Posted on 02/22/2016 9:32:52 AM PST by Alberta's Child
The business incubator idea is a good one. There was an article about one of them in a recent Chamber of Commerce newsletter in my town.
I don’t know about where you are, but our Florida Board of Engineers has very specific (via Florida statute) requirements for engineering businesses. Make sure you understand any of those requirements. For example, here a business named John A. Smith Engineering must have John A. Smith, PE working for that business.
Good luck to you.
Very interesting. Thank you!
You might want to try contracting under W2 for a year to see if their is enough demand.
I’ve been doing it for 1.5 years and it has worked well.
Full on contracting in USA requires 30% to Social Security right off the top.
Also if you are going to jump around, Per Diem cam save you big bucks in taxes. (only good for 1 year without break)
1. Yes, I have run a business before -- and my current managerial position requires me to be on top of everything in my office anyway.
2. There is no purpose to renegotiating with my current employer. I'm not doing this for the money; I'm doing this for the independence from a bureaucracy.
3. Staying with my current employer will not help if we have 8 more years of economic stagnation. I will probably lose my job anyway by the middle of 2017 in that scenario.
4. The five years of income suggestion is a good one.
“Now the guy’s got Paulie as a partner. Any problems, he goes to Paulie. Trouble with the bill? He can go to Paulie. Trouble with the cops, deliveries, Tommy, he can call Paulie.
But now the guy’s gotta come up with Paulie’s money every week, no matter what.
Business bad? ______, pay me.
Oh, you had a fire? ______, pay me.
Place got hit by lightning, huh? ______, pay me.”
http://www.imdb.com/title/tt0099685/quotes
Also, while you have the time begin arranging your external resources to simulate a "corporate environment". So you don't have to do it yourself or research it later when you're very busy and an emergency arises, identify and qualify such support services as IT support, communications (high-speed Internet is really a "must"), sales/accounting (unless you've factored in these non-billable activities you plan to do yourself -- and which can consume unplanned large blocks of time).
Just a few "side" thoughts I hope you find worth considering.
1. I wasted my money on attorney fees when I first set up my LLC. All they did was go to the State’s website and filled everything out and got me a federal tax id. You can easily perform this work yourself.
2. You will need to create bylaws assigning individuals their proportion. This is allowed in Michigan.
3. I can work in other states without a problem. Since you are a civil I am assuming you have your state’s license. You will require reciprocity if required by another state. This is usually a nominal fee through the other state.
4. I started working out of my home and now have an office. I was able to write off my home expenses by the percentage of square feet my office consumed. Internet and phone 100%
5. If you are your only employee you are wasting your time with an attorney. You will need one if you split your ownership. Get good liability insurance. Repeat, get good liability insurance. Also QuickBooks. Saves a lot of time.
Good luck!
Make dead certain that you have a business reserve to run for at least a year, and personal resources for the same length of time. Your business will not turn a profit for a long time. Hard fact, best embraced soon.
Follow your cash flow like you are OCD. Ruthless, daily reviews of income and expenses, some of which should be abstracted and taken as givens. If you only review your numbers weekly you are goofing off and flirting with disaster.
Be courteous to but leery of vendors. Legitimate vendors will allow you time to think and consider and will accept ‘no’ as an answer. Hard sell pricks who won’t let up are shaking you down. You must have the resolve to say no, and also to cut your losses, no less than you need the daring to make your endeavor.
Have a business model in hand, and realistic anticipated objectives. If your business begins to decline, cut your losses before you are up against a wall. Closing a business can be almost as expensive as starting one. Know when to shut it down. Trying to make a last stand will make your recovery much longer, more difficult, and takes a deep toll on your psyche. I got this advice and ignored it. Don’t let that happen to you.
The SBA can if you are lucky provide some good counsel starting out. The guy I had I went to only when we were in decline, and it was too late to help. Had I gotten his counsel up front, the business probably would have prospered. With the exception of a single month, the sales kept increasing all the way up until I had to close the doors, and transfer the business for a nominal amount and a great loss. I ran out of sufficient reserves.
Have a much larger reserve than you think you need.
Reserve. Have one. Reserve, reserve, reserve.
Reserve. Big. Have. Do not tap more than necessary.
Be frugal.
Reserve.
Congratulations and good luck. I can honestly say that I have never enjoyed my work more, even though it did not pan out. I DID NOT HAVE ENOUGH RESERVE.
But I think you take my point.
:-)
If you are as careful as you claim, you’ll get specific legal advice from an attorney to whom you write a specific check. Excellent that you have your questions listed. Keep that list. That said, I will spew some.
The LLC structure sounds right. The corporation has some fairly strict rules that you have to follow as to meetings and officers, etc; and if you run afoul of those, the IRS (or other nasty legal authority) can often in effect force you to revert to sole prop. I don’t reco this for the small guy. The LLC does allow for later introduction of “partners”, but there are few terms in business use that are more damaging and destructive than “partner”...if there is no specific reference to “limited”. A “partnership” is a rotten form of biz organization. Terrible.
Though you may know a lot about your intellectual or art field, you may not in fact have as much business savvy as you profess. Shun overhead and shun employees, that’s the best small biz advice I can give you.
If you are NOT going to have a businesslike (rented) office then make sure you give your clients good reason to work with you. Somewhere in that organization that hires you is someone who has to justify the idea to the rest of the organization of working with a guy out of his home.
I would profoundly, profoundly suggest undergoing some sales training. Unless you have a book of contacts ready, willing, and able to do business with you.
I was a very small guy working out of his house selling very expensive equipment for a time. I was able to do it because I could respond to problems immediately, well before the “big boys” could. And, the equipment WAS sensitive, and DID fail and I COULD fix it or swap it out with amazing speed in most cases super fast. So people liked doing biz with me. But it took me a long time to be able to have the people skills that is selling, modern selling.
You will NOT be able to NOT know about selling.
Yes. Will likely have my P.Eng. within the next few months, too.
“4. There’s no disadvantage to using your home address EXCEPT for the fact that your address then becomes a matter of public record for your business.”
That is a VERY important point. Sooner or later you will have a customer or client who is stark, raving, rabbit boiling insane. Usually they can be deflected. Get an office if only an office share as soon as you can.
I am a very good salesman. I am a better salesman than I am an engineer, in fact. LOL.
My type of work is generally low risk. I operate in a hazy area between planning and design, so most of my work — even if it requires a P.E. — does not require me to sign and stamp designs.
I highly advise Subchapter S. Talk to your CPA. I had a Subchapter S for 17 years and it gives you a lot of ways to go.
“My advice is to not do it. Have you ever run a business before? I would at least hold off to see how the election turns out.”
Negative as it is, that is not unreasonable advice. I set my ship into the teeth of the Obama economy, defiance in my heart. We sank. If your margin is thin, consider this advice well. Maybe keep a day job and ease into this.
Good advice. My market area is the entire Northeast, and many of my potential clients already know me by name and reputation. I’ve authored several articles and publications that are considered standard industry guidelines in my field.
Very good. Thank you!
Excellent advice. Thank you!
Thanks! I will check that out over the next couple of days.
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