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In today’s Q&A, we are helping Joe Chang decide when to set up his first business entity.
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Let’s dive into this week’s question!
JOCELYN: Hey y’all you are listening to a Q and A with S and J.
SHANE: Welcome to the Flipped Lifestyle podcast where life always comes before work. We’re your hosts, Shane and Jocelyn Sams. Join us each week as we teach you how to flip your lifestyle upside-down by selling stuff online. Are you ready for something different? All right, let’s get started.
JOCELYN: Hi guys, welcome to today’s Q and A mini podcast where we have a question from Joe Chang and Joe says, here is my question: in episode 13 Josh, the CPA, explained a little bit about different business entities but should I setup a business entity instead of operating as an individual, should I set it up at the very beginning or when I see some real money coming in? alright Joe, let us preface this answer by saying that we are not legal professionals or accountant so just keep that in mind when you listen to our advice, but honestly it really doesn’t matter especially at the beginning when you operate as an individual or as a business entity. We waited a long time before we applied for our business entity and we actually operate as an LLC now but there are other ones out there that maybe more appropriate for you just depending on your situation. But really until you start making a whole lot of money it really technically from a tax standpoint, doesn’t matter that much if you are an individual or a business.
SHANE: And basically it’s pretty easy to setup a business account. You can either in some states they let you do a DBA. You can just say I am doing business as Sams Digital Company and go start a bank account for that business and there your business. Other places, you just apply with your state. It’s usually just a little paperwork, I think it costs like 50 bucks or something to start–
JOCELYN: Yes, it’s not super expensive. It depends on your state.
SHANE: Yeah so I mean it’s extremely easy to start a business. There is probably no excuse not to do it. I would say just make it general. Like we have, our business is called Sams Digital LLC and the reason we called it that is because it’s kind of like the umbrella that sits over top of each individual website which is kind of its own business but they all kind of funnel to the same bank account so it’s not a real big deal. So I would just start something that’s kind of general and just whatever business you end up doing you can add to that. The morale of the story is this, it really doesn’t matter unless you are trying to protect yourself from some kin dof a liability. Like if you have an LLC they can sue your company and you can protect some of your personal assets instead of coming straight after you if you’re just an individual. It’s a lot of semantics. It’s really not a big deal. It’s so easy to set it up, there is probably no reason not to do it from the beginning. I wish we had have just so we could have got it out of the way. Don’t you think Joce?
JOCELYN: Yeah, it’s a lot easier moving forward if you set up your business from the beginning. I mean it technically doesn’t matter especially if you’re not making a whole lot of money, it doesn’t matter that much. But it may make things easier down the road if you go ahead and set it up from the very beginning and the best thing to do is to talk to somebody who is a professional at this. Especially in your state or somebody who knows about your state and they can tell you all the tax implications and all the liability questions and all of those types of things that we don’t really 100% know the answer to, we can just share out experiences with you.
SHANE: And it can even be like you don’t have to see a lawyer and pay them 500 dollars to do this. You can talk to an accountant. You can talk to someone at your bank, just ask them what the best thing for you to do going forward is and get that advice but it really is so easy to setup an LLC in most states. You probably just have to call the state office, ask them to do it, send them a check and you have got a business in the mail basically.
JOCELYN: In Kentucky, you can actually apply for a business online. It’s super easy. It just takes a few minutes. So definitely check it out in your state, see what it entails and give it a try. And if you have a question about accounting we actually have a really great accounting team. You can check them out at thebottomline.accountants—that’s really a real thing, .accountants—and they are really super nice and probably would be happy to help you. They specialize in online businesses.
SHANE: And there is also, real quick before we close this question up, this question doesn’t really boil down to should I start an LLC or not. I know that’s the specific of this question but this is one of those hang up points that a lot of people get an online business, like should I start a business, should I do this, I am afraid if I don’t, I’m afraid if I do and this is one of those things people allow to creep in and they are afraid to keep moving forward on their online business because they don’t know, am I legit because I am not an LLC, should I be an individual and they allow it to be a fear part, a procrastination point. The bottom line is it’s just like anything else, pick something and do it. If you just want to stay an individual then do that for as long as you want to and make your products and get things for sale. If you want to start a business and make it feel a little more official, call your state office and figure out how to do it, pay 50 bucks and go create an LLC. This is so minor of a detail in the grand scheme of things in your online business especially if you are starting out. Do not let this be a road block. Pick something, be an individual. Go start an LLC, flip a coin if you have to right now and keep moving forward as you get this online business rolling.
JOCELYN: And also just wanted to throw in there that if you are operating as an individual be sure to keep your business expenses and personal expenses separated. It will help you immensely at tax time.
SHANE: Alright Joe, thanks for the question. It was an awesome question. We don’t always have an answer to some of those legal accounting type deals but if we can point you in the right direction, help you overcome some fear and take you forward in your online business then that is what we here to do. If you have a question, all you have to do to get that on the Flipped Lifestyle podcast is go to flippedlifestyle.come/qasj and we would love to answer on the air. Until next time, we would catch you all on the flip side. Thanks for listening.
JOCELYN: Bye.
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