Small Business people...inside...

[black2002ls]

I'm sure some of you have seen the cake thread in the pic/vid forum. I've been getting increasing orders here locally for my cakes. Its been an idea/dream I've had since I was working at wal mart doing cakes, to have my own store front/bakery. I've found someone in my area that has a stock pile of recipes for pies and confections so I've decided its time to get the wheels in motion for this and see just how probable it is. If anything, I would like to continue renting kitchen space and increase my orders through marketing and advertising without having to worry about the comptroller and health department. I know that halo/horns has started her own baker in east Texas I think it is, and CWO has been through the motions trying to get one started. Here is what I'm asking

Lets leave business model/product recommendations out of this. What all do I need to begin doing to get the business side of this rolling? Corporation? or no? Who has been down this road and can offer some insight?

[Chopped54]

I setup a DBA then an LLC under that DBA.

[kenny c]

What all do I need to begin doing to get the business side of this rolling? Corporation? or no? Who has been down this road and can offer some insight?

I setup a DBA then an LLC under that DBA.

What C54 said it what I've done too.

Aside from that, I use a spreadsheet to track all transactions... mileage, expenses, sales, etc. I turn that in along with all receipts to a CPA. That's the cliff note version.

[Big A]

without having to worry about the comptroller and health department.

I'm competely ignorant here, but I don't see how you can have a business that sells edible goods, that doesn't have to deal with the health department. If you ignore them and become at all successful, they'll shut you down if you're out of spec.

[Kyle]

I'm competely ignorant here, but I don't see how you can have a business that sells edible goods, that doesn't have to deal with the health department. If you ignore them and become at all successful, they'll shut you down if you're out of spec.

I agree here. Make sure you are within the legal lines of what you are doing. Nothing worse than if you get sideways with a customer or the health dept gets involved later down the line and you are left out in the cold b/c you were trying to get an easy start up.

Being in business for yourself isn't easy! If it was then everyone would be doing it. The old adage, anything worth doing is worth doing right holds true in this case. Sure its possible to do a very small scale thing on the side for a little extra money, but you can't have it both ways. If you really want to pursue this then its worth the time and effort to do it right the first time. Given enough planning you should see it really take off.

Before starting my business, it was in planning for a year or more... and trust me when I say I was no where near as ready as I thought!!

Now for getting started, the DBA and LLC recommendations are a good start. I'm not sure if it applies in your situation, but a sales tax and use permit will probably be a must. Also good ahead and register an EIN with the IRS just to have that rolling. From there you will have a start on the basics of starting your business.

Next step is making sure you have money in savings if you plan on doing this full time and quitting your current job. If this isn't the case, then ignore this part. If you are going to go after this full time, then I would really recommend having 12 months of personal and business expenses in savings. It will be a good 6-12 months before you really start to make any tangible income and profits. In my estimation, its this lack of liquid funds that causes most businesses to close up in the first 12 months. It almost put me under!!

Make sure you have all the equipment you need ready to go. Nothing worse than getting the door open and then scrambling to make a last minute purchase or losing a job b/c you don't have the right equipment. Although with it being cakes, you probably do, but just warning you in case!

If you are not starting this from home, start looking for a store front. It sounds like you have a decent solution for renting kitchen space, so if this works for you then awesome! If you go the store front route, then what types of permits and insurance do you need to carry? Make sure you have that all figured out.

Lastly, get ready to advertise. Flyers, business cards, internet marketing, phone book listing etc. When I first opened I did tons of cold calling and just beating the streets for business. Be ready for this! It will beat you down at first, but you've gotta be tough and persevere to be successful.

At the end of the day, just don't give up! There have been countless times, where I have wanted to throw in the towel and call it quits. I try to remember that "its always darkest before the day." Things have to get really bad, before you can realize just how good they are! There is no greater reward than to build your own business and watch it grow. Its kinda like a child in some respects!

When and if you get the ball rolling, then hit me up. This is just the beginning and there is so much more to discuss!

[black2002ls]

I guess I need to go back and clear a few things up. I've dealt with the health department, and an even more strict third party health auditor, Kay Chemicals/ecolabs. I've ran a couple of bars which had to maintain health department compliance and paid taxes to the state comptroller in the form of mixed beverage and sales and use taxes. I'm in no way trying to bypass either one of those. In the second bar I ran, we ran into an issue with the Comptroller because we were ignorant to sales and use and learned that lesson the hard way.

What I'm seeking is some insight and help into setting up the DBA LLc and stuff of that nature. What route is best.

To Kyle. Thanks for your input! Thats the kind of stuff I need to hear. As for a store front, I don't think I have the business/clientele to strike out that far yet. Custom cakes is a small niche, and until I have some customers/brand recognition, I don't think a store front is much of an option.

Marketing. I've had a logo done by a graphic designer at the Loomis Agency. Next week I will be getting business cards printed and some media for the cake boxes to make them recognizable. I've also begun a website and have been doing some advertising through my personal myspace. Within the next 2 weeks I should have a facebook page up and hopefully a website.

The kitchen I rent is attached to a cafe/catering business. She does weddings and big parties and had approached me about doing wedding cakes for her when I was working at wal mart. I feel this partnership is going to be great to get the business off of the ground.

Now, with all of that said, I want to make sure everything is properly taken care of from the business side of things, IE state comptroller and such, so that 3, 6, 8 months or more down the road, I'm not staring down the barrel of a gun loaded with back taxes, fees, and fines. I'm off on Monday and will begin the DBA stuff

[jakesford]

First off you have several entity choices out there, the advantage with an LLC is the flexibility it provides. LLC's are a legal entity with the state, that provides liability protection, and you have the choice to be taxed as a partnership, S-corp, or not at all with the IRS. What I mean by that last statement is that if you are the sole member of an LLC, it is considered a disregarded entity for the IRS, and the activity is reported on your personal 1040 schedule C. At this point, you probably wouldn't want to have an additional tax filing (1120, 1120S, 1065), but you would most likely still want liability protection, which the LLC can provide.

What it takes; you have to register with the secretary of state, there are fees involved and there are some basic formation documents that need to be written up. Many people use a lawyer to do this work, but it can be done your self if you feel comfortable doing so. Once registered, you will have a file number and tax id number with the state, and there is a annual franchise tax filing in the state of Texas for any entity that provides liability protection. There is a lower limit of gross receipts before any tax would be due on your franchise tax filing, but you have to file a return each year regardless to maintain good standing with the state. To get a DBA you file with the county clerk, so you would be Black2002ls, LLC dba Black2002lc Cake Service. As mentioned you will want to handle the health department issues and your sales tax license, but since you aren't doing alcohol it won't be that difficult. You do not want the state coming after you for sales tax so just do it right from the get go.

You do not have to have an EIN unless you have employees, but you would be using your social, and given how easy it is to apply for an EIN with the IRS, just do it. Having the EIN helps further separate you business from your personal activity, and this is especially helpful on schedule C. The IRS is very picky with the difference in running a business, or having a hobby. Run your business like a business, have separate bank account under the LLC's name and EIN and only run business income and expenses through it. Keep your personal expenses and business expenses separated, and show that you are trying to have a successful business venture, even if you are losing money. The IRS can and will disallow losses if you can not prove that you are operating a business rather than baking cakes as a hobby

The Texas SOS website has some helpful info, and goes into detail on the differences in entity selection. If you wanted you could operate as a sole-prop, but the LLC is the next step and considering the activity it would seem worthwhile to have some protection.

[black2002ls]

First off you have several entity choices out there, the advantage with an LLC is the flexibility it provides. LLC's are a legal entity with the state, that provides liability protection, and you have the choice to be taxed as a partnership, S-corp, or not at all with the IRS. What I mean by that last statement is that if you are the sole member of an LLC, it is considered a disregarded entity for the IRS, and the activity is reported on your personal 1040 schedule C. At this point, you probably wouldn't want to have an additional tax filing (1120, 1120S, 1065), but you would most likely still want liability protection, which the LLC can provide.

What it takes; you have to register with the secretary of state, there are fees involved and there are some basic formation documents that need to be written up. Many people use a lawyer to do this work, but it can be done your self if you feel comfortable doing so. Once registered, you will have a file number and tax id number with the state, and there is a annual franchise tax filing in the state of Texas for any entity that provides liability protection. There is a lower limit of gross receipts before any tax would be due on your franchise tax filing, but you have to file a return each year regardless to maintain good standing with the state. To get a DBA you file with the county clerk, so you would be Black2002ls, LLC dba Black2002lc Cake Service. As mentioned you will want to handle the health department issues and your sales tax license, but since you aren't doing alcohol it won't be that difficult. You do not want the state coming after you for sales tax so just do it right from the get go.

You do not have to have an EIN unless you have employees, but you would be using your social, and given how easy it is to apply for an EIN with the IRS, just do it. Having the EIN helps further separate you business from your personal activity, and this is especially helpful on schedule C. The IRS is very picky with the difference in running a business, or having a hobby. Run your business like a business, have separate bank account under the LLC's name and EIN and only run business income and expenses through it. Keep your personal expenses and business expenses separated, and show that you are trying to have a successful business venture, even if you are losing money. The IRS can and will disallow losses if you can not prove that you are operating a business rather than baking cakes as a hobby

The Texas SOS website has some helpful info, and goes into detail on the differences in entity selection. If you wanted you could operate as a sole-prop, but the LLC is the next step and considering the activity it would seem worthwhile to have some protection.

GREAT post, thank you so much! This is the kind of information I was looking for. I'm going to spend some time tomorrow getting things lined out for a plan of attack for Monday so I can get this ball rolling.

One thing I wanted to mention in regards to Kyle's post. Its good to have some insight from someone on start up capital and taking that step from employed to self employed. This will essentially be job number 3 for me. All expendable cash from job 1 and 2 will be invested in the viability of this venture to minimize personal financial risk.

[slow99]

Net cash flow generation is the killer of the vast majority of start-ups. Have 3x the cash you think you're going to need.

[black2002ls]

Net cash flow generation is the killer of the vast majority of start-ups. Have 3x the cash you think you're going to need.

The good thing is, my out of pocket is going to be advertising and cost for setting up the corporation. Im renting the kitchen for next to nothing.

[slow99]

The good thing is, my out of pocket is going to be advertising and cost for setting up the corporation. Im renting the kitchen for next to nothing.

I'll second jakesford recommendation, do an LLC instead of a corp.

[black2002ls]

DBA has been filed in my county. I'll take care of the state through the online file tonight. Who is everyone using for their business accounts? pro's, con's?

Next up is the LLC may be a week or two before I have the $$$ to file that

[black2002ls]

The LLC was filed with and accepted by the state today! Next up is the franchise tax stuff

[V8tt]

Ours is set up as an LLC / sub s corp status and we dba Fresh From The Oven

www.freshfromtheoven.net <----solid plug right there :-)

We use EECU for all of our business stuff and I have no complaints with them. My buddy is the branch manager in Mansfield. Let me know if you want his contact info. Why can't you umbrella under the current kitchen health inspection?

[black2002ls]

I'm using that for health department protection. I want the business stand alone, so that I'm not branded with her catering/cafe business.