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bxlnt
07-09-2011, 01:04 AM
Hi,
I am looking to start my own online graphic/web design business. Basically, I'll be designing for businesses or people's personal projects. They contact me, and then I design.

Some things to know:

- I will be the only owner.
- I'm 16 years old.
- I am expecting to not reach $100,000 in yearly sales for a few years
- State of Connecticut
- I don't have enough funds at the moment to hire a attorney for these type things

Would you suggest that I make the business a sole proprietorship or LLC? What would it depend on? Which do you think may potentially be better for this type of business? I can't see myself running into any debts, do you?

I'm basically 90% done with my website for this business, but I'm still looking into what I'd legally need to do in order to officially operate it.

Any help is much appreciated.

vangogh
07-09-2011, 02:20 AM
Welcome to the forum bxint. Other than being older I'm in a similar situation as you. Or I was. I'm also a freelance web designer so I've been where you are.

As far as forming a business entity it's probably not a huge deal for you given your age. The main reasons to form an LLC or any kind of corporation are for the liability protection and the taxes. At 16 I'm guessing you don't own a lot of value that someone would sue you for and your taxes shouldn't be too high. A sole proprietorship is probably fine. You can reinvestigate forming another business entity later.

Since you have a website 90% done I assume you've chosen a name for the business. You should register the name with your state. Usually you can do that through the Department of State website (http://www.sots.ct.gov/sots/cwp/view.asp?a=3177&q=392124). At the bottom of the page I linked to you'll see another link to download the forms to register a Trade and Service Mark.

If you want to get a tax id it looks like you would do that with the Department of Revenue (http://www.ct.gov/drs/cwp/view.asp?a=1433&q=265880). I don't think you'll need to. It's mainly used if you have employees or sell good where you'll need to collect taxes. I registered for one so I can use it instead of my social security number on certain forms.

You won't need an attorney for either of the above. It's a couple of forms and a small fee for each. It looks like it's $50 for the Trade Name and $100 for the tax id.

One thing you may want to think about is how you'll collect money. Common ways are to charge the client's credit card, have them pay by check, or go through PayPal. Unfortunately at 16 I don't think you can get a merchant account to charge credit cards and I don't think PayPal lets you have an account. Checks can sometimes be iffy, especially if you don't know the client. There won't be an issue with most people, but sadly there will be with some. Typically in the industry you collect a deposit of 50% prior to starting the work and then collect the remainder once the job is done and before delivering the files. For a larger project you might collect a third up front, another third at the midpoint of the project and the last third when the job is finished.

As far as getting clients you want to get your name out there. A website is a good start, but it's not the only thing. You have to let people know about your site and also interact with them in other places. Forums like this one can be good since your clients are likely to be small business owners. Open accounts on some social networking sites and build your brand there as well. I attract a lot of traffic to my site by blogging. The posts often rank well in search engines and over time you build up a steady following. Some of my best clients found me through my blog and others have found me through a blog post ranking in a search engine.

If you don't already have a portfolio you can do a few low cost or even free sites just to have some sites to show. Be careful about charging low rates for too long though. The clients you get early will recommend you to others and if they liked you because of your low price they'll recommend you to others as someone who doesn't charge much. Price yourself based on the value you offer.

Probably enough for now. Feel free to ask any questions you have. Like I said I've been where you are now and I'll be happy to share anything I can to help you get started.

greenoak
07-09-2011, 09:11 AM
good luck!!! there is a lot of good info on here on tons of subjects..
..i would do a lot of local freebies to help get your name and abilities circulating around... and maybe work some of the bugs out.....

bxlnt
07-09-2011, 01:34 PM
Thank you!
Would I need to register for an Employer Id Number so I don't have to use my SSN everywhere? How much would an EIN cost?

"Forums like this one can be good since your clients are likely to be small business owners."
Hah I didn't even think about that... are people allowed to advertise on here? I'll definitely make accounts for it on different social networking sites.

My portfolio is in the process of being done as well; I have about 6 different examples in various categories (illustration, print, etc.)

For pricing, I was thinking about just asking my clients about their budget and basing the pricing on that. Is that bad or?

I also don't completely understand how taxing works. If the tax is, say 15%, do I just deduct 15% from each client's payment?


Welcome to the forum bxint. Other than being older I'm in a similar situation as you. Or I was. I'm also a freelance web designer so I've been where you are.

As far as forming a business entity it's probably not a huge deal for you given your age. The main reasons to form an LLC or any kind of corporation are for the liability protection and the taxes. At 16 I'm guessing you don't own a lot of value that someone would sue you for and your taxes shouldn't be too high. A sole proprietorship is probably fine. You can reinvestigate forming another business entity later.

Since you have a website 90% done I assume you've chosen a name for the business. You should register the name with your state. Usually you can do that through the Department of State website (http://www.sots.ct.gov/sots/cwp/view.asp?a=3177&q=392124). At the bottom of the page I linked to you'll see another link to download the forms to register a Trade and Service Mark.

If you want to get a tax id it looks like you would do that with the Department of Revenue (http://www.ct.gov/drs/cwp/view.asp?a=1433&q=265880). I don't think you'll need to. It's mainly used if you have employees or sell good where you'll need to collect taxes. I registered for one so I can use it instead of my social security number on certain forms.

You won't need an attorney for either of the above. It's a couple of forms and a small fee for each. It looks like it's $50 for the Trade Name and $100 for the tax id.

One thing you may want to think about is how you'll collect money. Common ways are to charge the client's credit card, have them pay by check, or go through PayPal. Unfortunately at 16 I don't think you can get a merchant account to charge credit cards and I don't think PayPal lets you have an account. Checks can sometimes be iffy, especially if you don't know the client. There won't be an issue with most people, but sadly there will be with some. Typically in the industry you collect a deposit of 50% prior to starting the work and then collect the remainder once the job is done and before delivering the files. For a larger project you might collect a third up front, another third at the midpoint of the project and the last third when the job is finished.

As far as getting clients you want to get your name out there. A website is a good start, but it's not the only thing. You have to let people know about your site and also interact with them in other places. Forums like this one can be good since your clients are likely to be small business owners. Open accounts on some social networking sites and build your brand there as well. I attract a lot of traffic to my site by blogging. The posts often rank well in search engines and over time you build up a steady following. Some of my best clients found me through my blog and others have found me through a blog post ranking in a search engine.

If you don't already have a portfolio you can do a few low cost or even free sites just to have some sites to show. Be careful about charging low rates for too long though. The clients you get early will recommend you to others and if they liked you because of your low price they'll recommend you to others as someone who doesn't charge much. Price yourself based on the value you offer.

Probably enough for now. Feel free to ask any questions you have. Like I said I've been where you are now and I'll be happy to share anything I can to help you get started.

Evan
07-10-2011, 01:00 AM
Thank you!
Would I need to register for an Employer Id Number so I don't have to use my SSN everywhere? How much would an EIN cost?

"Forums like this one can be good since your clients are likely to be small business owners."
Hah I didn't even think about that... are people allowed to advertise on here? I'll definitely make accounts for it on different social networking sites.

My portfolio is in the process of being done as well; I have about 6 different examples in various categories (illustration, print, etc.)

For pricing, I was thinking about just asking my clients about their budget and basing the pricing on that. Is that bad or?

I also don't completely understand how taxing works. If the tax is, say 15%, do I just deduct 15% from each client's payment?

The advice that vangogh offered you I think is pretty solid. I agree that an LLC is not going to offer you much, as even individually you have no assets to protect. It's also likely as a minor that if they were to try suing you, they'd include your parents anyways.

An EIN is free from the IRS. This is used instead of your SSN.

I was in your shoes when I was 13 years old, before I chose the accounting profession, so I know the challenges of being a young entrepreneur. My advice is to charge what you're services are worth and don't just discount it based on customer budgets. You're putting them in control of what the job is worth. Asking for their budget is fine, as you can say that will allow you to gauge the level of detail that the site will have. So if someone says they're looking for a full-blown e-commerce site and they want to pay $300 total... You can say that's great, but with that sort of budget, the most e-commerce they'll get is a phone call from the business card webpage you'll create for them.

For taxes, you'll be paying 15.3% on your net income. It comes from YOUR profits. So assume you sell $1,000 of sites this year. Well, you had some of your own costs to operate the business, those may total $200. You have $800 left over. Your tax is on that 15.3%.

bxlnt
07-10-2011, 01:12 AM
I think accidentally re-asked that post b/c I didn't think it went through. Some of it is different though.

And thanks Evan! I'll keep that in mind.

bxlnt
07-10-2011, 01:15 AM
"Well, you had some of your own costs to operate the business, those may total $200. "

Would this include the cost of buying my website and the licenses and stuff?

Evan
07-10-2011, 01:24 AM
Yes, the cost of your domain registration, web hosting, etc. If you buy paper to send invoices, or buy an accounting program, that is deductible. If you buy software (e.g. the Adobe Suite) that can also be deducted...

bxlnt
07-10-2011, 01:28 AM
Does this cover everything?
Sole proprietorship or general partnership without employees - registration outline - FAQs of the Connecticut Licensing Info Center (CLIC) (http://www.ct-clic.com/FAQ/faqView.asp?FaqID=215&CategoryID=17)

bxlnt
07-10-2011, 01:56 AM
"For taxes, you'll be paying 15.3% on your net income. It comes from YOUR profits. So assume you sell $1,000 of sites this year. Well, you had some of your own costs to operate the business, those may total $200. You have $800 left over. Your tax is on that 15.3%."
So the tax payments are due annually right?

bxlnt
07-10-2011, 11:02 AM
vangogh-
Would I need a Terms of Service and Privacy Policy on my site? I read somewhere that all businesses need one, but I wasn't sure if that's correct. I've made both of them anyway, and was wondering what things I should include in them?

greenoak
07-10-2011, 06:03 PM
you are proposing charging more to financially well off people than to less well off people....that would be totally offensive to the better off people.....
its hard to figure out the right price...at least at the start.... but the price is your job not the buyers..i think the same amount of work should be the same price for anyone hiring you....but i like freebies too, just for pr and to get you started...maybe for clubs and charities.. if that would happen in the course of things..... .... ..
. you do need to know customers budgets tho...for sure...

vangogh
07-10-2011, 10:27 PM
Would I need a Terms of Service and Privacy Policy on my site?

You don't need either. It's up to you if you want to include them. I don't have a TOS on my site. Any terms I would work out with a client when we're agreeing on their project. I do have a privacy policy though I'm not sure how useful it is. I doubt I'll include one when I redesign my site. I suppose the advantage of having a privacy policy is it can help generate trust for you. I'm not sure how often they really get read though. It's more appropriate for sites that are storing customer data. Technically you'd be collecting data via a contact form so maybe you could mention what you do with their information.


you are proposing charging more to financially well off people than to less well off people

I don't think that was the intention. Without fail every person who's ever contact me for a site wants more than they really want to pay for. Most people don't realize how much certain things can cost. If you ask for a budget upfront you can then reasonably let the client know how much of what they want you can deliver for that price. It's a also a good way to quickly find out who the tire kickers are.


So the tax payments are due annually right?

As a sole proprietor the taxes you pay are income taxes. It's essentially the same as if you were working for someone else with a couple of key differences. The first is you aren't receiving a W2 from an employer, which lists your taxable income for the year. You have to keep track of your income and you fill out additional forms to report it.

Also since you aren't receiving a paycheck from an employer you aren't having taxes taken out of your check throughout the year. You have to pay estimate taxes 4 times a year. There are forms to help you determine how much you should pay. In the end you're just trying to cover what you'll end up having to pay when you fill out your income tax returns in April. Once you've filled out a return a few years you'll get a good sense for how much you want to pay in estimated taxes.

Evan would know the tax stuff better than me. I'm not really sure how it works when you're under 18. I know I wasn't paying taxes at your age, but I also wasn't making enough money to require that I pay anything.

You'll probably want to talk to an accountant and get some advice about taxes. You can also check out the IRS website (http://www.irs.gov). Taxes can definitely be confusing, though they get easier after you've filled out the same forms a few times.

tylerhutchinson
07-11-2011, 03:24 PM
I think VG's initial info is great so I am not going to really get into that too much.

Advertisement- Social media and for you Linkedin is a great resource to find business owners. That is where I do prob 60% of my advertising. As you grow I suggest taking some of your profits and re-investing back into your business for advertisement. Get posted in directories and chamber of commerce.

setting a price- Since you are new I would take a look at the industry average (basic site is around $1,000 on average) and cut it by 10-20% for your "base rate". You really should do it on a by project basis. So if it is a simple 5 page site with no real flash or extreme services then maybe lower it a bit. If they want you to build a 200 page site and have a shopping cart, video, graphic design, social media linked in, you would want to increase it. Figure out a good hourly rate then do an estimate of how much each project would take hourly. Also, if it is something like an e-commerce site or someone who needs regular updating, offer a monthly flat maintenance fee. That will give you good residual business after it is created. So build the site for $1,000 then say for $50 per month you will maintain and update it. Either way I would not suggest a "pick your price" option to the potential client. Many people think that sites only cost a couple hundred to build which is not worth your time.

Too bad you didn't get on here a few weeks ago. I just had to find and sign a contract with a new web designer to do web design work for my clients. Once your site is up and going send me a link so I can take a look at it. If I need another web designer I will keep you in mind. I only charge a small finders fee for the client but with my consulting business I get a lot of small businesses that need web work so I have to refer them off.

Good luck also! I remember starting businesses at 16. I actually started my first business at 13! One thing I tell to all new business owners, especially young ones, do not give up, and do not think you can't do it. It is hard sometimes to be taken seriously when your young. I am only 24 and it is hard to compete with people who can say they have 40 years experience. I can let me work and testimonials speak for me, but I do still get the occasional person that looks at me and thinks I am to young to know what I am talking about. That can make it tough at times!

vangogh
07-12-2011, 12:09 PM
Good points Tyler. Social networking sites can be a great way to get your name out there. One thing I would suggest with social sites is not to try to work them all right away. It's probably a good idea to open accounts with several of them so you can claim the username you want for branding. After that spend some time learning how each works and pick one or two to participate with. I think you're better off using one or two well than trying to jump into all and using many poorly.

Different people seem to get different things from different networks too.

Something I'd add with price is to track your time on projects. The only way you'll really know how long it takes to complete a project is to keep track of your time. Once you've tracked time on a few projects you'll get much better at estimating how long the next one will take.

Evan
07-15-2011, 12:36 AM
"For taxes, you'll be paying 15.3% on your net income. It comes from YOUR profits. So assume you sell $1,000 of sites this year. Well, you had some of your own costs to operate the business, those may total $200. You have $800 left over. Your tax is on that 15.3%."
So the tax payments are due annually right?

If you will owe $1,000 or more in taxes, you must make quarterly tax payments by filing 1040-ES.

Evan
07-15-2011, 12:46 AM
Does this cover everything?
Sole proprietorship or general partnership without employees - registration outline - FAQs of the Connecticut Licensing Info Center (CLIC) (http://www.ct-clic.com/FAQ/faqView.asp?FaqID=215&CategoryID=17)

Name availability works best when you're incorporating/organizing, which I don't think you need to do. You may want to swing by your Town Hall about filing a DBA which is a minimal fee. But I cannot think of many proprietors who actually have this certificate on file with Town Hall.

Whether you need a sales tax ID depends on whether you're going to be selling anything that is taxable. Many services are not taxable in CT.

Generally a sole proprietor is not covered by Worker's Compensation laws unless you choose to include yourself. As you are at a low risk of injury, probably not worth any expense. Plus I always find it difficult to prove it's not related to something else if you were a sole proprietor, and you were doing things in a home office environment.

bxlnt
08-25-2011, 02:45 AM
Thanks for the help!