Startup Business Structure

Discussion in 'Starting a Business' started by eattrig, Mar 6, 2012.

  1. eattrig

    eattrig
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    My wife and I are trying to decide the best method to open a home-based business (or businesses). I am currently employed as a software engineer and I have been writing software on the side since 2009 (iPhone apps) from our home. I will keep my job, but I would like to make my software business legit. Also, my wife has recently entered into a contract as an independent sales consultant for a major gift bag seller. She is currently a homemaker but would also like her business to be legit.

    We've read quite a bit about small business, but we can't decide whether it's smarter to open one sole proprietorship, two sole proprietorships, a partnership, or a qualified joint venture. We won't have employees or inventory (her sales go directly through the seller's website, and mine are more of a service), and our risk level is very low, so we believe the LLC and corporation routes are unnecessary. Our businesses are completely unique and likely won't share any resources, so we're thinking one sole proprietorship is probably out of the question, too. And since our marriage is already a "partnership", we're thinking two sole proprietorships is the correct route, but we need some guidance. We live in Texas, which is a community property state, and we've read some things regarding being able to start a co-sole proprietorship.

    We have many, many other questions, but we'll start with the most important one - what type of business(es).

    Thank you very much in advance.
     
    #1 eattrig, Mar 6, 2012
    Last edited: Mar 6, 2012
  2. ThirdSEO

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    Texas, my home state! Such a great state...

    I'd say you two are already pretty informed on the subject and are heading in the right direction already. I'm usually a fan of the LLC but I believe that two separate sole proprietorships is the way to go in this specific situation, although not enough information is provided about your software company to enable me to make a sound recommendation on the subject of LLC vs. SP (for that company in particular). Software companies usually favor the limited liability of the LLC. Since your two companies aren't similar, it'd probably be best to keep both of them separate just for the sake of organization for things like accounting and bookkeeping. If you two were running similar businesses this might be a different story, but because you are both operating your businesses independent of each other it's probably best that you file for two separate sole proprietorships. That's just my opinion, though.
     
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  3. eattrig

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    Wow, thanks for the quick response. My software "company" has currently only created one app and it did not make much money. Of course I have some ideas as to how to change that :)

    Do you consider there to be high risk with software companies?

    Also, do you know of any rules that would prevent us from starting just one SP? I'm just wondering if it might save us some money come tax time, including a lower cap on Social Security (since it would only be "one person") and less to use an online tax agent like TurboTax for the same reason. I could always keep separate books in my system and just combine at tax time. Of course, I could easily be missing something obvious.

    Thanks again.
     
  4. ThirdSEO

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    There's always risk with software companies when you publish software and make it available to the public, especially if your applications are directed towards businesses. People might use your software in ways that you hadn't intended for them to use it, which can sometimes be damaging to a company or individual.

    I don't think there are any rules that would prevent you from operating under a single SP. When talking about sole proprietorships and partnerships you're essentially talking about the same "legal" business structure so it ultimately comes down to personal preference. It's when you get in to LLC's, S-corps and corporations that things start to get more complicated. SPs in Texas only cost around $10 (I think) and are pretty open in terms of what you're allowed to do and how you want to conduct your businesses. TurboTax is a great program and I've seen many people use it effectively. As long as you keep separate books and separate bank accounts (which could be an issue with a single SP, don't know if you can have more than one bank account assigned to a single SP) it's really up to you and your personal preference.

    It seems like you both have done a decent amount of research, which is more than most can say they did when starting their own businesses. A single SP or two separate SPs is the difference between a few $10 bills so you shouldn't worry too much about them. The fun stuff comes after you get passed the business structure and start running your business :D
     
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  5. JJBarker

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    Hello, good day eattrig.... a good start up in a small business requires mastership in every aspects of the business that you would like to put up. For me, it was a great idea to put up a business that you and your wife are business partners. Furthermore, your experiences in your work would contribute a lot of ideas on your business so as your wife in sales. However,i dont think two sole partnership between you and your wife will work. This is because even though it will only be a small business, it should always require someone who you would like to rely on every aspects of the business. In my opinion you should hire someone who has the knowledge on every aspects of your business.

    financialpitfalls.com.....this website should help you in starting up your business....^_^
     
  6. eattrig

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    ThirdSEO - thanks again for the helpful insight. I hadn't considered that scenario yet (regarding someone using the software in a different manner than I intended). Could we start an SP and later, if we think our risk level has or may increase, change it to an LLC?

    Also, do you know what the real value of opening a business checking account is? For some reason, I can't quite understand how it would differ from just opening another personal checking account (or probably two - one for my software company and one for my wife's sales company) and using that for our business-related transactions.

    Yes, I can't wait to get it up and running and stop worrying about these no-fun (yet necessary) details.

    Thank you.
     
  7. ilovedesign

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    That's great that you're taking a lot of time and effor to think things through. Unfortunately I am unable to give you professional advice, but it looks as if you're on the right track anyway. Just make sure that while you make detailed and foolproof plans, don't be afraid to take reasonable risks now and again.
     

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