Thread: How to go Legit

Going to be starting two online businesses soon.

1) I will be selling services

2) I will be selling products


What is the best way to go about this while still being legit and staying out of trouble.

I took a business degree but never learned the how to's on starting a business... Only learned how to manage/market a business.


Not really sure of the legalities of an online business and what I need to do to make it "Legal"

In the US this matters more by state than on a federal level.
Remember though you need to be aware of laws for each state you ship to. While this is next to impossible, you need to try to be aware of them as when you ship acrossed state lines the other state can prosecute you, plus it opens you up to federal problems as well.

Most states however require at minimum some form of sales ID/certificate, most states also require you to collect sales tax on sales made inside your state, some local communities and counties will require you to collect tax as well.

Best bet would be to consult your local state commerce department. An accountant would also be highly recommended.

Damn all this just to sell something...

I live in MA

Guess ill start researching

Originally Posted by xsnoboard

I live in MA

Really, where in MA? I'm in Quincy.

MA has tons of laws and it depends on what you want to do. If you are operating your business with your own name, you just need a license from your town and a bank account.

If you want a company name, but don't want to pay a lot you can do a DBA. You come up with a business name which is something like "My Company d/b/a My Real Name". You go to your town hall and apply for the dba license, then you go to your bank and open a bank account.

If you want to do a Corporation, LLC, etc. Those are more complicated but provide a lot more benefits if you earn more. For this, you should check out the mass.gov website, I believe they have some resources to help start your business.

^ where DBA means "doing business as"

Originally Posted by axemedia

^ where DBA means "doing business as"

sorry, yes, not to be confused with DataBase Administrator


DBA = doing business as
LLC = Limited Liability Corporation
LLP = Limited Liability Partnership
Corporation can be a couple different kinds depending how it's setup.

I am going to be running two online businesses.

1) Selling Services (Myself Only)
2) Selling Sunglasses (Myself and My father)

Should I operate both under my own name? And my father do the same?

Should I do a DBA?

What are the limitations on doing business under my own name?

Does it stop me from running my sunglass store under niftyshades.com?


I live in Pittsfield

Originally Posted by xsnoboard

I am going to be running two online businesses.

1) Selling Services (Myself Only)
2) Selling Sunglasses (Myself and My father)

Should I operate both under my own name? And my father do the same?

Should I do a DBA?

What are the limitations on doing business under my own name?

Does it stop me from running my sunglass store under niftyshades.com?


I live in Pittsfield

DBA on the most basic form, it's your ass instead of the company. Should you get sued they can go after EVERYTHING you own. With an LLC or similiar setup it gives you some protection.

You can do DBA under niftyshades.com as far as I know.

I run dozens of sites, several retail stores, all under the same parent LLC.

So if i go with an LLC it might be easier because I can run other businesses off this one.

I don't see where I would get sued for everything I own for selling sunglasses.

but ya never know

You can run more businesses off of DBA, the main difference is you are personally responsible for everything. The business is you.......

What if someone gets hurt wearing your sunglasses, someone could claim you falsely advertised, etc, etc, It can happen How about the services you offer, etc.

There are also different costs and taxes associated with each of them. It might be best to talk with an accountant, especially if both you and your father are involved. Some form of LLC/LLP might be better because it provides both of you protection. But, like I said, best to talk to a tax pro, possibly also a business consultant.

Originally Posted by Cyberbite

There are also different costs and taxes associated with each of them. It might be best to talk with an accountant, especially if both you and your father are involved. Some form of LLC/LLP might be better because it provides both of you protection. But, like I said, best to talk to a tax pro, possibly also a business consultant.

Possibly even an attorney

So many get into online ventures thinking it's easy money, w/o thinking ahead of all that is necessary. Good to see you wanting to know what you need first..

Well if something was wrong with the sunglasses and I got sued. Wouldnt it get put on the wholesaler? I dont make the sunglasses. And I advertise them just as they advertised them to me.

Services I will be offering... check LC Media Designs

Originally Posted by xsnoboard

Well if something was wrong with the sunglasses and I got sued. Wouldnt it get put on the wholesaler? I dont make the sunglasses. And I advertise them just as they advertised them to me.

Not necessarily as the customer bought them from you, they follow the money trail.

Services I will be offering... check LC Media Designs

Even if unlikely there is always the chance, even if remote you could be sued. Or how about not sued but even other financial difficulties all goes on you, not the business. Being sued is only one possible way to lose everything, how about simply falling behind in bills?

In a DBA you are a sole proprietor. When you are small the legal liabilities are not much of an issue, typically.

The income the business makes is part of your personal income so it gets taxed at your personal income rate. You can of course deduct your expenses.

As your business grows you may want to incorporate (LLC). Then the business is a separate legal entity. The money it makes gets taxed at the corporate rate, often lower than personal rate. You would then pay yourself a salary which then becomes your personal income and is an expense of the business. Once its making significant money you can pay yourself a base salary and keep excess cash in the business where it gets taxed less. And you will have more opportunities for expense write offs.

Example: the business makes $100,000. You pay yourself a salary of $50,000. Your 50k gets taxed at your personal rate. The business is left with 50K and that gets taxed at the corporate rate (ignoring other expenses). The business can lease a vehicle, pay your gas bill, cell phone, if you have a home office then that portion of your house or apartment (by square footage) can be written off as an expense in relation to your rent or mortgage. So you have a personal salary of 50K but are able to have a lifestyle of someone making 60 or 70 as the business covers some of those expenses. Plus your building equity in the business you own (the extra money that gets taxed lower).

Now with that extra money in the business account you can pay yourself a dividend as a shareholder of the company, from time to time. These dividends are not income so they get taxed at an even lower rate than your personal income rate. But they did already get taxed once at the corporate rate, they cant be expensed away.

As soon as you want to go from a DBA to an LLC your best off hiring an accountant. Their initial consultation will outline all that you need to do. Then you pay them a relatively small fee to do your books each week, or month, or quarter, or yearly depending on your needs. Don't be afraid to pay out money on an accountant. They will save you many more dollars in the long run.

As for legal liabilities, its a matter of risk assessment. When you are small and starting out your risk of being sued is lower (less customers = less opportunities to piss someone off) and you have less to loose should you actually get sued. Weight that versus the costs of incorporation and/or insurance. As soon as you see significant money coming in then you must takes more steps to protect yourself. If still DBA then get insurance, then next step is to incorporate.

Maybe the business with your father should go LLC sooner as I'm sure he has much more to loose than you do.

Part of risk assessment is to think about what it is you could actually be sued for. If selling sunglasses and a customer is not happy and feels you were negligent or whatever, how much can they reasonably sue you for over a low priced item. Are they going to take your house over a $100 pair of sunglasses. Nope.

Originally Posted by axemedia

As for legal liabilities, its a matter of risk assessment. When you are small and starting out your risk of being sued is lower (less customers = less opportunities to piss someone off) and you have less to loose should you actually get sued. Weight that versus the costs of incorporation and/or insurance. As soon as you see significant money coming in then you must takes more steps to protect yourself. If still DBA then get insurance, then next step is to incorporate.

I've been using an attorney and accountant since way back when I was a DBA. I keep them on retainer. All my contracts are either drawn up or reviewed by my attorney. And you wouldn't believe how many times they have come in handy.

Limited liability company - Wikipedia, the free encyclopedia

BTW an LLC is actually a company, it is not a corporation..

I dont see where I would fall behind on bills. The only bills I will have for the business is webhosting and domain name. This business is just sidework.

Originally Posted by xsnoboard

I dont see where I would fall behind on bills. The only bills I will have for the business is webhosting and domain name. This business is just sidework.

It was just an example.
There are always things that can happen in business, especially things start to grow, you spend more in inventory/advertising all of a sudden things crash.

Having your ass protected is always a good thing.

Originally Posted by GRIM

Limited liability company - Wikipedia, the free encyclopedia

BTW an LLC is actually a company, it is not a corporation..

aha, I was speaking in very general terms (as i often do).

this is interesting;

Check-the-box taxation. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation, providing much flexibility.

Originally Posted by axemedia

aha, I was speaking in very general terms.

this is interesting;

It is a great option, it's why my business is an LLC

Originally Posted by xsnoboard

I dont see where I would fall behind on bills. The only bills I will have for the business is webhosting and domain name. This business is just sidework.

If you sold a service/product that caused some type of damage (monetary or other), and they decided to sue you. In this country people always sue for millions even when that may not be what they paid.

So if they do and you're operating as a DBA, they can come after your business, your home, your car's, your personal bank accounts, etc. They can go after anything with your name on it.

With all the other types of businesses, you are separating your personal assets from the assets of the business. So the worst that would happen, is they bankrupt the business, but they could not touch your personal assets.

Again, time to talk to an attorney and accountant, possibly even a business consultant.

Thanks this has been alot of help. I dont want to make things complicated at the start. It all depends if the business takes off. Maybe I will do business under my own name or a DBA.
Then if things take off i will incorporate.

Now say me and my dad both do business under our own names. We can still work together selling sunglasses. Everything is split 50/50. He just has to claim his earnings and I claim my earnings.

Originally Posted by xsnoboard

Now say me and my dad both do business under our own names. We can still work together selling sunglasses. Everything is split 50/50. He just has to claim his earnings and I claim my earnings.

You'd have to ask an accountant. If you're selling them on the same site, that would/should be a partnership and can get legally tricky.

yeah thats what is confusing me on what I should do.

Maybe I will just incorporate my own business right away....

Hire him as an employee but go 50/50 with him.

Then i can still run my other website which offers services under this llc

xsnoboard added 43 Minutes and 50 Seconds later...

Or would it make more sense to setup a DBA for my sole business

and setup another DBA with my father for the other business.

If either one grow. Then incorporate.

Originally Posted by Cyberbite

I've been using an attorney and accountant since way back when I was a DBA. I keep them on retainer. All my contracts are either drawn up or reviewed by my attorney. And you wouldn't believe how many times they have come in handy.

Care to give us an example of sticky situations Cyberite?

Originally Posted by xsnoboard

Well if something was wrong with the sunglasses and I got sued. Wouldnt it get put on the wholesaler? I dont make the sunglasses. And I advertise them just as they advertised them to me.

What's the worst that can happen? Probably not much, but you do hear of crazy stories of people slipping on stuff in shops that they dropped themselves, and then they sue the shop! :sshocked:

Imagine those same stupid people using your sunglasses, wearing them at night, walking down stairs in a dark house... getting into fights...ow! I've got glass in my eye!....the possibilities are endless, and they might want someone to sue.

Don't underestimate the stupidity of people (or should that just be stupid people?).

My father is going to be speaking to his lawyer this week. He has done an LLP before.

As far as them wearing it at night and falling. That is solely their fault. They can try to sue but most likely would lose the case.

xsnoboard added 2 Minutes and 7 Seconds later...

Another question that arises is Do i have to tax certain states? How does it work? They pay me the tax , So i have to keep track of how many people got taxed in what state? Then when its tax time how does it work?

Originally Posted by xsnoboard

Going to be starting two online businesses soon.

1) I will be selling services

2) I will be selling products


What is the best way to go about this while still being legit and staying out of trouble.

I took a business degree but never learned the how to's on starting a business... Only learned how to manage/market a business.


Not really sure of the legalities of an online business and what I need to do to make it "Legal"

Obviously dont buy hot goods

Originally Posted by xsnoboard

Another question that arises is Do i have to tax certain states? How does it work? They pay me the tax , So i have to keep track of how many people got taxed in what state? Then when its tax time how does it work?

Typically you are required to collect state sales taxes only for residents in the state that you are doing business in. As in the state where the business is located. Other states outside your own don't pay those taxes, and you should not be collecting them.

Exact rules will depend on your state. I imagine its more or less the same in the US as it is here in Canada. You collect the tax, and remit it to the tax man quarterly (every 3 months). You even get to keep a small percentage (very small) as payment for the extra paperwork you need to do to keep track and submit taxes to the state.

Every question you ask here will need to be answered in more detail, as it pertains to your business, by an accountant. But by all means keep asking, our generalized info will allow you to know more about what your accountant is talking about and allow you to ask him/her better questions.

Yeah I am just trying to get a general understanding of all this. But I have seen sites where people from certain states that are ordering have to pay sales tax.

My business will be strictly online... At least for now.

People outside of your state 'unless you do actual physical business or locations in their state' follow their own state laws. In many cases they are required to report the transactions in their tax returns, or as in sales and use tax. It is not up to you to do this, the responsibility falls on their shoulders.

GRIM added 1 Minutes and 2 Seconds later...

Originally Posted by xsnoboard

Yeah I am just trying to get a general understanding of all this. But I have seen sites where people from certain states that are ordering have to pay sales tax.

My business will be strictly online... At least for now.

Yes but it will be physically located in one state

Originally Posted by GRIM

Yes but it will be physically located in one state

And thats not the state the hosting server is located. It's the state where the business mailing address, and bank account is. In other words, the state you live in.

Originally Posted by axemedia

And thats not the state the hosting server is located. It's the state where the business mailing address, and bank account is. In other words, the state you live in.

Yes, where his business is.
Not necessarily the state you live in, some might go acrossed state lines for their business. 'rare I know' but it does happen.

Sounds good thanks for clearing things up. I have learned alot today

Originally Posted by GRIM

Yes, where his business is.
Not necessarily the state you live in, some might go acrossed state lines for their business. 'rare I know' but it does happen.

Nevada and Delaware are popular places to incorporate a biz. I don't know the details but those states must have some very lax laws, or lower taxes or something. Seems Nevada LLc's are all the rage.

Originally Posted by Halobitt

Care to give us an example of sticky situations Cyberite?

Talk to any business attorney, this stuff happens every day to businesses.

I've been lucky that I have used professional contracts. I regularly get contracts for developing web applications. I always get contracts drawn up detailing exactly what the customers need right down to specific specs. We go into great detail to make sure that we document everything. After the contract is written up, we then review the contract together and sign off on each item to make sure they understand what I'll be doing.

I can name 5 specific times when I've done contracts where the customer came back and tried to change the specs after the project was done to add more features or change the way the features worked. If I didn't get a signed contract, it would be my word against theirs and I would probably end up eating the extra work. By keeping them to the contract I can sit down with them and negotiate the additional requirements.

One thing you don't want to be...

Too legit....Too legit to quit....

Sorry, I couldn't resist...

Ok MC Hammer.


Anyways... Good info Cyber

Originally Posted by Halobitt

Care to give us an example of sticky situations Cyberite?
What's the worst that can happen? Probably not much, but you do hear of crazy stories of people slipping on stuff in shops that they dropped themselves, and then they sue the shop! :sshocked:

Halobitt, We like in a country where coffee cups have warnings saying "caution hot" because people have burned themselves on the hot coffee they bought.

Originally Posted by michelle

Halobitt, We like in a country where coffee cups have warnings saying "caution hot" because people have burned themselves on the hot coffee they bought.

.....and sued for lots of money.

I remember the case where a lady sued McDonalds because the coffee burned her.