# Legalities of a strictly e-commerce clothing company??



## Domboslice (Nov 16, 2011)

Hello I just had some questions about a strictly e-commerce clothing company. My mind is boggled in regards to what I need to do first to get started so I am not putting funds into a certain aspect of the business that may not even exist. In other words should I initially focus on my brand, web site and designs before the legal aspect or vice versa?? (Sell shirts first then form LLC or LLC then sell shirts?) 

Also if I am strictly e-commerce can my house address be the business address when applying for an LLC or do I need an office location?

I just need the the guidance of the proper steps to take to cover myself and my ideas/designs but also make sure my business will even exist in this industry before spending too much.


THANKS IN ADAVANCE!


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## tankueray (Apr 16, 2010)

It depends on where you're located and what your business plan entails. In some states you can use a service similar to a "mail boxes etc. for incorporation" for your address. In others, it has to be an address you have physical control of.

Contact your local Small Business Development Center by filling out this form and looking at the local offices on the right side of the page after submission of the form: SBA Direct | SBA.gov

The SBDC has staff, training, and resources that can help you with these questions for free.


> I just need the the guidance of the proper steps to take


That's exactly what they get paid for, go see them and let the government spend some of your tax money on you for a change.


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## greyhorsewoman (Jul 19, 2007)

You certainly can start your business as a 'sole proprietor' and work out of your home (except in certain areas that prohibit businesses). I've been in business 9 years now and am STILL a sole proprietor' working out of my home (I do on site vendoring and websites only).

An LLC can have certain benefits but is not necessary and EIN number is only REQUIRED if you have employees (though it is free to get one). You do need to register any fictitious name you are going to use for your business and get a sales tax license.


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## ReggieTees (Mar 14, 2011)

We went with the LLC from the very beginning. There's a fee in our state of CA for doing so, but the limited liability of the LLC is attractive. But your company doesn't have to start that way. We work from our home too. Tax wise it would be very beneficial to have a exclusively designated room for your business to qualify as a home office. 

Before you start spending a lot of money do some research and then do a whole lot more. We learned the hard way and it's cost us money we could have spend on other things. Live and learn I guess.


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## famfunllc (Jan 7, 2012)

I strongly recommend you form an LLC. If you don't have any partners you can still fill out a Schedule C on your personal 1040 but you will get the added benefit of personal assets being legally separated from your business.

Also, if you don't intend to have a physical location for your store or production then start a PO Box and put the PO Box address on everything you can. This isn't for legal reasons but if you're going to be online you don't want people to have access to your personal address.

Also, get a tax ID (you can do it all online - it's free) and that will allow you to get a separate checking/savings for your business only. Keep a separate set of books for your business - you want to know where you're making and loosing money. 

Beyond filling out all of the necessary forms required by your state/feds (organization forms for the LLC, sales tax collection forms (for the state you have nexus in) if required, etc) you should be OK.

I wouldn't worry much about the home office deduction - there will likely be very tiny benefit and it will expose you to a higher risk of being audited.

Consult a CPA in your state for more guidance on forming a business.


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## greyhorsewoman (Jul 19, 2007)

The wisest advise is to book a 'consultation' with an CPA/accountant to answer of your questions. You'll get numerous conflicting responses here depending on what path individuals have chosen to follow.

I have a business checking and never needed a Tax ID, it is a simple business checking with a DBA heading. I have used the home office deduction. Two rooms of my house are dedicated to my business... it has been a nice deduction. 

I've use Quicken (though QuickBooks is probably preferable, I already had Quicken for Business) for my bookkeeping and Turbo Tax for my federal & state filings.


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## Domboslice (Nov 16, 2011)

If i plan to use LegalZoom to file my LLC it looks like all the paperwork, EIN number, etc can be done for about $900. Does this seem a bit pricey?? I could go with the basic package which would be about $250 less but if I'm going to do it I would probably just get the gold package and make sure I have all the resources possible. 

Should I file the LLC with Legal Zoom first prior to consulting with a graphic designer to make a logo with my potential business name? (That way I know I have full access to the use of my business name?) Or should I have the business logo designed and start selling t-shirts prior to the LLC filing to make sure I have a legitimate business venture?


Thanks!


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## ReggieTees (Mar 14, 2011)

Domboslice said:


> If i plan to use LegalZoom to file my LLC it looks like all the paperwork, EIN number, etc can be done for about $900. Does this seem a bit pricey?? I could go with the basic package which would be about $250 less but if I'm going to do it I would probably just get the gold package and make sure I have all the resources possible.
> 
> Should I file the LLC with Legal Zoom first prior to consulting with a graphic designer to make a logo with my potential business name? (That way I know I have full access to the use of my business name?) Or should I have the business logo designed and start selling t-shirts prior to the LLC filing to make sure I have a legitimate business venture?
> 
> ...


We used LegalZoom, it was marginally helpful, but we only spent $600 and that was 11 months ago. They must have raised their prices. Although we got a notification that they were being sued. Haven't had a chance to read the whole 'class action' details yet though. They helped do some of the paperwork but we still had a bunch of stuff to do on our own. I'd say if you have to time and mental energy save yourself some $$ and do it all yourself.


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## Obertor (Dec 15, 2011)

In my eyes, there is very little benefit to becoming an LLC...

If you're accepting your online payments through a payment processor like paypal and you make over $20,000 or 200 sales, your sales totals will automatically be sent to the irs in the form of a 1099-k

You'd then crunch your numbers and send in your sales total matched against your own 1099, including all of your deductions like the "home office" deduction. You can be a sole proprietor with no official "business" or anything like that... 

You'd have all of your sales and most of your expense totals in paypals database ready to go without extensive book keeping.

If you're under that $20,000 or 200 threshold, then they aren't required to report anything to the IRS, effectively making your sales invisible... I still recommend paying your taxes of course... 

The point being, as far as I can tell, there is almost no point in forming a business to sell online. You shouldn't fear an audit or anything like that if your honest about your sales and keep the proper paperwork, and you can get a reseller license without a .llc or inc.

When opening a brick and mortar storefront.. I can see the benefits, but online I'm not seeing it. Save your money and invest it in something more meaningful

(remember to always look into local laws and be careful of any legal advice that you receive online. We all live in different cities, and states, so there may be specific regulations in your area.)


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