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How to legally start a programming / consulting business?

OK, so I'm currently in college and have a pretty large town that I can pull work from. I'd like to start a small consulting business to get a little bit of cash on the side, and set myself up to move into full tim after college.

How do I need to go about this legally? I figure there's a permit from the city I have to get to do business, but not sure where to start. Does anyone have any pointers on getting the business registered / set up? After that I can start on a few of the leads I have to turn them into work.
Anon for Hire
Tuesday, January 24, 2006
It all depends where you are, local laws can differ by state, county, city and of course country.  In most US states you can simply start doing business.  I filed articles of incorporation to limit my liability, and had register for a state sales tax license, plus federal tax id.
Phil Send private email
Tuesday, January 24, 2006
This is a great question for your local SCORE office http://www.score.org/  Or if they are not in your area, maybe a local chamber of commerce.  They can give you a good idea of what your local city/county/state requires, plus you can get some other good advice about how to get started, simply by making an appointment to talk to someone for an hour.
Tuesday, January 24, 2006

I recommend checking your state's website for how to form your business and your town's (and possibly county's) website for any local regulations pertaining to businesses.

The SBA may also be a resource, and sometimes there are continuing education courses covering this topic.
Tuesday, January 24, 2006
Okay then, don't even mention what COUNTRY you are in! Sheesh! Anyway, I am not sure it is necessary for you to create a company when as a consultant you can just get paid via 1099 and do your own withholdings.

But here are some of the things you might consider doing:

1. Choose a unique name and get your website domain
2. incorporate: create a company/legal entity which is something you do with your state corporation commission, and get your TIN or EIN i.e. SSN for the company
3. register your business in your county, that's county as in city or township, but they may want a piece of the action (like 0.2%) depending on their categories of businesses.

On second thought, just get a website and call yourself John Smith Consulting (don't say LLC or Inc until you really are).

Good luck.
Anon and anon
Tuesday, January 24, 2006
"On second thought, just get a website and call yourself John Smith Consulting (don't say LLC or Inc until you really are)."

In most states in the U.S., you need to file a ficticious name application to do business under any name other than your legal name ... it's simply a legal alias and it's pretty easy to do yourself (fill out the form, pay the fee and place an ad in a newspaper or two).
Steve Moyer Send private email
Tuesday, January 24, 2006
Getting an LLC is VERY easy--only costs about $30/year in some places (you often register with the state).  Business income is just considered personal income, so you file taxes with a Schedule C I believe.  I don't have any idea about sales tax though...

Tuesday, January 24, 2006
Anon and Anon makes a good point.  It will help if you say what country (and state if USA). 

In the US, the minimum you need to do is code, collect payment, pay taxes.  Some counties and townships expect you to have a vendor license if you work there.  In almost all cases, this is waved if you work on the client site, the majority of time.  Never presume you know what words like "majority" mean to tax and township people.  Logic need not apply as a coworker in NJ was told majority was over 85%.

What you should do is another story - if you are in the US:
 - Incorporate only if you have a tax advantage doing so. I would not do it the first year.  Find a small business accountant to do your taxes and then figure this part out.
 - Incorporation does not free you from liability, especially if you are the only worker in the corporation.  They can still sue you for negligence.
 - If you are going to bill direct to clients, buy insurance for negligence/liability.  It runs about $1000/year for every million in coverage.  Being young and inexperienced, you will pay more, or you may find it impossible to get until you work for someone else first.
 - Check with your local chamber of commerce. They can get you a good deal on health insurance  and in many cases help you find experts. 
 - Open a business checking account. (Or a second personal one).  When you get paid, it goes in there.  Then pay yourself a salary from there. All business expenses come from this account. NEVER let the business be used for personal expenses. A nice clean line makes your end of the year life so much easier.
 - Never sign a contract that has something in it, you cannot accept.  You are agreeing to all the terms.  Later claiming it is unfair, or you did not understand is not going to help.
 - Never sign a contract that has something in it, you cannot accept.  You are agreeing to all the terms.  Later claiming it is unfair, or you did not understand is not going to help.
 - Never sign a contract that has something in it, you cannot accept.  You are agreeing to all the terms.  Later claiming it is unfair, or you did not understand is not going to help.
 - Did I mention the do not sign a contract ....
 - Spend some money to get a good contract to sign with clients.  You can surf for some boiler plate on the web, but at least get it reviewed by an attorney.  Figure about $100-200.

The list could go on and on, but that is at least a start.
Tuesday, January 24, 2006
Within my state of Maryland, others have told me that it's better (for a one-person operation like myself) to form an LLC because with a corporation you have to file an annual report with the state and that's a lot of work!

Good luck with your start-up!
Matthew Choinski Send private email
Tuesday, January 24, 2006
He said he's in "college" so I think it's safe to assume he's in the US, otherwise he would have said "university" or "uni".
Michael H. Pryor Send private email
Tuesday, January 24, 2006
You file the dba (Doing Business As) at your county courthouse (or wherever the county clerk offices).
Tuesday, January 24, 2006
If you are going to get checks payable to you by name, don't need a DBA.

You really don't need a business license if you are just a small timers doing individual jobs.

What you need to do is pay your income taxes. Assuming you are in the USA, that means Federal, State, possibly City.

For a college student, that's about all you will need.

If you start to pull in real money, consider the rest.
dot for this one
Wednesday, January 25, 2006
OP is in college, and wants to go consulting directly...

Is it me, or did consultants used to need a little experience before hosing other peoples' companies?

Wednesday, January 25, 2006
Taking my own experience in building my company, take in account:

1- If you don't have experience in working (i.e.: for others) then is more hard. Try get a medium-time work, so a) You have some money while your idea take off b) You develop experience c) You develop relationships with other person, know some clients, learn good and bad things (like how are the boss, the clients, etc...).

2- Learn all the articles you can from Joel or Erik, and that kind of stuff, I think are very good

3- DELAY this as far as you can. You never imagine how much presure is pay this and that. I'm on this from 3 years and have a large debt (US 13.000) because I never figure how much can eat the taxes, the salary, the office, etc... By fortune I have 8 years of experience and a good team of people, so we are able to resolve this, but in retrospective, I start too quickly:

1- Ads in local yellow pages. A waste of money because first years you not get enough customers and you relocate more quicly. I think is a waste of time go for traditional marketing for the first 1-2 years if the thing is a from zero-start

2- Paying a office. Unfortunaly we are 8 persons so we not can work on my own apartment, but this cost hurt us. Avoid like a plague go out your own house if can...

3- Paying salarys. In taxes, a salary in my country add a 50% more to the money spend in the person, ie. if I pay US 100/month to somebody, I need pays US 50 month for tax things.

Our main idea is build a search engine for the enterprise and revolve around integration and e-commerce. But we start selling websites (that is easy stuff! we think) but that suck all our time, so we delay the profitable things and go for the cheap work. This was the most terrible mistake we make, and only from december we are finishing all our websites and focusing in our core work.

So, if you really, really NOT have a workable version 1 of your product or idea, NO TAKE OFF.
Mario Alejandro M. Send private email
Wednesday, January 25, 2006
I work for myself. My name is Donald Lee, so when I work for a client the check is made out to Donald Lee.

The IRS wants me to pay the self employment tax four times a year. Every April I also pay income taxes just like everyone else.

I also incorporated myself. My corporation is called Donald Lee, Inc. So far I have never done business under my California corporation. It cost me $100 to create and took five weeks after sending the paperwork to Sacramento.

I can also have checks made out to any reasonable name I choose to make up if I file a Doing Business As (DBA) with my local country clerk. I think it costs $5 or $10.

This is all very easy. You don't need to register with anyone to do business, just do business and get a check made out to your name. Read the Nolo press books so you know how to pay taxes.

Julius Seizure Send private email
Thursday, January 26, 2006
>consultants used to need a little experience before hosing other peoples' companies?

Not knowing the OP I have no idea of his skill level, but when I first did some "consulting" in grad school, I was paid student rates (about $15/hour in today's money) and delivered student results.

One bit of advice. If you ever quote "student rates" to a client, you will never be able to get grown-up money from them.

I found, when I left school, my whole image changed and I could double my rates without a problem.
dot for this one
Thursday, January 26, 2006

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