Jarfi said:
So consider the following scenario:
-A man starts is own business to sell stuff.
-Sells equipment he makes at his house, let's just say it's camera stabilization equipment
-He has no employees, he does ALL the work himself and sells through his personal cellphone number.
-Has a normal job too
No I am wondering, apart from the material costs for the products he is selling, and minor ad costs, where is the actual cost coming from? I've heard starting a company is supposed to be this huge expensive thing, but I don't see why this should not be.. well, free apart from the material required for the products he is making?
Some companies can be started just about for "free".
Baby sitting, and dog walking are two examples that come to mind for entrepreneurs with limited cash to begin a company. All that is needed for initial investment would be some clothing and a good pair of sneakers. You could sell your business door to door, by word of mouth, or whatever which only costs your time. Other methods, would include printed flyers distributed to residences, or taking out advertising space in local newspapers. Perhaps you might set up an internet site. The more courageous you get, the more outlay of startup cash you will need.
A tax number, and registration with the municipal, provincial, state, federal governments might be necessary. You might need a regulatory permit to allow what you do where you do it. Musicians, as an example, with just an instrument to carry around to play, in a lot of cities have to identify themselves with the city, and join certain agencies for their own and others protection of copyright and all that.
If your business becomes successful, and you want to expand, you might consider employees to carry some of the workload. Again, that costs money, with more record keeping, possible tax filing with the government, and regulatory red tape. Please keep in mind that the more time you spend on paperwork, the less time you have to make money with the actual business. Hiring someone to do the paperwork costs money, but so does your time.
Others are not so free for startup.
If you go into manufacturing a product from home as a sole proprietorship , the startup costs include your tools, the space that you no longer have use of at home ( think of it as renting space form yourself rather than from someone at the industrial tech park), transportation, cost of raw materials, disposal of refuse, packaging, sales invoices, etc. Most of this is variable with type of manufacturing, and product.
Some of this can be absorbed by the place of residence, but if the tax man cometh around to audit you, you had better be making a clear cut distinction between residence / company acceptable for his list of tax rules, or you might find out that what you think is OK is NOT by his standards.
You also would want to purchase some type of good liability insurance in case of product malfunction. Be forwarned though, in most jurisdictions, that as a sole proprietorship, all your assets, including your house, car, savings accounts are not thoroughly separated from business assets when someone desires to sue the pants off you. Legal advice might be warranted as the business gets set up.
You might want to incorporate an place yourself as the only shareholder, being paid a salary or share profit. That also comes with other legal responsibilities and obligations with extra expense, for you and the company.
Some times it's simple. Other times not.
