thinking about a new business venture

[Blessed]

Quick background - my sister and I have been sewing things for my kids since my daughter was born almost 5 years ago. We both enjoy sewing/crafting and would like to turn that hobby into an income stream.

Grace (my sister) is working at an in-between job, getting ready to pursue her Master's degree since in her field (Environmental Science - specifically in watershed and soil type things) it seems that she either needs 3 years experience or a Master's degree for every job she wants to apply for. Also she's probably going to go for the Civil or Environmental Engineer degree at this point, simply because of how many more opportunities those degree's open up for her. She graduated last spring with her Bachelor's got a forms processing type job in the field with a company that went through employees like paper drinking cups and has been working at part-time or temporary jobs for a year now trying to get the career break-through she needs.

I've been struggling to get my print-only graphic design business to grow. Of course at this point in history everyone needs a website, not just a brochure so my lack of skill in web design is hurting me professionally. My husband has asked that I wait until we get our little bitty 2 bedroom house sold (hoped for last year, actually looks like it might happen this year!) and move into something bigger to really pursue web design - getting the training I need and then putting the effort into doing the marketing I'll need to do to start building the business. In the meantime I've started adding some administrative assistant type services to my portfolio and actually act as a call center for a series of consignment events each spring and fall - that has definitely helped to fill in the gap some with my income, and I'm pushing to add a few more of those clients to my roster but I would like to add another income stream if I can. One that didn't involve hours on the phone would be awesome...

We've both seen a definite difference in how few hand-made, cute items are available at Etsy and even other online resources for boys. I've been making ties for my son and they have been very popular around here with people asking if I would make them some. Also a few of the things my sister has made for my kids have been greatly admired. We know we can start an Etsy store to sell these handmade items. Our main thought is to open a boutique that sells accessories for boys - ties, vests, bow-ties, with matching hair-bows, simple skirts, etc... for their sisters. Additionally we may sell things like color aprons, softies, etc... We both have a decent stash of supplies already at hand that we can use to create our initial inventory. And I do have a stash of ties ready to go that I had prepared to sell at the consignment event I participate in and then also as part of our annual fund-raising booth for the church at the local craft show this fall.

Neither one of us expect to get rich from this venture (but that would be nice!) but the main things that have kept us from starting (we've been talking about this for almost a year) are some questions that I plan to find answers for in the next few weeks because we've both decided it's time to stop talking and start doing:

What about sales tax?
What will be different about claiming the income from this and my other service-based business?
How to expense out existing supplies when figuring the cost-per-item made to figure both price points and profits?
How to share expenses/profits that aren't related to the items we directly created - i.e. marketing, independent web domain costs, etc... things that will come into play if this becomes a successful venture? How to compensate for additional time I will spend on pushing this to make it work and get the word out about our boutique - or if there is something additional Grace will add that will balance that work out?
What would we name our boutique/partnership?

OK - I'm sure I'm missing something - if you have more questions we should be asking or any answers to these other questions or ideas of places to look for answers let me know.

Also - name ideas would be greatly appreciated! We've been sorely uninspired on that topic :)

PS - this sister and I actually work together remarkably well, live 1700 miles apart and have always been fair and upfront with each other on financial transactions we went into together - i.e. joint gifts for our parents, etc... I cannot say the same for my other two sisters, but I trust this sister and I to be able to pull off this type of business together while maintaining our friendship and love for each other. :p

[KristineS]

My understanding is that you have to charge sales tax to people who are in the same state as you are. Unless they can provide you with an exemption certificate which you must keep on file in case you are audited. I'm sure there are others more qualified than me to speak on that issue.

You also will want to look into the CPISA as it has a large impact on clothing and items made for children. I know there are a lot of regulations with which you must comply. A lot of people who make children's clothing and own smaller businesses have been complaining quite strongly about CPISA, so I imagine it might be an issue for you.

I didn't answer a lot of your questions, but I did want to throw out the CPISA thing as I know that does impact businesses that make things for children.

[vangogh]

First let me wish you some good luck in getting this started. One thought about your graphic design business is to partner with a web developer who's lacking design skills. There are plenty of them around. You'd be able to offer both online and offline services. Just a thought.

I think Kristine is right about the taxes, though I'm not the expert either. It looks like Etsy has some info about taxes (http://www.etsy.com/blog/en/2010/tax-tips-everything-you-need-to-know-about-sales-tax/) on their site.

With your own personal taxes it will depend on how you and your friend decide to form your business. If you form a partnership there are forms you fill out to show how much of the partnership's money you each earned. That money should be included similar to how you include revenue now with the graphics business (assuming that's a sole proprietorship). In general it will depend on what kind of business entity you form with both.

With expenses and partnership you probably should talk to your partner and decide on what kind of business entity you want to form and discuss each of your responsibilities within the business. Instead of seeing it as you created this so you make the money on it while she created that so she gets that money, see it as the business created a product and the business made the money. Within the business each of you will have different responsibilities and you'll split the business in some way, likely 50/50 or close to it.

[Blessed]

Thanks to both of you Steve & Kristine I appreciate your thoughts. Steve I specifically appreciate your recommendation on the profits/expenses thing - letting everything be part of the business rather than simply two people selling independently under the same name. And thanks for reminding me about the CPISA Kristine I remember reading about some changes they made in the past couple of years that have been tough on parts of the cottage industry.

[vangogh]

I think it'll be easier accounting wise to have everything come into one business and then have the business direct things to each of you. Plus it'll probably make you both think of it more as a business.