# Serious concerns about starting up.



## albion01 (Dec 9, 2009)

As the title states I have some very serious concerns about a t-shirt business I am getting into. After reading through many of the articles on this forum I'm really beginning to wonder if it's a good idea for me to remain a 'partner'.

A little history first. A couple of buddies of mine and I have been working to start a custom T-shirt website. On the site a user can generate his or her own unique content and have it printed on a shirt... similar to CafePress. I'm a web developer in real life so I am designing the web page. One partner is a spectacular artist and he's doing the graphic design. The third partner has the vinyl cutter and printing equipment. At this point in time there are no contracts between us other then verbal, "You want in?" "Sure!". 

I am trying to convince them that we really need to make sure that all of our bases are covered. They want to put the site online, make some money, then deal with all the legal matters once we have the money to do it. 

Any way...

1. Incorporating.

As you might imagine, my main concern here is that my personal assets are protected. I'm afraid that without completing this important step that I may be personally liable. I'm afraid that someone could take my house, to be completely honest with you all. Is it really that important for the three of us to form an LLC? 

2. Copyright.

We want to allow our users to create their own t-shirts. What do we need to do about copyright issues? We've talked about checking every phrase before we ship an order. If we find a phrase to be copywritten we'd reject the order and give a full refund. How feasible is that in a real life operation? I'm afraid that we'll get to many orders to keep up with all the checking.

What about sentences from books? I'm sure we might have a problem with "I am Ishmael" but I'm also sure something like "She said" is written in a hell of a lot of books.

We want to include our own predesigned content as well. What could happen if a phrase we thought was original turned out to be not so original? Say we found out later on that our saying was sold by T-Shirt Hell or one of the other big stores. Do we just take it down when we learn of the discrepancy.

3. Business plan for.

How important is a business plan? Will it help us get financing if necessary? What about government business loans?

4. Necessary documentation. (Return Policy, Privacy Policy, Terms of Use)

Right now our documents are pieced together from examples around the internet. I am not confident that my hodge podge is legal in any way shape or form. How important is it to have these documents on our site? And how important is it to have them created by a legal professional? What are some real life consequences of their absence or lack of luster? 

5. Licensing

This is my largest concern. How important is it to make sure we have a sellers permit and proper licensing before we start selling product? My concern is this... doing under the table work for a friend is one thing, but having a store on the internet seems to be very "out in the open" and rife for prosecution. 

If there is no corporation and no contract, whose name would be on any tax documents? 

I know many of you are going to say, "Get out now!" But I'd like to give them the opportunity to do this right. 

Thanks in advance for all your comments.


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## TshirtGuru (Jul 9, 2008)

albion01 said:


> As the title states I have some very serious concerns about a t-shirt business I am getting into. After reading through many of the articles on this forum I'm really beginning to wonder if it's a good idea for me to remain a 'partner'.
> 
> A little history first. A couple of buddies of mine and I have been working to start a custom T-shirt website. On the site a user can generate his or her own unique content and have it printed on a shirt... similar to CafePress. I'm a web developer in real life so I am designing the web page. One partner is a spectacular artist and he's doing the graphic design. The third partner has the vinyl cutter and printing equipment. At this point in time there are no contracts between us other then verbal, "You want in?" "Sure!".
> 
> ...


Do it right to begin with and save all the headachs that may arise in the future. Also sign contracts between all three of you because partnerships can become a huge headach is one wants out or if one claims to own this and that. 

Saving money to do things the right way later is probably the worst thing to do. If you guys don't have the money to do it right now, DON'T do it yet.

Every state has different laws so check with your secretary of state. You know what they, "not planning is planning to fail," or something like that . 

You will need a strong business plan to get a small business loan, especially at this time with banks in trouble already.


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## sjidohair (Apr 9, 2008)

I would like to address the Trademark Copyright laws,, 
A simple phrase or word or words,, that everyone uses,, could very well be trademarked,, 
always I mean always do a Trademark search with the unites states trademark office,, 
Start with a basic Tess Search.
You would be amazed, at the trademarks on words we use everyday in our language that someone has Trademarked.. 
If you are turned in by someone, and it happens, everyday,you are not exempt from whatever actions they choose, it is a State and Federal offense to use anyones copyright or Trademark item.
I am doing massive research on this right now,, so this is very fresh in my mind.

I hope this helps.. 
oh , i think if you want to use something that is trademarked, words, or copywritten,, you can aproach the owner and pay a fee for usuage.. 
MMM


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## in2infinity (Dec 8, 2009)

Let me start off by saying 2 things.

1. I'm not a lawyer, and even if I were I probably couldn't give official advice since laws vary from state to state and I have no idea where you are so these are only personal experience and opinions I'm sharing. See a lawyer if you want real official legal advice ... you'll be glad you did.

2. Congratulations on the possibility of being involved in a new business, it is truly the american dream - but it can also be your worst nightmare.

I'll go through your questions in order. First, a little history on me... I have a business which I started with my father 15 years ago. We started with just about nothing and have since acquired quite a bit including the building we occupy and several pieces of equipment. Here's what I can share from those experiences. We've had ups and downs but overall its been a great experience.

1.) A business is a serious commitment which should be done right. You're entering a world, much like a marriage that has pluses and minuses for all involved and its important that you at least have a formal agreement as to what is expected of each participant. This protects you from both the ups and the downs. If the company makes a ton of money ... you'd want your share. If it tanks, you'll want your partners to pay their share. I have met a number of people who have had substantial financial issues from businesses deals gone awry. Their partners we great partners when the money was coming in, but when times got tough they bailed and left the others holding that tab. You DO NOT want to be that guy. The agreement is to protect you from all angles, good and bad.

Do you need to incorporate? Yes... why? Not necessarily to protect you from creditors as far as personal liability is concerned (more on that in a second), but to make sure everyone in the organization has their roles and responsibilities legally established. Declaring yourself a part of an LLC or a Corporation offers little or no protection from personal liability (at least not in my state). It's one thing to be running Microsoft, something completely different to be running a small screen printing business (even if its large to you.). As a company we own real estate, equipment and intellectual property. We also have several loans and various types of credit. These are all personally guaranteed even though we're registered as a "C" corporation (the highest separation you can have from personal liability). I've been fortunate not to have to use my home as collateral although that has been offered as an option by various banks over the years. The bottom line is that regardless of your status ... you are likely to be personally responsible for the actions you take or the debt you establish.

Copyright is a tough one. Legally, you cannot reproduce anything that you do not have the rights to. Enforcement of that is up to the copyright holder. As long as you can show you do your best to prevent violations you should be OK so definitely have a definitive policy in writing and document that you're following it. You'd be wise to consult an attorney in developing that policy to make sure you have your bases covered.

Business plans ... never had one in writing (we do have an incorporation agreement ... which is like a "business plan lite". People tell me it helps get money. My experience has been that collateral gets money much better than a "plan" and in this economic environment a personal letter from God is a near necessity. The business plan would be a good basis for your Incorporation, or LLC filing. In fact, in my state, a business containing multiple partners a basic plan is required since you have to declare the official role of each participant in the company. At a very minimum you should outline in writing the role of each person, an exit plan (how do I get out?), and what happens to your interests should you become disabled or die.

Necessary documentation ... good thing to have. It does two things. 1.) establishes in writing the rules you plan to live buy. 2.) gives the customer information that is important in their buying decision ... essentially establishes confidence. Again, this protects you from them, and them from you by establishing the rules up front. Specifically what those should say should be established with the consult of an attorney since state, local or federal laws may apply to your specific situation.

Licensing... absolutely never ever ever ever work under the table... especially when partnered with others. All it takes is one disgruntled person to rat you out (especially if you don't have a partnership agreement in writing) and you'll be faced with back taxes, penalties, fees, and headaches that can't even be imagined. You'd be shocked what you'll owe if you get caught - beyond personal income tax .. think sales taxes on all your sales, local taxes, city taxes, business permits, etc. Get your proper licensing in the state you're operating. In my state you can't get a business bank account, credit card, business loan, etc without it. If you're not officially a business, nobody will treat you like one.

I hope this helps ... like I said these are just my experiences. Everyones situation is unique and I would highly recommend consulting an attorney (and maybe a CPA to explain the differences between the different business types as they relate to your personal finances) to get all the proper facts. It may cost you a few hundred dollars, but compared to what you could lose its a very very small cost.

Best of luck to you ... hope this helps...


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## Teamwear (Mar 12, 2007)

How important is a business plan?

If you are asking this then you have not even started to really think about spending YOUR money.

Especially in these days-would you invest in a company that you know nothing about and what it takes to make that company run-let alone survive?

How much of YOUR money can you lose while figuring out a business plan? 

I once worked for a fortune 1000 company. Numbers followed by a lot of 0's meant nothing until it was my money. 

Make a business plan with realistic expectations and worse case scenarios or you will likely find yourself on the forum of another industry looking for another opportunity before 10 people have the time to read this post.

(holds true to any industry-but yes I like what I do)


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## JaeAmera (Dec 25, 2006)

albion01 said:


> 5. Licensing
> 
> This is my largest concern. How important is it to make sure we have a sellers permit and proper licensing before we start selling product?


Craig-

You have been blessed with some great advice so I won't repeat.......but the simple fact that you asked about licensing tells me you need to slow down a bit, gather your friends and become business partners.

Research what needs to be done business wise in your state and what needs to be done for your desired business structure. Write a list and mark off as completed. All web design, art design, and equipment are secondary to structuring your business legally and with piece of mind.

Jae


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## albion01 (Dec 9, 2009)

Thanks JaeAmera and everyone else. In2infinity, for the liability part I am more concerned about being sued by a customer. You know how this world is, people are sue happy. I always though if a business were being sued that the individual property of the owners was protected. 

I am afraid they are far too over zealous and hungry for the cash to start rolling in. It's unfortunate but I am thinking I am going to have to bow out of this one. So let me ask you this. If my name appears nowhere as being part of the business; on the web hosting, paypal, etc... accounts. Should I still worry about liability if I am only the guy who designed the web page for them? 

Thanks again


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## in2infinity (Dec 8, 2009)

Craig,

Again .. not a lawyer here, but my understanding is that being incorporated as a "C" class could make it more difficult for someone to go after your private assets. "C" corps are financially separate from you - they have their own federal tax ID which is the business equivalent of your social security #. With an LLC all the finances are considered personal so all the business income and expenses (at least your share of them) are lumped together with your personal income. When you hear people talking about raising taxes on those making 250,000/year hurting small businesses they are talking mainly about LLC type businesses. Since all the business revenue is tied to your personal taxes it can raise your "income" quite a bit from the federal government's point of view. There are benefits to using either method (I have companies set up both ways) that you'd need to talk to a CPA about that.

The bottom line is that if someone sues you or your company they are going to go after the money. If its all in your personal account then thats where they will go after it. The degree to which they can do that may depend on the state laws where you live which is where an attorney would come it.

As far as separation, if you're not officially part of the company and you are hired to work for them then your liability would be limited to the work you do and you would be liable only to the company that hired you... just like any other work for hire agreement. So if you did something that violated a copyright for example. Someone could sue the company for that, if they won then the company would have to go after you for your mistake to recover their losses. At least thats my understanding of how it would have to go down, but you should consult an attorney to get the definitive facts on that.


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