Setting Up Your Business Name | Chris Malta's EBiz Insider Podcast

Chris Malta's EBiz Insider Podcast

There are a lot of mixed-up perceptions out there about what you should name your business and how you should register it. That can cause you a lot of problems down the road. If you do those five things, you'll be fine.

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EPISODE TRANSCRIPT

There are a lot of mixed up perceptions out there about what you should name your online business and how you should register it.

There are, of course, all the self-proclaimed but terminally self-interested EBiz "gurus" out there who tell you that you have to spend tons of money to let them register your business for you in some other state, and spend thousands of dollars doing so.

Please don't listen to those people. In case you're not aware, Google and YouTube are packed wall to wall with newbie marketers calling themselves gurus who are simply affiliates of the many scams that exist in this business.

In other words, they're only after your money and couldn't care less about your success. I'm here to talk about the truth, not the scams.

When it comes to setting up and naming your business, first, I have to state for the record that I am not a lawyer or an accountant. What I'm telling you is not to be treated as legal advice. These are my experiences and opinions after over three decades in online business for myself.

With that being said, here are the facts as I've experienced them over and over again. When it comes to setting up your business within the United States, always set up your business in the state you live in.

The so-called experts tell you to set up in states like Nevada or Delaware or Wyoming to take advantage of "amazing secret tax breaks" and other such drivel.

While there are some differences in corporate law in those states as a home based business, those differences aren't going to matter to you at this point.

Make no mistake, you're going to pay taxes, and you're not going to escape that fact, no matter where you set your business up.

When you grow to the size of Nike or Netflix, okay, you might want to consider some of those Nevada, Delaware or Wyoming perks. But until then, keep it simple and keep it local. It's much easier to deal with a business setup in your own state, and it's much less expensive to deal with your accounting when your business is in your own state.

In some states, an accountant can set up your business properly. In other states, an attorney is needed. In all states, you can actually do it yourself, but you shouldn't. If you do it yourself and you make a mistake, most of the time that mistake won't be noticed at first. By the time it catches up to you, possibly even years later, you could find yourself owing penalties and fines that could cost you tons of money. Governments "love" penalties and fines.

You need to locate an accountant or attorney near where you live, not in some other city. Having the ability to easily meet in person with the accountant or attorney who manages your business filings is a huge advantage. Make sure you shop around. The fees for setting up businesses are set by your state, but the costs you pay for your accountant or attorney are set by the accountant or the attorney.

Some are way more expensive than others for exactly the same work. Don't be afraid to come right out and ask what they charge and then shop around until you find that balance between a reputable professional and the fees that they charge. Remember, the initial business setup fee isn't the only fee you'll pay them over the life of your business. You need to make sure you get a good hourly rate on your accounting and legal advice, because you'll need more of it in the future.

It's actually best to find one of these professionals in a small practice. The big firms charge you for all their overhead expenses, and you don't need to pay for that.

When you do this, consider the type of business entity very carefully. The legal professional you choose will give you good advice on this.

My personal advice would be to go with a limited liability company known as an LLC.

There are three main types of business entities that can work for a home based business. A DBA, also called a sole proprietorship, is the one that most people choose. It's quick, it's cheap and it's easy.

However, with that type of business, your personal assets are exposed. That means that if you ever do have any serious legal issues with your company, the men with the black ties and the calculators can show up and take your car, your house and clean out your bank accounts. It's not worth the risk, no matter how small that risk may be.

The next business type is called an LLC. You can think of an LLC as kind of a halfway step between a sole proprietorship and a full blown Corporation.

It has legal protections in place for your personal assets, but it's not as complex or costly as a full blown Corporation is.

The LLC was created in Wyoming in 1977 and has spread across all the US states since then. The LLC, like I said, protects you in many ways without costing as much or causing as many complications as a corporation.

It's my business entity of choice. It's inexpensive to file and run an LLC. It also allows you to write your own agreements and bylaws, so to speak, as to how that business will be run within a loose framework, which makes it very flexible.

The third general business type is called a corporation. A full on Corporation has many forms. They're all expensive, complicated and cost much more to maintain.

Personally, the only time I would recommend a corporation is if you're going to have a business partner. A corporation offers you more detailed remedies against a partner who does you dirty in some way in the future.

I've been involved in several partnerships over the course of my decades in business, and I hate to say it, but I have never had a partner who did not try to screw me out of money at some point. A couple of them succeeded. It doesn't matter who the partner is. They can be the most trustworthy person you know. They can be a lifelong friend, even a family member. People get really weird when it comes to money.

Money changes people in ways you would often never expect. If you're going to have a business partner, I would strongly recommend that you talk to your legal pro about a full corporation and a very detailed Partnership Agreement.

Other than that, out of those three basic business types, once again my personal recommendation will always be an LLC.

Finally, don't screw up the name. I see new ECommerce business owners doing that all the time. How can you screw up a business name?

First, you could name it something that you personally think sounds really cool, like "The Purple Unicorn, LLC", for example. When you're in business, you have to remember that something that you think is really cool, could look really silly to other people. You don't want your business name to be something that could be a negative for any of your customers in any way.

Second, you could screw it up by naming it for the product niche that you think you're going to be selling. So if you think you want to sell Baby Shoes, you call it Milton's Baby Shoes LLC. What happens if that product niche doesn't work out in your research, or if you decide to sell in additional product niches down the road?

People who might at some point buy a metal detector from you are going to scream fraud when they see the name "Milton's Baby Shoes" on their credit card receipt. Then they're going to complain to their bank. Your merchant company is going to get a credit card charge back, and you have a whole nasty mess to straighten out.

If that happens often enough, you could actually lose your merchant account. That's the thing you use to collect money from your customers. It's kind of important.

The best thing you can possibly do is choose a generic business name. "Smith Enterprises LLC" is just fine.

You're not going to have a domain name for the business name. You're not going to have a website for the business name. The only place people will see it, will be in your website's copyright notices and credit card receipts. Your actual product sales website will be called something different altogether, and that site name will be owned by your business.

So ignore the self-proclaimed gurus who want to change you thousands of dollars for this. If you do it right, it's very affordable.

Consult a legal pro in your area. Strongly consider the LLC (unless you have a partner) and keep the name generic.

If you do those things, you'll be fine.

As always, if you have questions, talk to me. You'll find my phone number and my FREE ECommerce Q & A Meetings at ChrisMalta.com. I'm happy to help.

Thanks for listening, and I'll catch you next time.