards than they do perfecting their product and marketing it Start making some money first and then you can afford to hire a professional to guide you into the future.

[JustStartingUp]

The llc would only be to protect my assets in case I say provided a software gui and someone wanted to sue.

I plan to use my money for the small capital I need at the moment. 5k would get me a lot, equipment wise.

I would rather work on my product than figure out whether I need an llc.

[Harold Mansfield]

The llc would only be to protect my assets in case I say provided a software gui and someone wanted to sue.

If you think this is a possibility, then it would make sense. It's a really easy process.

[JustStartingUp]

If you think this is a possibility, then it would make sense. It's a really easy process.


I'm sure I can figure out how to do an LLC with some searching online. Do I need to wait on purchasing parts until after I complete the LLC paperwork, or do I have to wait until it is fully completed?

[tallen]

I think the best approach is to file your LLC paperwork, get an EIN from the IRS, and then take that and your "certificate of formation" (or whatever it is called in your state, the document that shows that your LLC exists) to your bank to open an account in the name of your LLC, from which you can then pay for everything for your business.

Certainly lots of people start their business as sole proprietors, and then incorporate or form an LLC later, transferring the business assets to the new entity then. But if you know that you need or want to form an LLC, I think it is easiest to do that first.

[JustStartingUp]

Is it worth it using a service like LegalZoom to help with the paperwork? Normally, I just like to jump into things and do it myself but I'm trying to learn to try and get things done in a timely fashion.

[turboguy]

If it were me I would do LegalZoom before I used a lawyer. However my first choice would be to just check out my state's web site, download the forms, instructions and requirements and do it that way.

I have done it that way and it was quick, straightforward and relatevly easy.

[walmartsupplier]

I agree with Harold,

I would not worry about the LLC . What you need to work on is a solid business plan and marketing budget. Good Luck, I just love to see people who take risks and step out on their own if they can.

[MosheC]

No offence but you seem to be focused a lot about the LLC, and what you would like to buy. But you are giving no information about what you are going to sell. Did you do the market research? do you know who your client is?

I just see to many new businesses focused on the wrong thing, and I want you to get started on the right foot.

[BrandonL]

I agree with Harold,

I would not worry about the LLC . What you need to work on is a solid business plan and marketing budget. Good Luck, I just love to see people who take risks and step out on their own if they can.

I wholeheartedly agree with this. It is very common for most people starting a business to focus on questions like, should I do an LLC, should I incorporate, where should I design my business card, what color should be my website be, etc.

The best thing to focus on is generating revenue and making sure you actually have demand for your products or services. You can always do the other stuff later. You don't want to waste time on things that don't matter much right now.

[ilik]

lolz, this is exactly what i'm trying to do right now. but i will suggest to not to aim at consulting,solutions and design for the others. nobody will come. everyone who needs an engineer already has one. design a device and sell it yourself. do not search others to finance you, nobody will, and if they do you will have to cut the profit to give them their share. it will downgrade your financial fighting capability because shareholders want solid profit, they are not interested how much of that profit needs to go back into the job to make things going. technology is a tricky thing. it always runs forward and you need to keep it up. i work in such company and nearly 85% of profit is being turned back into the technologic research because we know if we won't do that today, we will fail in tomorrow's competition. problem with hardware design is that things that are doable by your 5K are already done and saturate the market. so you must be extremely wise and smart to surprise a buyer. because you have got a low budget and small amount of time. however, if you do know that there are clients who are willing to pay you, that is 50% job done thing! then definitely start your business, design the hardware and you will find success.
so here are my suggestions:

1. if you aim at software and hardware solutions for some other companies they will demand you to have a legal form. i have tried to sell few computer finger mice to a pc shop few years ago and they demanded all the necessary documents. i don't know where you live but it may be demanded for you to have some fixed value of starting capital. in short $$$. in this case you may choose to register yourself as a Sole proprietor. in this case you will be a legal company like person; without need for starting capital. but first ask your clients if they are willing to have business with this form of legal person.
2. eh... that is a hard question. you might need a logic analyzer,an oscilloscope, soldering iron, soldering station, vertical bench drill and all bunch of stuff all of which vary in price by it's speed and quality; but i highly believe that all of it will not exceed 2000$ including some lovely notebook.
3. if you do not open LLC use whatever you want. if you do open LLC you have to register all of your hardware in finance report. recently my boss bought a new chair for my working desk. gave me money i went to a furniture house and when payed i demanded documents for this purchase. this document i carried to our finance manager who registered it and included this chair into company's ownership. later on they use these documents when the inspection comes from the revenue service. recently they knocked at our door just like that. sniffed everything around for entire 3 weeks, checked that we have registered every inch of every screw and left with grumpy faces :) you know they get benefits when they fine someone. buttholes.
4.now, if you solder a microchip to a PCB nobody will accuse you in mass manufacturing in the residential area. any manufacturing that does not pollute anything may be done within city areas. my company produces electronics and we sit in the center of the city. BUT! -you will have to check it anyway. consult a lawyer this is the only way. if you are opening LLC you definitely have to get a list of restrictions and with the lawyer, compare each restriction to your activity. if any of your activity looks like the restrictions, then you may need to open your office outside the city. the rules are described in the legislation. your lawyer will know where to search.

to cut long story short do not open an LLC unless absolutely necessary. and without it, do anything you wish. or open it, and you will have to legalize everything right to the last hair on your balls. :))))