I was hoping that my 100th post was going to be more memorable than this. The reason that I haven’t been blogging more is because I have been wrapped up in governmental red tape. I have been putting into place all of the necessary documents to incorporate my online company.
The first hurdle was to decide what type of company that I wanted to develop. Since most of my sales were going to be derived online, I thought about going through a simple incorporation or just a sole proprietorship. The problem with this type of structure is that you have fewer legal protections and it is harder to separate your personal finances from those of your business should something go wrong with the business. The benefit of this structure is that it costs less to develop.
But I was afraid that I was being myopic by not looking at the bigger picture. What if I wanted to get investors to help take the business to the next level? I have already received overtures from some big moneyed people for me to work for them in their businesses. What would happen if they would want to invest in my lowly adventure?
I finally decided to create an LLC. Of course, this costs more money in NYC because you have to publish an announcement of your company in two sources for six consecutive weeks. The first quote is for $700 for one of the newspapers. This particular newspaper is a requirement from the Secretary of NY State.
I have an EIN (Employer ID Number) now which was retrieved online and was free. This means that I can start paying payroll and receiving and paying payroll taxes. Now I am waiting for my NY sales tax certificate to come through. Once I get this back, I will be able to apply for my resale tax certificate which will allow me to not have to pay NY sales tax on items that I purchase for my business.
After all of this happens, I will be able to set up my ETSY shop. It will probably take me 10 years of ETSY sales to recoup the monies that I am spending.
4 comments:
Wow, do you really have to do all that to set up an Etsy shop?? Good luck!
Wow, you're going big time. I'm also wondering if you had to do all that for an etsy shop. Wouldn't a sole proprietorship work too? That's what I have. (Although I don't have an etsy shop.)
The problem is the state tax issue. If you are on etsy and sell to anyone in NY state, you are required to collect sales tax and then pay it to the state. An Etsy store will charge sales tax but won't pay it for you.
The bigger problem with a sole proprietorship is that you get taxed twice on your income taxes. You get taxed on your business income and taxed on your personal income for the same amount of money that is made. For example, if you make $10,000 as a business, you get taxed on that as well as taxed on the personal income derived from it. So--going simple (aka sole propietorship)costs you more money in taxes.
I've also been trying to determine what I want to do on that issue. Although I always hope to make some cash, it is unlikely I'll make enough to make any big difference either way!
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