Smooth talking lawyer types needed!

[Big Gulp]

Okay, so here's my situation.  I just filed for an LLC to start my own business.  I assume that I've got a 15-40 day wait before my articles of organization get approved by the state.  I'm in a kind of limbo here where I don't know what to do next.  I can't secure funding without the incorporation being complete, right?  I'll be applying for a VA loan, and with the new Patriot Express Pilot Loan Initiative I think my $75,000 request should sail through pretty easily.  Until I get funding I can't really start shopping for a commercial lease, and applying for permits from the city of Ann Arbor seems to be a little bit premature.

So is there something I should be doing right now, or am I in a holding pattern 'til this gets approved?

[Johny Cee]

Okay, so here's my situation.  I just filed for an LLC to start my own business.  I assume that I've got a 15-40 day wait before my articles of organization get approved by the state.  I'm in a kind of limbo here where I don't know what to do next.  I can't secure funding without the incorporation being complete, right?  I'll be applying for a VA loan, and with the new Patriot Express Pilot Loan Initiative I think my $75,000 request should sail through pretty easily.  Until I get funding I can't really start shopping for a commercial lease, and applying for permits from the city of Ann Arbor seems to be a little bit premature.

So is there something I should be doing right now, or am I in a holding pattern 'til this gets approved?

You don't need the official recognition of your LLC status.  You can still do business as a sole proprietorship under whatever your business dba is with the LLC status pending.  Without the LLC, you just won't have the limited liability protection.

Which, with a small owner business, doesn't matter that much as you will more than likely have to personally guarantee everything anyway.


Right now you should probably finding a CPA to, you know, run through this stuff with.  (Have an EIN? Need to register for UI? Set up a bank account in the business' name?  Are you set up for eftps? etc. etc. etc.)

[Big Gulp]

Right now you should probably finding a CPA to, you know, run through this stuff with.  (Have an EIN? Need to register for UI? Set up a bank account in the business' name?  Are you set up for eftps? etc. etc. etc.)

Good advice.  I just wish there was a way to find a really shady accountant.  You know, that guy the IRS has examined countless times but just can't nail?  I want a guy who knows how to tiptoe exactly up to the line without the government destroying him or his clients.

[Johny Cee]

Right now you should probably finding a CPA to, you know, run through this stuff with.  (Have an EIN? Need to register for UI? Set up a bank account in the business' name?  Are you set up for eftps? etc. etc. etc.)

Good advice.  I just wish there was a way to find a really shady accountant.  You know, that guy the IRS has examined countless times but just can't nail?  I want a guy who knows how to tiptoe exactly up to the line without the government destroying him or his clients.

If you were in NYC, that's just about every one of them. 


Have you spoken with someone at your local Small Business Administration, Chamber of Commerce, or equivalent?  There are usually a fair amount of programs run through governments, non-profits, or colleges/universities that run free or low cost programs to help those trying to setup a small business.

[Signe]

Hey, are you going to open a tattoo parlour?  Because that would be totally awesome. 

[Big Gulp]

Hey, are you going to open a tattoo parlour?  Because that would be totally awesome. 

Yes, I am.  I'm kind of chomping at the bit because the perfect building is up for lease right now.  Great location, not too expensive, open floor plan.  It's ideal, and I'm being denied it by red tape and no money as of yet.   

[Abagadro]

While lots of LLC law is pretty standardized (at least among those states that have adopted the Revised Standard code), it is still somewhat state-dependent so it would be really difficult for a lawyer that does not practice in MI to give you much concrete advise.  15-40 days sounds like a long time. Here it is much faster, practically instantaneous.

[Johny Cee]

Hey, are you going to open a tattoo parlour?  Because that would be totally awesome. 

Yes, I am.  I'm kind of chomping at the bit because the perfect building is up for lease right now.  Great location, not too expensive, open floor plan.  It's ideal, and I'm being denied it by red tape and no money as of yet.   

There are a ton of things you can start doing, even if the LLC isn't legal yet.

1.  How much insurance will you need to carry?  Liability, property, worker's comp?
2.  Head to a bank and see about setting up a business checking account?  Do you know the closest branch of a bank with decent hours and works well with small businesses?  Is it a bank that has an easy process to securing a line-of-credit to the business?
3.  Do you have a business plan and budget?
4.  What are you going to use for record-keeping?  Accounting software or muddle through with spreadsheets?
5.  Is tatooing an activity you need to collect sales tax on?  Will you need to register to get your certificate of authority?
6.  Employees?  How are you going to do payroll?


Assuming everything goes swimmingly, one of the biggest unforeseen problems is your end of the year income tax bill.  You'll be taxed personally on all profits form the LLC, and you won't have the fallback of wages withheld on a paycheck.  That can lead to a big income tax bill come April, considering you'll be paying self-employment tax, Federal income tax, and whatever your state tax is.

[Paelos]

Right now you should probably finding a CPA to, you know, run through this stuff with.  (Have an EIN? Need to register for UI? Set up a bank account in the business' name?  Are you set up for eftps? etc. etc. etc.)

Good advice.  I just wish there was a way to find a really shady accountant.  You know, that guy the IRS has examined countless times but just can't nail?  I want a guy who knows how to tiptoe exactly up to the line without the government destroying him or his clients.

Speaking as a public accountant, we do a ton of LLCs so here's my advice. Keep good records of your expenses. Most people are idiots about this, and they lose the chance to actually take things. You fuck the government by being able to back up your deductions in a remote manner. Also get a company car for yourself and estimate the mileage for business. You probably don't need one, but estimate biz miles. Then, rack up deductions on your schedule C. Take your cell phone, your internet, everything you possibly can for business and put a percentage on it. If you have a bill for X, it's hard for them to say you didn't use Y as a percentage for business unless you are being ridiculous about it.

I could go on, but you get the gist. Talk to a man for tax planning, and get yourself set up the right way.

EDIT: Also some expenses are worthless because they are subject to 2% of your AGI, or various other restrictions. The accountants will help you avoid the stupid ones in profit years, and catch them in lean years.

[Broughden]

Right now you should probably finding a CPA to, you know, run through this stuff with.  (Have an EIN? Need to register for UI? Set up a bank account in the business' name?  Are you set up for eftps? etc. etc. etc.)

Good advice.  I just wish there was a way to find a really shady accountant.  You know, that guy the IRS has examined countless times but just can't nail?  I want a guy who knows how to tiptoe exactly up to the line without the government destroying him or his clients.

Having just gone through the entire process of setting up and running a business I would be happy to extend any advice. Feel free to post or PM me with any questions. Firstly dont worry about a lawyer, CPA or business checking account at this point....you are a ways off from needing them yet.

A) First off and biggest piece of advice: Start talking with someone at the Small Business Development Center in your local area, if your city has one not all of them do. They will help you through the process and start reviewing/editing your business plan with you.

B) Get a business plan written. If you are looking for a VA/SBA loan it is going to go through a bank and their business banking officer is going to want to see your business plan. The landlord for the building your are looking at leasing is going to want to see your business plan. Everyone is going to want to see your business plan. having said that be careful which business plan software you use to write it, they are not all created equal and some are outright shit. Talk to other business owners in the same field in adjacent or nearby towns (ie non-competitors who will be willing to share info with you).

C) Get the LLC, sales tax exemption certificate (so you can buy stuff wholesale with out paying sales tax), city license and all that stuff take care of up front. Most of it can be done on line and doesnt cost anything.

D) Get a realtor. I dont give a shit if you know the EXACT location you want and the landlord is your cousin Jerry. Get a commercial realtor acting as your agent. Is the space already built out exactly as you need it to be? No? Well then did you know most landlords will pay for build out costs up front in order to lure you in as a renter? Did you know most will wave your first 6 months of rent to make sure you get to a good start? A good commercial realtor acting as your agent will help you with all of that and know what you can and cant ask for.  You will need to get an LOI (Letter of Intent) to Lease done most likely before going to the bank to get financing. This will let the bank know you are serious and any money you might need for build out costs or equipment will be accounted for in the business plan you are showing them.
A LOI is not a lease, it will take the property off the market for 30-60 days and allow you to finalize everything with out the landlord renting the building to someone else.

E) Get started on financing quick, after the plan and location are finalized. Yes, you are going with VA or SBA but those organizations dont give out the loans themselves (not trying to talk to you like an idiot but its amazing how many people dont know this), they simply guarantee they will pay back the funds to whatever bank you loan the money from should you go tits up...increasing the chance the bank will loan you the money since they feel more secure. You will need collateral. Your store or business' inventory and equipment will account for some of it (they seize everything if you go under) and the bank will usually give 60% of value on equipment and 50% of wholesale value on inventory for collateral. You will need about 50-60% or more of the amount you are asking for in collateral (home equity, retirement account, etc etc). Dont worry about local bank versus national bank. That shit doesnt matter anymore. 99% of the "local" banks are going to be calling some guy named Jerry sitting in a cubicle in NYC, the underwriter, who will then tell the local bank whether or not they can loan the money. I dont care if the person has President of The Universe on their door...they still have to get the loan approved through the underwriter...unless they are a huge bank like Chase who doesnt underwrite their loans, they do them in house.

If you are opening a retail location start setting up your relationships with the manufacturers now (or were you serious about opening a tattoo parlor?). Depending on the industry they may be using outsourced rep agencies or they may keep sales in house...but if you want Brand X and brand X already has 5 retail establishments in town and doesnt want to open another retailer, then you are going to have to find another brand to go with.

After all of that you can worry about CPAs, and bank accounts and lawyers and such. Biggest hurdle will be writing the business plan, getting collateral and getting financing...after that it gets easier no I lied it just gets more hectic and harder.

[Nazrat]

While lots of LLC law is pretty standardized (at least among those states that have adopted the Revised Standard code), it is still somewhat state-dependent so it would be really difficult for a lawyer that does not practice in MI to give you much concrete advise.  15-40 days sounds like a long time. Here it is much faster, practically instantaneous.

Abagadro is correct.  You need a MI lawyer. 

In Texas, the process is also instantaneous.  You simply file the documents.  There is no state agency to review their legal sufficiency.  Obtaining an EIN is a simple as calling and asking for one.  Once you have an EIN and your articles, you can open a bank account, turn on utilities, etc. 

Broughden is right about the business plan.  Having been of counsel to quite a few small corporations, the hardest part is getting a business plan on paper that will satisfy the loan committee at the bank.  That can take a lot longer than you expect.

Also, SBA loans produce the single highest ratio of loan documents to value of loan that I have ever seen.  You will be personally guaranteeing everything.  Every document will have to be reviewed by both your bank and by the SBA.  This process takes a long time, i.e., weeks after approval of the loan by the bank.

Good luck.  Small businesses are one of the most exciting parts of the US economy for reasons that you are about to discover. 

[Big Gulp]

Also, SBA loans produce the single highest ratio of loan documents to value of loan that I have ever seen.  You will be personally guaranteeing everything.  Every document will have to be reviewed by both your bank and by the SBA.  This process takes a long time, i.e., weeks after approval of the loan by the bank.

The time part is understandable, but I'm a little bit concerned about the collateral issue.  Broughden could probably be some help here since it sounds like he's gone the VA loan route.  From what I read about that Patriot Express Pilot Loan Initiative, apparently loans less than $150,000 are guaranteed to be repaid 85%.  I was going to ask for $75,000, but in all honesty that's a lot of cushion.  I could very comfortably set up the business and run it without a profit for a year with $50,000, so I may just apply for that amount instead.  My credit is around 700, which isn't great but isn't horrible.  My problem is that I have dick for collateral.  I didn't think it'd be that big of a concern since I had that 85% loan repayment guarantee, but from what Broughden said I may be SOL on my own, which means I'd have to go to my parents for help.

I really don't want to do that considering that both of my siblings have screwed them over when they've cosigned stuff for them, and I really don't want to have to go them now that they're both retired and on fixed incomes.  So what are my options here?

[Sky]

Good for you Gulp, I hope you can be successful doing what you enjoy.

Although the moniker 'parlor' always makes me chuckle, it's like hip-hop places always being 'emporiums'. Maybe you can open a multiple parlor business: a tattoo/beauty/ice cream parlor!

[Big Gulp]

Although the moniker 'parlor' always makes me chuckle, it's like hip-hop places always being 'emporiums'. Maybe you can open a multiple parlor business: a tattoo/beauty/ice cream parlor!

Yeah, we don't ever call shops "parlours", or our tattoo machines "guns", but we also don't correct people when they call them that.  You'd be amazed at how easy it is to just dismiss people out of hand who come by looking for a place in the shop after they refer to a tattoo machine as a "gun".  Sure sign of a scratcher.

[rattran]

Get a CPA, and tell him the truth. A good CPA will save you tax money, but if you lie to them, you're fucking yourself.

Not that I cheat on my taxes with the collusion of a CPA, of course. I have receipts and stuff to back up everything it says on my schedule c. Just ask my CPA.

[Signe]

In the UK I think they mostly call them studios.  Unless that's changed, too.  Who knows what to call anything, anymore.  I should try to update my English out of the 19th century someday.   

[Broughden]

Also, SBA loans produce the single highest ratio of loan documents to value of loan that I have ever seen.  You will be personally guaranteeing everything.  Every document will have to be reviewed by both your bank and by the SBA.  This process takes a long time, i.e., weeks after approval of the loan by the bank.

The time part is understandable, but I'm a little bit concerned about the collateral issue.  Broughden could probably be some help here since it sounds like he's gone the VA loan route.  From what I read about that Patriot Express Pilot Loan Initiative, apparently loans less than $150,000 are guaranteed to be repaid 85%.  I was going to ask for $75,000, but in all honesty that's a lot of cushion.  I could very comfortably set up the business and run it without a profit for a year with $50,000, so I may just apply for that amount instead.  My credit is around 700, which isn't great but isn't horrible.  My problem is that I have dick for collateral.  I didn't think it'd be that big of a concern since I had that 85% loan repayment guarantee, but from what Broughden said I may be SOL on my own, which means I'd have to go to my parents for help.

I really don't want to do that considering that both of my siblings have screwed them over when they've cosigned stuff for them, and I really don't want to have to go them now that they're both retired and on fixed incomes.  So what are my options here?

Yes, you need collateral. The VA/SBA backing helps, but with the present banking problems in the industry some banks are going so far as requiring 100% liquid collateral. Now you are asking, "if I have 100% of the money in cash why would I need a bank loan?"  Dont ask me, it didnt make sense to me either.

Anyway you are going to need about 50-60% (reasonable and realistic amount) of the loan amount in collateral. Some of that collateral will be covered by the value of the equipment you are purchasing, generally at 60% of its original value. Home equity can be used as collateral. Stock plans. Investments. Paid off vehicles not.
As for the amount of the loan...figure out your initial build out, point of sale, equipment, furniture and other budgeted items, then add a cushion of 1-2k$ (should be enough with the small amount you are working with). The rest of the cushion will come from a business credit card (revolving line of credit) you will open with the same bank.

Biggest thing is getting your business plan written and edited by the SBDC.

[Big Gulp]

Just for an update, I'm now licensed to operate under an assumed name (the company name) in Washtenaw county, and I have an appointment with my CPA next Tuesday morning.  I want to get cracking on the business plan, and I'm thinking about going with Business Plan Pro.  Any opinions on that piece of software?  Got anything else you'd recommend?

[CmdrSlack]

No idea on the various software packages, but I'm debating driving from the Chicago 'burbs to Ann Arbor when you open. I have an old tattoo on my shoulder that I need to cover with something else I want (even if I still liked it -- I don't) because it provides nice symmetry with another piece on the other shoulder.

Heck, if I could be the first person you ink in the new space, I'd even pay cash so you can frame a single or twenty or whatever.

[Broughden]

Just for an update, I'm now licensed to operate under an assumed name (the company name) in Washtenaw county, and I have an appointment with my CPA next Tuesday morning.  I want to get cracking on the business plan, and I'm thinking about going with Business Plan Pro.  Any opinions on that piece of software?  Got anything else you'd recommend?

My wife used the same program to write ours. Th premier edition. Some of the spreadsheets are a bit dodgy, and you dont need to fill in ALL of the various tabs (descriptions of the long term strategic goals of your company and other random verbage). Over all it did the job though.

[Big Gulp]

Heck, if I could be the first person you ink in the new space, I'd even pay cash so you can frame a single or twenty or whatever.

Nah, $1 max just to be able to frame my first buck.  Hell, if you're in a hurry to get it done now I'll take care of you for nothing, it'll just be at the shop I work at, rather than the shop I own.

[CmdrSlack]

In no hurry, won't have the spare cash until mid-November anyway (saved paid time off FTW!), and I've been living with the tat I hate since 1994.

[Big Gulp]

Just got back from a tour of the space I want, and it's fucking fantastic!  Right on Main St., in easy walking/biking distance for all the college kids.  The lobby is massive.  Plenty of room for flash on the walls, couches, a desk for the piercer/receptionist, etc.  The back room should fit four artists, and there's a room that's perfect for piercing.  Also a good amount of space in the basement for storage (not that I'll need much).  We're right across from a BP, and near a stoplight.

Rent is really reasonable for the location since this building has been on the market for like 10 months now.

[Selby]

You going to keep the name? ;-)

[CmdrSlack]

That last shot just screams "murder room."