Hello,

I am interested in establishing a home business. It will consist of
computer hardware sales, Web hosting, and more. Right now I cannot
afford to rent an office or building, so everything has to be done
from my home. And I want everything to be legal so I won't get into
trouble and have to pay fines, go to jail, or whatever.

The first step is to decide what type of legal business I want to
become. The only two that suit me are sole proprietorship and LLC. Do
home businesses benefit from LLC, or is that generally for office
firms? I would love to become an LLC (thus safe), but the fees are a
lot. In California, the fee is $70 - which is okay, but there is an
annual tax of $800. I assume sole proprietorships don't pay any such
fees. But is a sole proprietorship safe? I mean if I ship orders, make
customers happy, give refunds and operate within the terms and
conditions, I cannot be sued, right?

I even heard sole proprietorships are responsible if that UPS guy
slips when picking up orders... well, I will send the items to post
office, UPS, Fedex or whatever myself with my car until I have enough
funds to get business insurance. Is there anything else that I should
worry about?

Are most home business sole proprietorships or LLC's?

Also, do I really need to pay for a lawyer and accountant for a home
business? Can't I just file for the business name with the county
office, start my business, pay taxes, and be fine like that?

Thank you for your time.

"keseko" <keseko2000@yahoo.com> wrote in message
news:49c39d61.0307162009.4feb5d8a@posting.google.c om... I am interested in establishing a home business. It will consist of computer hardware sales, Web hosting, and more. Right now I cannot afford to rent an office or building, so everything has to be done from my home. And I want everything to be legal so I won't get into trouble and have to pay fines, go to jail, or whatever. The first step is to decide what type of legal business I want to become. The only two that suit me are sole proprietorship and LLC. Do home businesses benefit from LLC, or is that generally for office firms?

The owners of the LLC are not responsible for the debts and liabilities of
the LLC. There are ways to lose that protection, and exceptions, but that's
the general rule. That means that if someone sues the business and wins,
the judgment might wipe out the company, but the plaintiff won't be able to
reach the assets of the owner. That protection is less important when you
have no employees because you will be personally doing everything that gets
done. That means the plaintiff will sue you personally as well as the
business. So the protection of the LLC isn't perfect. But still, there are
circumstances where the LLC can save your bacon. And it's very cheap to
creat one.
I would love to become an LLC (thus safe), but the fees are a lot. In California, the fee is $70 - which is okay, but there is an annual tax of $800. I assume sole proprietorships don't pay any such fees. But is a sole proprietorship safe? I mean if I ship orders, make customers happy, give refunds and operate within the terms and conditions, I cannot be sued, right?

Nope. There are false claims, and good faith claims file by plaintiffs who
think they are right even though you know you did nothing wrong. And you
are not perfect. There will be mistakes. Some of your risks can be covered
by liability insurance, and you should have some, but some things can't be
insured.
I even heard sole proprietorships are responsible if that UPS guy slips when picking up orders... well, I will send the items to post office, UPS, Fedex or whatever myself with my car until I have enough funds to get business insurance. Is there anything else that I should worry about?

Worry about starting a business without business insurance. Check with your
homeowners insurance agent and find out exactly what the rule are about no
coverage for business risks. It may be you have some level of coverage.
Are most home business sole proprietorships or LLC's?

Proprietorships.
Also, do I really need to pay for a lawyer and accountant for a home business? Can't I just file for the business name with the county office, start my business, pay taxes, and be fine like that?

You can do it yourself. Including forming the LLC.

McGyver

Thanks for the information, guys. It was very helpful. But you guys
sound like being sued is a common issue. Is it really common for home
businesses? If it is, I might reconsidering starting up a home
business. The reason I wanted to start off from home is because of
building rent costs. But if I have to worry about getting sued, going
to court, etc., then forget it.

One person here said that creditors come knocking on your door. Did I
understand correctly? They come to investigate your home office, look
at receipts, look inside your computer activity, and etc.? Seems like
a lot of waste of money and time, not to mention a violation of
privacy.

Also, another person said that California taxes home business who do
business online (doesn't everyone?). This brings up another question.
Where do I go to find ALL information on taxes... as in EXACTLY what I
can keep as revenue and what to give to the government? Most business
forms are online in PDF format that I can print and send via postal
mail to the county or state offices. They are easy to understand, and
the procedure is fair. But why aren't there sufficient information
about taxes? I personally thought I had to pay a flat percentage of my
profits (minus deductions) when I file the, if I remember right,
Schedule C form.

"keseko" <keseko2000@yahoo.com> wrote in message
news:49c39d61.0307170947.abba335@posting.google.co m... Thanks for the information, guys. It was very helpful. But you guys sound like being sued is a common issue. Is it really common for home businesses? If it is, I might reconsidering starting up a home business. The reason I wanted to start off from home is because of building rent costs. But if I have to worry about getting sued, going to court, etc., then forget it.

Basing the business at home has nothing to do with it. Business risks
include the possibility that some customer, supplier or whoever, might sue.
But you instinct is right, lawsuits are not common. Still, if it happens,
it will be too late to wish you had formed an LLC or bought insurance.
One person here said that creditors come knocking on your door. Did I understand correctly? They come to investigate your home office, look at receipts, look inside your computer activity, and etc.? Seems like a lot of waste of money and time, not to mention a violation of privacy.

Won't happen. If it does, tell them to go away and never come back. If
they don't comply, see an attorney, sue them, win, collect on the judgment.

McGyver