What is the actual cost of owning a company?

[Jarfi]

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?

 

[WWGD]

Where does s/he buy the raw material to make the camera equipment? How about mailing costs? Any legal assistance in case of customer complaints? Advertising? Incorporating costs? How about hiring someone to work the phones if the business starts growing, or for tech support ? Business cards?

 

[Jarfi]

Where does s/he buy the raw material to make the camera equipment? How about mailing costs? Any legal assistance in case of customer complaints? Advertising? Incorporating costs? How about hiring someone to work the phones if the business starts growing, or for tech support ? Business cards?

Well I'm mainly thinking, starting a company and writing it in your name regardless of later costs(all the things you mentioned) would that cost anything?

Mostly thinking about legally what is the process of a company being created, where is it official, and what institution says "this is a company and this is not"

 

[WWGD]

Sorry , don't know much about that. Have you tried a search for "(how to) register your business". Also look up whether you need a special license for your type of business, e.g., if you repair cars, you may need certification in some states.

 

[phinds]

Starting/owning a company of the small type you describe costs very little. If you want to go whole hog, you can hire a lawyer and incorporate in the state you live in but if you want to go cheap you can incorporate in Delaware for peanuts using a form off the internet. After that you only need to worry about state taxes and licensing fees on corporations and that's not usually much.

If you expect the company to grow, it's not a good idea to start off on the cheap with the incorporation.

You should also check into the KINDS of companies ... "inc", "LLC", "sole proprietorship", etc.

 

[jtbell]

Mostly thinking about legally what is the process of a company being created, where is it official, and what institution says "this is a company and this is not"

That depends on which country you're in. In the US at least, it also depends on which state you're in.

 

[AlephZero]

In the UK, you can register a private company with a standard set of articles of association for £15 (about $25) online.

In the UK, a "one person business" operating as a sole trader is not a company at all. You only need to register for self-assessment of income tax, which is free (apart from paying the tax itself, of course!) If your turnover exceeds £75,000 per year you also have to register for VAT (sales tax) - though it may save you money to register with a smaller turnover, to reclaim the tax you pay buying raw materials etc.

 

[SteamKing]

That depends on which country you're in. In the US at least, it also depends on which state you're in.

That's true.

One of the chief benefits of incorporation is that it confers certain legal rights on the company and protections for the owners. The corporation is a recognized legal entity, which is distinct from its owners or shareholders. If a corporation gets into financial difficulties, for instance, it goes bankrupt without necessarily bankrupting its owners.

Corporations in US states are generally registered with and regulated by the secretary of state in each state. There are various fees and taxes which the state extracts, and depending on where the actual business is located, there may be various license fees or other taxes assessed by the local authorities.

If there were huge startup costs involved in starting a business, it is unlikely you would see as many one or two person firms as you do. For a professional business, like a law firm, an accountant, or an engineering firm, you need a place of business, some furnishings and office supplies, maybe some books, and you're ready to go. The intellectual capital and experience which is contributed by the founders is significant, but generally, there is no dollar amount assigned to this investment.

Apple Computer, Hewlett-Packard, and the Disney Corporation are three examples of large companies literally founded in a garage for a very small investment.

 

[AlephZero]

Mostly thinking about legally what is the process of a company being created, where is it official, and what institution says "this is a company and this is not"

A company is a legal entity in its own right (i.e. somebody can take legal action against the company, independent of its directors, owners, employees, etc).

The cost of setting up a company is filing the required legal documents to show that the company exists and give basic legal information like who owns it, how to contact it, etc. Like most legal documents, that information is public and is available to anybody from whatever organization runs the register of companies in your country or state.

 

[256bits]

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.

 

[SteamKing]

Well I'm mainly thinking, starting a company and writing it in your name regardless of later costs(all the things you mentioned) would that cost anything?

Mostly thinking about legally what is the process of a company being created, where is it official, and what institution says "this is a company and this is not"

It's not clear what you mean by 'starting a company and writing it in your name'. In the US, many professional people, like attorneys, set up a personal company to handle their business affairs.

http://en.wikipedia.org/wiki/Corporation

http://en.wikipedia.org/wiki/Limited_liability_company

A professional limited liability company (PLLC) allows people in certain licensed professions, like attorneys or medical professionals, to operate with some of the protections and benefits of a corporation.

 

[Jarfi]

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.

Hm, this helped a lot. I might want to add that I live in N-Europe, so things are a bit less registrated.

How about a trademark? since a company will have a name, say I named my company "asdf" how would I make that the trademark of my company? do I talk to a lawyer and does getting a trademark work similar to getting a website domain?

And with the product/suing. If I make say a camera stabilizer, and list everything it does, and then everything that can go wrong, can they still sue me if it crushes someones finger, if I said "warning, use this product like this or it may cause injure or trauma"

 

[jtbell]

How about a trademark? since a company will have a name, say I named my company "asdf" how would I make that the trademark of my company?

Again, it depends on which country you're in. In the US, you would register the name with the United States Patent and Trademark Office, which has an online form for this.

 

[WWGD]

A company is a legal entity in its own right (i.e. somebody can take legal action against the company, independent of its directors, owners, employees, etc).

.

If it is a corporation in the US, it is a person legally, AFAIK, re Citizens United, I think. Corporations are people, my friend. Only they cannot be put in jail, nor executed, nor...

 

[SteamKing]

If it is a corporation in the US, it is a person legally, AFAIK, re Citizens United, I think. Corporations are people, my friend. Only they cannot be put in jail, nor executed, nor...

But they can be fined, forced to divest all or part of their assets (especially if these were acquired by fraudulent or other illegal means), and even dissolved altogether (either voluntarily, or as a result of bankruptcy).

The illegal actions of the owners or directors of a corporation are not immune from prosecution under the regular criminal statutes.

Corporations are not allowed to rig the books, evade local, state, or federal taxes, nor collude with one another to fix prices or to engage in monopolistic practices. Only the government may engage in such activity.

 

[Vanadium 50]

If it is a corporation in the US, it is a person legally, AFAIK, re Citizens United, I think. Corporations are people, my friend. Only they cannot be put in jail, nor executed, nor...

False. You should read the ruling (and the dissent).

Corporations can, however, enter into contracts. This is an important aspect to commerce. If you buy a plane ticket on Delta, you have a contract with Delta - not the individual phone agent who sold you the ticket. If they can't get you where you need to go, it's their responsibility: they can't say "Agent Mary Jones sold you the ticket. Take it up with her."