What Type of Business Should I Start As?

Discussion in 'Starting a Business' started by JBMedia, Aug 27, 2014.

  1. JBMedia

    JBMedia
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    Hey everyone!

    Me and two of my really good friends have decided we want to start an outdoor apparel company. We have really good innovative ideas for new products that aren't similar to current products on the market. We're working on starting with a wholesale supplier of a fabric blend of shirts to start having cash flow coming in while also having donations coming out for everything sold.

    We are starting with about $10-15k in liquid cash. However, in order for us to do this and have production on our new products happen, we'll need investors, as the amount of cash we have currently is not enough to handle all expenses.

    What type of company would you suggest for us to start out as? We eventually would like to be a C Corp, however I'm a little worried that going in to secure the name as an incorporation will cause unnecessary tax issues seeing how we will be pre-revenue.

    Should we start by filing as an LLC? Also, is there anyway we can pique the interest of investors by being an LLC? If not, how hard is it to convert to a C Corp a couple years down the road?

    Thanks for any help or information. If you need more information to give me better advice, let me know and I'll try to answer the best to my abilities.
     
  2. OakMarkLondon

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    If you have a very good business plan and willing to give away a slice of your company you can advertise yourself on croudfunding websites where basically bunch of people will invest a small amount of money in return for part ownership of the business. The croudfunding comapny will serve as a middle man dealing with all the paperwork.
    Another option wold be talikng to some Investment Angels if your idea is viable you will get the funding and support from them.
     
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  3. WildWing

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    Great question! I have had a few friends start apparel companies. Start with an LLC. It's cost effective and protects you from liability. If you do decide to take on investment, the investors might suggest that you transition to a C Corp - it's easy; however, this process was quite expensive. Most investors would probably wonder why you are pre-emptively a C Corp if you haven't taken investment or have a fully or even partially funded business.
     
    #3 WildWing, Sep 24, 2014
    Last edited by a moderator: Sep 24, 2014
  4. LeroySimpson

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    It sounds good that you decided for starting a new business, but the fact is how to get it funded. Because if you are starting your biz then you surely want a good result as well.
    So, first and foremost thing is that first make a survey that what is the need of the customers and what they really want from a company according to that start your business, and for starting the business you also need investors.
    Make all the strategies related to your business and investors, and prepare a document that communicate ideas and information and if you are not getting any source for investing to your business then bank loans are the best option for funding a new biz.
     
  5. MikePeterson

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    Hmm, exactly knowing the needs of the customer and starting the business, and after that making strategy for developing your business as well as taking financial help with the investors is must and very important for your kickstarter business.
     
  6. Alexishost

    Alexishost
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    I suggest you to go for LLC.

    If your business currently operates as a sole proprietorship, changing to an LLC is in your best interest. For a variety of reasons-including the fact that an LLC protects the owners from the debts of and any judgments against the business-it's the preferred form of business organization.

    Until recently, the corporate form of business organization provided the only protection to entrepreneurs from the dangers of unlimited personal liability exposure. With the advent of the LLC form, business owners can now enjoy protection from any present and future liabilities or judgments against the business without having to incorporate. Furthermore, as the LLC form developed and became more widely accepted by individual states, the considerable tax benefits of the LLC form became even stronger.

    For individual business owners, the LLC offers a one-person LLC form, which is taxed as a sole proprietorship. In addition to offering the owner all-important limited personal liability exposure, the LLC retains important tax benefits of the sole proprietorship, such as: owner compensation in the form of distributions of profit, which are taxed at the individual owner's potentially lower marginal tax bracket (the tax rate applicable to the next dollar of taxable income the owner earns); and pass-through of business losses, offsetting the owner's other nonbusiness income.

    I hope it is helpful to you.
     
  7. Shield Funding

    Shield Funding
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    A lot of small business owners don't go for C corporation status to avoid having to tax profits at a corporate level and then a personal level. Especially if you are just starting out, an LLC should provide you enough coverage without assuming too much risk.
     
  8. abhi_garg

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    Fully agreed. There are tremendous business and legal implications involved in trying to start something "on the side". And once the government becomes aware of what you're doing, they'll stick their fingers in your pockets and take away All your rewards. Believe me, I know.
     
  9. Jybrael

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    I would recommend beginning as an LLC...you will have limited liabilities and should the company by any chance fail..(Which I hope it won't.) you will be able to learn a few good things from the experience and be better prepared for your next venture. Business is a risk...one must do the proper research in order to determine what will work and what will not..you also need to know what the customers needs and wants are. LLC will give you a slightly lesser risk than a C-corp would be plus you might also be able to find investors on crowdfunding websites like Kickstarters or other things for a share of the profits.
     

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