Anyone here own their own business?

[Steff]

My sister and her girlfriend are talking about starting a new construction cleaning business (clean the houses after construction, but before the owners final walk). I guess the market is pretty good ($0.25 per square foot) and the start up cost is relatively low. She was asking me about business licenses, insurance, etc.. and I have no idea. And quick advice I can pass along?

[kapkomet]

Definitely incorporate - that way if some housing company gets stupid and says they lost $100K because the house wasn't cleaned properly... they are not personally liable. You can do that with the Secretary of State's office - don't pay some third party to do it because that's a ripoff (unless it's me, hehe).

 

Insurance - probably recommended - I wonder if that is something the home builders require? Probably. But I'd check on that part. Remember the home builders still own the house at this point. A good insurance broker would know about this - not the auto mom and pop type stuff either.

 

Business license - see my comment about corporations (LLC is probably best way to go as they are flexible)...

 

That should be enough to get you started.

[Steff]

Thanks Kap..

 

 

Questions, even if they don't "inc" but have insurance they wouldn't be held liable, no? I do think they need insurance in case something should happen (theft or damage while they have keys, etc..). Any other pros to "inc" ing?

 

The liability quotes they are getting are between $700 and $1200 for the year. Seems high to me but I have no idea.

 

How do they get a business licence? With the county or the state?

[kapkomet]

State.

 

Secretary of State offices.

 

And I wouldn't do "Inc" - I would do LLC because you can pass through everything as though a partnership.

 

As far as quotes - $700 a year doesn't sound too bad but the $1200 does.

Edited March 27, 2006 by kapkomet

[EvilMonkey]

You can incorporate an an 'S' corp and then any income only gets taxed once. For startup, that may not be a bad thing, since any losses come off of personal income. After a few years, if growth is good, you can swith to a regular inc or some other type. The insurance quotes sound ok, considering what I pay. Will they have any employees? You will also have to have worker's comp, which being around construction could be high. check out the insurance companies, sometimes they also 'specialize'. Sentry Insurance targets printers (ME!), and has very detailed policies that cover me for a heck of alot of things that people not familiar with the industry may not know of. Some construction companies also may require them to be bonded. Kap is right, the state does the liscense thing. If they have a good lawyer, they should be able to answer the pros & cons of LLC vs S corp, vs whatever, and take care of the state paperwork. It's a big step.

[RibbieRubarb]

My sister and her girlfriend are talking about starting a new construction cleaning business (clean the houses after construction, but before the owners final walk). I guess the market is pretty good ($0.25 per square foot) and the start up cost is relatively low. She was asking me about business licenses, insurance, etc.. and I have no idea. And quick advice I can pass along?

 

I had a lemonade stand when I was 5. Relatively low start-up cost. No license needed. Don't take on a partner, though...they tend to drink the product.

 

Quick Advice: use lots of sugar!

 

[Chisoxrd5]

State.

 

Secretary of State offices.

 

And I wouldn't do "Inc"  - I would do LLC because you can pass through everything as though a partnership.

 

As far as quotes - $700 a year doesn't sound too bad but the $1200 does.

 

 

If they plan on becoming an LLC they have to apply for an FEIN through the IRS. I can get you an application if you need one Steff.

[kapkomet]

LLC vs S Corp - yea you have to have an FEIN, go to irs.gov and fill it out. It doesn't cost anything.

 

S Corp for what most people need isn't as good of an option as an LLC, IMO.

 

LLC can be declared single (proprietorship), partnership (allows passthrough to individual income tax), full corp (not even going to explain this), or similiar to S Corp. That's why I like the LLC so much is it is very versitle (sp) and can be molded into what type of business you want it to be.

[Steff]

If they plan on becoming an LLC they have to apply for an FEIN through the IRS. I can get you an application if you need one Steff.

 

 

 

Yes G. I think I am going to go in and be the silent partner in this. From talking to some builders we know, the market is huge on this and they are looking for people all the time. Knowing a few builders can get them contracts immediately. The potential is there to gross $4K a week with just the 2 of them (busting their asses, but they are both $$ driven so I think they will be fine).

 

Kap, so she (my sister) can file the company taxes via her personal return, correct?

 

Monkey, it will just be the 2 of them to start and from what I have read they don't need workers comp until they have 3 or more employees, is this correct or did I misunderstand? Also, they don't have an attny on retainer. They are being told they don't need one at this point. Also being told that bonding is not necessary as it's more geared towards those agencies that service personal residences (the contractors we know didn't mention it). Does it cost anything to get bonded? What exactly is it?

[kapkomet]

Yes G. I think I am going to go in and be the silent partner in this. From talking to some builders we know, the market is huge on this and they are looking for people all the time. Knowing a few builders can get them contracts immediately. The potential is there to gross $4K a week with just the 2 of them (busting their asses, but they are both $$ driven so I think they will be fine).

 

Kap, so she (my sister) can file the company taxes via her personal return, correct?

 

Monkey, it will just be the 2 of them to start and from what I have read they don't need workers comp until they have 3 or more employees, is this correct or did I misunderstand? Also, they don't have an attny on retainer. They are being told they don't need one at this point. Also being told that bonding is not necessary as it's more geared towards those agencies that service personal residences (the contractors we know didn't mention it). Does it cost anything to get bonded? What exactly is it?

Bonded is basically a form of insurance. I would say you don't need to.

 

If you do file for an FEIN (LLC route) you elect partnership and then that flows through to the individual's return.

 

I'm setting up my own consulting firm even this week (for just this kind of stuff, ironically)... doing it as an LLC.

 

So, since I'm consulting, any clients out there?

 

[Texsox]

As Evil mentioned, check around on the insurance. I saved a bundle once I found someone who was familar with pressure washing. What can happed is the agent or whomever is processing the quote has to place their business in a category. If they aren't familar with the service, they will always guess at the higher rate to save their asses.

 

One of the biggest headaches and potential problems, believe it or not, is removing the stickers from the high tech windows. Damage some of the coatings and you bought some expensive windows. We do windows as a sidebusiness and I've heard some serious horror stories from the professionals.

 

I agree with Kap, LLCs have been the most common down here for small business. A good accountant to help them set up their books and a periodic review is important. Having a plan, it doesn't have to be elaborate is also important. Understanding the hours and scheduling is also important. The only person I know doing this kind of work quit because of the hours, not the amount, but the demands from his customers. If the closing is 3pm on Tuesday, and they don't get finished with their punch list until 5 pm MOnday, they expected someone to be in there that night. He would up working 7 days a week to meet demands and when he refused, they found someone else.