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So you want to start a web business
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well let me tell you something.......
Part I
© 2002
John Bubula
Like
a lot of people, we often thought about having our own
business, but weren't sure what to do. One day my
wife, Kim, was talking to her brother, Chris, and he started
to talk about his six pack abs.
Not to let an opportunity to needle my brother-in-law go by,
I told him he didn't have six pack abs, but had twelve pack
abs from all the Budweiser he drinks. Of course this
brought on an insult melee, which turned into a
brainstorming session on a company called 12 Pack Abs.,
which offered humorous athletic apparel.
As the discussion progressed, we felt that it was a novel
concept to offer this kind of athletic apparel, but
"Abs" was too narrow and thought Gym would be more
encompassing. From that point on a business concept
was born. After that we met almost nightly, getting
ideas for different shirt designs. When we had ten or
so, Kim, who is an artist, drew up color pictures so we
could see the designs. What transpired below are our
experiences in setting up our company, 12 PACK GYM, Inc.,
and our web site www.12packgym.com.
Domain Name
Since none of us ever put together a business before, the
prospects of doing so appeared daunting. However, we
figured we were a reasonably smart group of people with
backgrounds in business, art, management, and distribution.
The first order of business was to secure a domain
name or internet address. I got a
recommendation from a coworker.
I looked up that company on the internet, and they were
offering a two year registration for forty dollars. I
did a search on www.12PACKGYM.com,
and it came up as available. The price seemed
reasonable, so I signed up for www.12PACKGYM.com
domain name. I later came to learn that we could have
gotten that cheaper if we had researched other companies
that offer that service.
What type of business
The next order of business was to figure out what type
of business we wanted to be. Since there are
three of us, our choices were Partnership, Limited Liability
Company or L.L.C., or a Subchapter S Corporation. Each
entity has its own advantages and disadvantages.
Partnerships are relatively easy and inexpensive to set up.
The downside to them is you have unlimited liability.
With an L.L.C. you have the income treatment advantages of a
partnership, but you have limited liability. The
downside to these is that they are more complex and cost
more to set up. Also, there are differences in how
L.L.C.'s are treated depending on what state you are formed
in and doing business in. In addition, if you get into
legal trouble, because of their relative newness, there is
limited case law for these entities. The last type of
entity and ultimately the one we went with is a Subchapter S
Corporation. These are actual corporations that you
own stock in where the IRS treats income distributed to the
shareholders like a distribution from a partnership.
You have limited liability. There is very strong case
law for this type of entity and the rules are the same no
matter which state you are in. The downside to these
is that they are complex to set up; there are a host of
different filing requirements with the state you are
incorporated in, and they cost more to set up. We set
our S Corporation up with the assistance of a company called
Par Corp Services, LTD, which I found on the internet.
For a fee of approximately $400.00, they filed the necessary
paperwork with the State of Illinois to incorporate 12 PACK
GYM and answered questions we had.
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Sales tax and payroll
There are also additional things to be aware of when doing
business. In Illinois we have to collect and remit sales
tax to the state. Because we are so small,
this is done on a quarterly basis. The state contacted
us shortly after we were incorporated.
They also need to know if you have employees for payroll tax
withholdings. Another beneficial thing to get from
your state is a tax exemption reseller's certificate.
You contact your state government, in Illinois they have a
web site, and apply for a tax exemption number. Once
issued by the state, you can use it with your suppliers to
not pay sales tax on materials used in the creation of your
product. The theory is that the tax will be collected
and remitted to the state when that product is sold to the
end user.
Be careful only to use this for things that are ultimately
sold to the end user, otherwise, if audited you could face
back taxes, penalties, and interest. Look through your
state's web site or call them. They are happy to help
you with making sure you are following all the rules and
doing things properly.
Suppliers
Another critical element to your business is lining up
suppliers for the raw materials used in your
product. Kim went on-line and researched dozens of
clothing companies and transfer companies.
We requested information from them and talked to the ones we
were interested in using. Most of them are wholesalers
and require the reseller's certificate number. If you
do not have one, they will either charge you tax or not sell
to you. I would also suggest you find different,
multiple companies that offer the same or similar products
that you can use in production of your product.
This is just in case one is out of stock or goes out of
business, you have another place to go to get what you need.
At this point, you will need to also think about is
packaging.
A good starting point for packaging materials is a company
called Uline. Generally, their prices and selection
are the best and you receive your order the next day.
Shipping
Another decision you will have to make is on shipping.
Who will deliver your goods to the customer? Chris
looked at all the big names like Federal Express, UPS, and
the U.S. Post Office. For our purposes the U.S. Post
Office Priority Mail was the best solution.
Accounting
Keeping track of your company's financial information is
critical. There are numerous accounting software
products on the market for small business.
Depending on the size and complexity of your business, and
your own comfort doing accounting, will dictate to a degree
what type of software to buy. With our business I
looked at Quick Books and Peachtree. Of those two,
Quick Books is a good program, but geared for someone not
that familiar with accounting. Peachtree, in my
opinion, is a little more sophisticated and has a better
inventory module. I priced out Peachtree on-line and
purchased it for around $225.00.
In conjunction with all the above it is advantageous to have
a business checking account. We called around to many
different banks and received information on all their small
business checking accounts.
We compared fees and services and decided on an account at a
local bank that offered free small business checking if we
write ten checks or less each month. Any checks
written above that limit we are charge a fee per check.
We can also, at any time, roll that checking account into a
regular business checking account, but we will be subject to
additional charges.
To be continued in the next issue.
1. Selling over the website
- website design
- credit cards
2. Marketing
-traffic
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John Bubula
CFO
12 Pack Gym, Inc.
http://www.12PACKGYM.com
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