Small Business Owners on the forum? <3

[Sparrow]

What is your story? How did you get started? How long did it take for you to get established?

I really would like to one day own my own business . I went to a SBA meeting last year to get a little information, as of now my plan is to pay off my credit card debt and then save at least $10,000 to $20,000 to put down on a loan. I'm hoping to find a partner as well...but have heard horror stories about having partners.

Any advice would be much appreciated! Thank you!

 

[Giggly]

Good thread

I tried getting one going with what appeared to be a strong partner a few months go but my partner ended up bailing on me in the final hour. Lesson learned. Having a partner is soooo tempting for reasons too numerous to list. I was told by a successful solo entrepreneur friend of mine (ESTJ) to avoid partners at all costs. I didn't listen then but hindsight is 20/20. My friend recommended getting other people to be investors or advisors if you need that, but never making a partnership. I see the wisdom in this now. I also recommend thoroughly doing your research on the market and incorporating before or soon after opening for business, and if you can avoid getting a loan. Start smaller if you have to and save money to expand, because a loan will own you and your life. That is what small business owners who have a loan tell me they feel.

 

[Sparrow]

Thanks for the good incite mademoiselle . Yea mom had a partner (her best friend), she ended up doing most of the work....they arent friends anymore . Where and how does one get an investor!!!!!?

 

[Bamboo]

I'm slowly establishing myself as handyman/small scale contractor. I have a few clients who I've met through working what just my weekend job at estate sales. Doing stuff like loading cars gave me a chance to 1) meet clients via one on one interaction, 2) demonstrate competency (of I'll note, somewhat unrelated work, but to some extent it doesn't matter so much) and 3) give them contact information. A card is a basic but important thing to have.

I'm doing a lot of work right now that I could probably get paid higher for, but that will net me referrals, which is another large component of my growth (about half my fresh work comes from word of mouth referrals). For instance, I just did a project with a lady who seems to have many people over who took an interest in my project. I'm sure I'll hear from people down the line who saw XYZ and could use some help. I also make a point to thank my clients who refer me to others.


Being organized - project organization and the other things, tools, materials, also sets me apart and gives me an advantage over other workers who may have similar skills but don't have the pieces in place to push their business to the next tier.

I'm honest. I don't take on work I'm not comfortable with, and I make a point to demonstrate my confidence (or lack thereof) in my ability to do a project that they show me. Since my work is somewhat technical, this is like finding an "honest mechanic" - someone who won't screw you over. People don't want to refer their friends to people they don't trust. This only helps me. I've seen a lot of guys who just jump into projects without really knowing up from down. They might get the initial "bite", but eventually people don't want to work with them when they see the end results.


I don't mess around with debt. I have none and have plenty in savings. For the most part, I have the tools I need - that is my major investment. They will fail and be replaced over time - don't buy junk. Your "tools" might be different, but if you rely on it, get something that will work and work well.

 

[rav3n]

When considering self-employment, consider the legal and tax implications of what type of business such as a corporation, sole proprietorship, LLC, partnership or others. I wouldn't try to figure your way around this without the professional help of a good tax lawyer and possibly a chartered accountant.

 

[Beorn]

When considering self-employment, consider the legal and tax implications of what type of business such as a corporation, sole proprietorship, LLC, partnership or others. I wouldn't try to figure your way around this without the professional help of a good tax lawyer and possibly a chartered accountant.

Good advice. But, if your lawyer isn't guiding you toward an llc they better be able to give you a damn good reason.

 

[rav3n]

Good advice. But, if your lawyer isn't guiding you toward an llc they better be able to give you a damn good reason.

It's more difficult to find seed investors if you choose to become a LLC. Why would they trust you with their money if you've stepped so far back from responsibility but have no proven track record?

 

[Beorn]

It's more difficult to find seed investors if you choose to become a LLC. Why would they trust you with their money if you've stepped so far back from responsibility but have no proven track record?

I'm confused. Are you talking about equity investors that will own a share of the company or those that will merely loan the company money? If it's the latter then the type of entity shouldn't matter as they can always require that the business owner personally secure the loan. If it's the former then low liability is something that is desirable in a company because the seed investor herself will only be putting her investment at risk and not her house and home.

Have you really heard that seed investors are put off by LLCs? Because that just seems bizarre.

 

[rav3n]

I'm confused. Are you talking about equity investors that will own a share of the company or those that will merely loan the company money? If it's the latter then the type of entity shouldn't matter as they can always require that the business owner personally secure the loan. If it's the former then low liability is something that is desirable in a company because the seed investor herself will only be putting her investment at risk and not her house and home.

Have you really heard that seed investors are put off by LLCs? Because that just seems bizarre.

Reliant on structure of LLC and jurisdictional differences (per State), managing members are also protected, barring fraud or proven deliberate misrepresentation.

 

[Beorn]

Reliant on structure of LLC and jurisdictional differences (per State), managing members are also protected, barring fraud or proven deliberate misrepresentation.

So what?

It's all the surrounding circumstances that matter.
Did the business owner already get a personally secured loan from a bank?
How much of their personal money are they putting at risk?
Have they given up a job?

I think all of these are better at showing the owner's commitment to the company rather than the legal entity chosen.

 

[rav3n]

So what?

It's all the surrounding circumstances that matter.
Did the business owner already get a personally secured loan from a bank?
How much of their personal money are they putting at risk?
Have they given up a job?

I think all of these are better at showing the owner's commitment to the company rather than the legal entity chosen.

You're assuming that all this information is relevant and ignore the core reason for LLCs. Also ignored is the operating structure of the LLC.

Investor beware.

 

[Beorn]

You're assuming that all this information is relevant

It's relevant to the following question you posed:

Why would they trust you with their money if you've stepped so far back from responsibility but have no proven track record?

and ignore the core reason for LLCs. Also ignored is the operating structure of the LLC.

Investor beware.

Look, every situation is different and this is why people should always consult an attorney. My point was that there are still a lot of older general practitioners that are ignorant of the rise of LLCs and will set business owners up in a partnership when an LLC would far better serve their interests. For many small business owners an LLC is ideal because of the limited liability, pass-through taxation, and small amount of paper work.

There are definitely advantages to forming a corporation over an LLC, but those advantages are only important in much bigger deals involving much more sophisticated investors and business owners.

 

[violaine]

I'm a fledgling small business owner. I have been involved in a small business before with a partner but his skill set seemed more suited to it than mine so we parted ways.

It's taken me a lot of time and research to get to the point I am with the new business I started but I'm not turning a net profit yet. The problem is that I haven't been able to devote the time needed to develop it so I'm thinking of devoting the next few months to it to see if I can get it up on it's own legs. (I don't really want to go into the details of what it is exactly yet, nothing very innovative but I enjoy the business immensely.) From seeing some of my friend's businesses fail, I think the most important thing is to make sure I have the resources to get the business to the point where it's profitable. I had a friend who had a great little business but because she didn't fund it properly, it collapsed about six months shy of when she would have started being profitable. :/

 

[rav3n]

Look, every situation is different and this is why people should always consult an attorney. My point was that there are still a lot of older general practitioners that are ignorant of the rise of LLCs and will set business owners up in a partnership when an LLC would far better serve their interests. For many small business owners an LLC is ideal because of the limited liability, pass-through taxation, and small amount of paper work.

There are definitely advantages to forming a corporation over an LLC, but those advantages are only important in much bigger deals involving much more sophisticated investors and business owners.

There are advantages and disadvantages to each type of corporation or partnership. And yes, we do agree on getting a professional involved. But to infer that LLCs are the best way to go for small businesses isn't necessarily accurate, particularly since there are jurisdictional differences. Also, from the perspective of being a managing member, there are also IRS salary caps which has its upsides and downsides.

As far as attempting to mitigate any commitment issues towards the LLC that members might have, particularly managing members, you can request personal guarantees that trump the benefits of an LLC. But who in their right mind would sign this, considering that we live in such a litigatious society?

Forgive the flipping back and forth between investor due diligence to managing investor due diligence. Hopefully it's laid out for easy consumption.

 

[INTPness]

^^This is why every INTP business owner should have access to an ENTJ within a 5 mile radius at all times. Just kidding. Sort of.

So I understand that there are jurisdictional differences, but let's just take your "average/common/run of the mill" LLC. As long as said LLC stays fairly small, then I'm not worried about anything and don't have any questions. But, let's say for discussion that said LLC suddenly gets a big contract that brings in ~7 figures in a short period of time (all at once, or even spread out over ~3-ish years). What problems could there be at that point for the owner/founder of the LLC? In other words, if bigger money came in, would their be reasons the LLC owner had wished he had gone with a regular corporation over the LLC structure?

 

[rav3n]

Since I'm not a lawyer, I can only give you my layperson's perspective. LLCs are flow-through entities for the purposes of taxation. With this in mind, retained earnings aren't permissible.

 

[Sparrow]

All of this is like a foreign language to me lol, thanks for your input! I'm clueless for the most part...keep the info flowing . I should go to more of the SBA meetings. Do you guys think loans are a good?

 

[Sparrow]

Sooo rather then starting big by opening a store front, I have been thinking of doing something on-line first. Anyone familiar with on-line retailing? I myself don't like to buy clothing on-line...but I guess people do. Any thoughts or info regarding this type of business?

 

[InvisibleJim]

All of this is like a foreign language to me lol, thanks for your input! I'm clueless for the most part...keep the info flowing . I should go to more of the SBA meetings. Do you guys think loans are a good?

Loans are good if you can pay off the loan to grow your business with a suitable margin over that loan.

This is why most business work the economics based on a Discount Rate based on a Working Actual Cost of Capital (WACC). The WACC follows the riskiness of the business. For new businesses or risky industries it is high.

There is a rather more complex argument of Loans-vs-Equity rather than 'are loans good?' The answer is: it depends how good the opportunity is and also ones preference for risk and partnership.

 

[Little Linguist]

Well, I'm "sort of" an entrepreneur. I say 'sort of' because I'm a freelance contractor: I work with other clients or businesses to acquire clients, but I'm solely responsible for managing my own time, doing my own work, and basically am not an employee, really.

At some point, I am thinking of shedding the 'middleman' completely and going out on my own, but in my business (teaching) it makes more sense to build a customer base slowly. I'll probably never be fully free from the middleman for part of my income, but that's okay. I like the stability that provides combined with the freedom I have.

So while I'm independent and do indeed have my own business, it's more in the service sector. Hope this helps. Feel free to ask any questions you may have.