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bacterozoid
08-20-2009, 10:37 AM
I'm interested in starting a web design business but I'm really not sure about some things. I'm just one guy doing this in my spare time from my home.

Do I have to form a "real business" and is there any benefit for me in doing this? I know that by forming a LLC, if I get sued my personal assets are protected. I don't plan on being sued, but I imagine it could happen to anyone.

What about finances? When I make money, how does all that work? If I just do this myself, I would report my additional income on my Indiana tax forms. Is there some benefit to being a business? Can I do the tax forms and stuff myself or do I need a lawyer?

I'm new to all this but would love to do this full time one day. I appreciate any help you folks can offer!

Also, I know nothing quite replaces the value of a face-to-face with a real lawyer, but I need to get the facts before I shell out the cash for something like that.

vangogh
08-20-2009, 11:45 AM
Welcome to the forum bacterozoid.

You don't have to file paperwork to declare yourself a business, though I think it's a good idea. You have choices about what kind of business you want to be as well. THe LLC does offer some limited protection. You should think about what kind of personal assets you have in order to decide if they need protection. For example if you own a house you wouldn't want to lose it, but you wouldn't be worrying about your collection of CDs and DVDs so much.

The easiest type of business to form is to set yourself up as a sole proprietor. You basically fill out a trade name with your state and you're in business. You can find the info on how at the dept of state for the state you live in. Here in Colorado registering a trade name cost me $8, which an occasional renewal for $1.

An LLC does offer some protection, but that protection is still limited. LLC = Limited liability company. I believe you can file all the paperwork to become an LLC on your own, but you'd probably want to hire an attorney to make sure everything is done right. I think the cost will end up being a few hundred dollars depending on who you hire to do the paperwork.

Taxes will be a little different in each case. Depending on how you set yourself up in business might determine whether or not you do them yourself of hire an account. I've been filling out my own taxes since I started. I do have the advantage of having an accountant for a brother who can answer my questions though.

Some of the advantages you'll see in having a business are you'll be able to deduct some things you might not be able to if you weren't in business. At the very least you'll probably want to register a trade name for your business. Whether you decide to become an LLC is up to you. It may or may not be necessary at first depending on what personal assets you have.

bacterozoid
08-20-2009, 11:59 AM
So I tried some website where you ask a question and paid like $18 for some lawyer to answer basically the same question. Then I had the thought to ask on a forum (too late for my cash), and I got a response about 100 times better.

I appreciate your time and thanks for the warm welcome! Based on your information I'll probably hold off on the LLC until I start getting more business (submitting a bid to my first client soon).

Now, as far as deducting expenses goes - shouldn't I be able to deduct them when I file my taxes with a Schedule C and declaring self-employment income (if I only register a trade name)? I think all that varies per state, so you might not know for Indiana.

I think I've got a clear grasp on most aspects of running a business - but the legal/financial stuff is the hardest. I do feel much more informed now. Thanks!

vangogh
08-20-2009, 12:17 PM
Glad I could help. Do I get to send you a bill for $18? :)

You probably don't need the LLC at first, though it's something to consider for down the road. It does offer some protection, but you do have to think if you need that protection at first.

I'm actually a sole proprietor at the moment. I fill out the 1040 and use the schedule C to report my income. From there I usually fill out a few other forms for like depreciation, etc. Usually it's just a matter of following along with the schedule C, which points me to the other forms.

There are a few things on the forms that trip me up, but for the most part it's not too hard to figure them all out. The first year I was a little lost, but each year it does get easier. The financial/legal stuff can be confusing and intimidating, but much of it isn't as hard as it first seems.

We have some lawyers and accounts here too and hopefully they'll see this thread and be able to offer some more specific thoughts to the mix.

One thing you may also want, but won't need is a tax ID. Once I had registered my trade name it was a 15 minute call and I had an EIN. You won't need it unless you need to collect taxes or hire employees, but I like having it since it means I can give it out instead of my social security number at times.

bacterozoid
08-20-2009, 01:28 PM
Hah, tell you what - I'll give you a discount on a logo design or something ;)

Thanks again for your help. I'll be referencing this info a lot as I get started.

vangogh
08-20-2009, 02:03 PM
Glad I could help. Don't hesitate to ask more questions as they arise. I remember when I was first getting started that many things seemed confusing. Most aren't as confusing as they first seem, but it's always good to be able to ask the questions and have someone help out with the answers.

Business Attorney
08-21-2009, 11:10 AM
Glad I could help. Do I get to send you a bill for $18? :)

vangogh, if you get paid, I have to report you for practicing law without a license. :)

I would like to clarify one point you made. The word "Limited" in "Limited liability company" does NOT mean your protection is limited, it means your liabilities are limited. On the other hand, note the word is "limited," not "eliminated." An LLC limits the liability of the members, but does not entirely eliminate all liabilities.

For a lot of small businesses with no employees, where the owner does all the work, the types of liabilities that you are protected from probably boils down to trade creditors who did not bother to get a personal guarantee from you. So the trade show promoter, the yellow pages, the postage meter leasor, etc... may have no recourse against your personal assets if the business is unsuccessful.

I have written an article on my LLC website entitled "How Limited is Limited Liability? (http://www.limitedliabilitycompanycenter.com/how_limited_is_limited_liability.html)" that goes into more detail.

vangogh
08-21-2009, 11:46 AM
If you don't report me I'll split the $18 :)

I almost went to law school. I was even enrolled for a couple of days. Does that count for anything?

Thanks for the extra info and the article. The LLC stuff always confuses me a bit. I've actually read through most of your articles on it, which is probably where I've gotten whatever info I do know about it.

huggytree
08-26-2009, 08:20 AM
You can file for a LLC w/ your state for like $100 bucks (atleast you can here in WI)

your accountant should be able to explain all the tax stuff to you...i think you definately need an accountant for your taxes when you are a business....ask him to setup your quickbooks and get you going...some accountants wont do it, others will....depends on their level of service...my first accoutant charged me for the 1st visit and refused to explain how to set things up....my 2nd accountant spend 2 hours with me for free and got me all setup...he makes his money back now when i go to him every 3 months...

janiels
09-04-2009, 05:40 AM
one good thing about freelance web designers is you don't have to file any kind of business registration, its tax free, also there are lots of sites for free lancers to get you started with, such as odesk, elance. etc.. its up to you.

Patrysha
09-04-2009, 08:52 AM
Actually, that is not true janiels.

While you may not have to register your business depending on where you are, you do have to pay taxes.

And in my experience freelance sites lead to cheap customers rather than quality ones who will pay a living wage for work.

bacterozoid
09-04-2009, 12:32 PM
And in my experience freelance sites lead to cheap customers...

I'd be interested to know why you say that.

Patrysha
09-04-2009, 01:00 PM
Well to be honest, I've only explored those sites from the angle as a publicist and professional writer and not as a web designer (I am not really a web designer, but a web tweaker...usually working with existing templates for local customers and not really seeking web design work beyond what is needed for existing clients) - so I guess it could be different for web design work.

In writing and publicity though...people posting there wanted rock bottom rates that could often only be fulfilled by those in developing countries (not that there is anything wrong with that but living in North America I can't live on $2 an article...

vangogh
09-04-2009, 02:02 PM
I think a freelancer can still be professional and pick up quality clients. I think you're thinking specifically about the job boards like getafreelancer and in that case you're probably right. A freelancer doesn't have to use those.

bacterozoid
09-04-2009, 02:16 PM
Assuming you do mean something like boards full of people desperate for work (as vangogh mentioned), then I agree - rock bottom prices means rock bottom clients and rock bottom quality.

I thought you had meant freelance sites as in their personal homepages. Those, I believe, can be properly used to get quality clients...if they showcase quality work.

Patrysha
09-04-2009, 02:47 PM
Yes, that's what I meant...the poster previous to me had said
there are lots of sites for free lancers to get you started with, such as odesk, elance. etc

Those were the sites I was referring to...not personal business websites of freelancers.

vangogh
09-05-2009, 01:13 AM
Got'cha. Think I missed the earlier post. I'm not a big fan of the freelancing job board sites, though I wouldn't say never to try them. You never know. When I first started I actually found a couple or three jobs through Craig's List, one of which is a current client who's sent two other clients my way.

I wouldn't tell someone Craig's List is going to be a great source of clients, but at the same time it did ultimately lead a few my way. You can't always know where your clients will come from so I think it's worth trying different sources.

In general I do agree with you on the freelance sites.