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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20
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Last Post Sep 20, 2007 11:07 AM by: deirdre@ebay.com
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deirdre@ebay.com
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Aug 31, 2007 12:35 PM
Topic: Member Workshop: 10 Steps to a Well-Structured, Well-Protected Business on eBay

Host: businessbymegan
Date: Thursday 09/20
Time: 10:00 a.m. to 11:00 a.m. Pacific time
Location: Workshop Board

Description: Do you "get" that running your business as an LLC or a Corporation can help lower your taxes and protect yourself legally ... but don't where to go from there? Or, do you understand the basics but have a few questions? Then this workshop is for you! We're talking "why should I" and "how do I," so bring your coffee and all those questions you've been dying to ask!

Cheers,

Deirdre
eBay Community Development
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:09 PM
Hi there! My name is Megan Hughes. I'm the owner of a business structure and maintenance company, called Business First Formations, Inc.[/url]Link[/url] I've been a paralegal for 20+ years, up until starting my own business in 2003.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:09 PM
Many of you have attended workshops led by my friend, mentor and business colleague, Diane Kennedy. She's the co-author of the book, TaxLoopholes for eBay Sellers. I contributed a bit of material to that book, and I'm the referral source she mentions when you're getting ready to plan and set up your business structures. I also help Diane with her monthly workshops - which is a roundabout way of saying how I wound up here today, hosting my very first workshop! It's very flattering, and I have to give thanks to the folks at eBay for inviting me.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:10 PM
Because I set up and maintain business structures for a living, that's, naturally, the topic of my workshop. This is a place where I want you to bring all those question's you've had, but have been afraid to ask, or haven't know who to ask. Things like "What's a resident agent?" and "What's the difference between treasury shares and issued shares and why does it matter?" and "Why do I need to do Annual Minutes if I'm the only person in my business?" But I was also a rookie business owner back in 2003, and the other thing I want to share with you today is how to steer clear of start-up mistakes that can haunt you for years (just trust me on this …)
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:10 PM
Before I get started though, I need to make something clear: I'm a paralegal, not an attorney. That means I have a ton of information learned over the years, but everything I tell you here today (or any other day for that matter) can't be considered legal advice. I can give you plenty of information, suggestions and guidelines, but when it comes to professional tax or legal advice you need to go to a professional, preferably licensed to practice in your area.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:10 PM
All right - with that out of the way, let's dive in.

Talking Point #1: When is it time to incorporate? This is a question I get all the time in my business, both from rookie business owners and folks who've been running financially successful businesses for years. My answer is (Diane will love this) - it depends. It depends on how much money your business makes. It depends on how much other income you make. It depends on how big your asset portfolio is, the type of business you do, how you plan to grow it, whether you want to sell it down the road, and so on.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:10 PM
In the early days, if you don't have much income and don't own a lot of assets, a sole proprietorship can work. There's little paperwork, and you don't have to keep any really detailed records - my husband ran his eBay business for the first 2 years on a single Excel spreadsheet. Yes, he did pay extra taxes on his income, but his income wasn't big enough that it made a big difference.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:11 PM
The downside is personal liability. In a sole prop, you've got no protection from lawsuits. Why would you get sued? Well, the most common reason I can think of would be that you got into some kind of accident, or got in over your head financially and were sued by creditors. After all, business owners are supposed to have stuff, right … even if they happen to be working out of their basement selling used items on eBay.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:11 PM
So how does incorporating protect you in these cases? Well, it won't necessarily save you from a lawsuit, but it can help to shield your personal assets from your business, and vice-versa. If you're sued personally, your business is protected, and if your business is sued, your personal assets are protected.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:11 PM
Will insurance cover you in many cases? Yes, hopefully. But a business structure is a great back-up. Besides, as Diane tells people at least once a month in her workshops, sole proprietors are about 10 times more likely to be audited than incorporated business owners. Those are the IRS's own figures, btw.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:12 PM
So what would I do in your shoes? Well, I'd look at two things: how much I've got in assets, and how much money the business is making. If I've got some equity in my home and a few other assets tucked away, I'd make the jump. If I look at my business income, my test is to look at how much it will cost to incorporate versus how much I'm paying in self-employment tax. If my incorporation costs are more than half of what my self-employment taxes are, then I'd suggest making the move.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:12 PM
(Free tip: If you're a hard-core sole proprietor, or you live in a state like California which has a nasty little hidden $800/year tax on businesses, at least consider filing for a homestead exemption to protect some of your home equity in the event of a lawsuit. I've got a free chart for everyone who wants it that sets out homestead exemptions in your state. If you want it, email me at Link with the words "homestead exemption" in your subject line).
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:13 PM
Talking Point #2: What's a Corporation? This question follows directly on the heels of "Why should I incorporate?"

Here's the deal with corporations: they have shareholders (who own it), officers (who run it) and directors (who watch the officers on behalf of the shareholders). Officers, directors and shareholders can all be the same person, or you can have many people involved. Shares represent your ownership percentage, and only those that are issued count.
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:13 PM
Pop Quiz!! Say you're the only owner of a corporation that has a total of 100 shares in its treasury (a treasury is the total number of shares your corporation is authorized to issue and is set at the time you file your incorporation papers). You issue yourself 1 share. Are you a 1% owner, or a 100% owner?
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businessbymegan
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10 Steps to a Well-Structured, Well-Protected Business on eBay - Sept 20

Sep 18, 2007 3:13 PM
You're the 100% owner of the corporation, because the only shares that count are the ones that are actually issued. Those other 99 shares just kind of hang out there in never-never land until you issue them. So why don't you just set 1 share in your treasury? Because you never know when you might need more and it will cost you extra money down the road to amend your articles.
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