Computer based business

[Toredan]

Hi guys,

Well, me and a college friend of mine were searching for jobs to fit our college schedules when we had the brilliant idea of creating our own company. This would obviously fix scheduling problems and all, but i've got a few questions.

We plan on making a spyware removal and registry repair service since we've been working on computers together, and doing pretty well at it, since the age of 8 but when we were looking up our local tax laws we ran into a few problems. But a word of caution, if simple questions bother you please don't read further ;-)

1. We've found that we need a business license, and tax id to begin with (what we can't figure out is if we need state/federal or both.

2. We've already got a few very good spyware removal programs, and an excellant registry repair program. We're also very good with building new registries. Question is what are the laws about me using a product to complete our service.

3. What taxes would me and my friend be subject to, we're working out of home and our own vehicles. Needless to say we'll be putting money into the company when it comes in, just don't want to end up broke =)


Any info or advice is very welcome here, thanks for stopping to take the time to read this. Wish us good luck!

[Evan]

The most basic form of your business would be a partnership. A simple written agreement between you would work -- search the internet. If you think this business can be extremely successful, other than just for a few extra bucks, you may want to get a more complex agreement to prevent any problems. Generally, you need to go to the city/town hall and can register your business name. Then go to the IRS, and register for an EIN for the partnership.

If you want to have an actual legal entity (a corporation, LLC, etc.) you would need to first register with the Secretary of State [visit your state Web site and go to the Secretary of States page] which will require paying fees. The benefit of this is you gain legal protection, but that's your choice.

As for the second question, I'm not sure but you may want to have a clear policy (that customers sign) that you are not responsible for any damage to their computers. This will protect you should they sue you if something is messed up.

For the third question, it depends on your entity. If you want a partnership, then next tax year you'd file 1040 (instead of 1040A or 1040EZ) to report partnership income. The partnership would file 1065 to report income which is then divided on to your individual returns. (So if you make 1000, and you split it 50/50, you each claim 500 on your individual return. If you have a loss, that is also split, depending how you set it up.)

[forum_help]

Originally Posted by Toredan

Hi guys,

Well, me and a college friend of mine were searching for jobs to fit our college schedules when we had the brilliant idea of creating our own company. This would obviously fix scheduling problems and all, but i've got a few questions.

We plan on making a spyware removal and registry repair service since we've been working on computers together, and doing pretty well at it, since the age of 8 but when we were looking up our local tax laws we ran into a few problems. But a word of caution, if simple questions bother you please don't read further ;-)

1. We've found that we need a business license, and tax id to begin with (what we can't figure out is if we need state/federal or both.

2. We've already got a few very good spyware removal programs, and an excellant registry repair program. We're also very good with building new registries. Question is what are the laws about me using a product to complete our service.

3. What taxes would me and my friend be subject to, we're working out of home and our own vehicles. Needless to say we'll be putting money into the company when it comes in, just don't want to end up broke =)


Any info or advice is very welcome here, thanks for stopping to take the time to read this. Wish us good luck!

Hello Toredan

For your licenses try here...

http://www.best-start-a-business-guide.com/L&P

For the rest of your questions you're sure to find answers browsing the rest of the best-start-a-business-guide site.

Have a good day

[Bluemotorcycle]

The steps to form a simple partnership are as follows.

• Apply for an EIN (Partenrship) - Federal, call 1-800-829-4933

• Apply for a ficticious business name (DBA) with your County - Local

• Run an add in a local paper stating your ficticious business name - Local

• Write up a simple partnership agreement

After you do this, you can open a business bank account. You can apply for an EIN on the phone and they will assign one to you right away. Then you can register your DBA (Doing Business As) at the County Clerk of Court. Here is a sample partnership agreement - something like this will work. It looks kind of jacked up because I copied it from Word and the formatting does on copy over, but you get the idea.

Partnership Agreement

1. Partners
Partner 1 & Partner 2_ (Partners) make the following Partnership Agreement.

2. Creation of Partnership
As of January 1st, 2004, the Partners agree to enter into a Partnership for the purpose of operating a business known as: __Your Business Name_ (Partnership Business).
The name of the Partnership (if different from name of Partnership Business) shall be: ____________________________________ (Partnership Name).

3. Nature of Partnership Business
The Partnership Business will consist of the following business activities: ___________________________________

4. Contributions to the Partnership
The Partners will make the following contributions to the Partnership:

(describe property and/or work; give cash value)

Partner 1
Cash $2500.00
yourname.com Domain name $29.00
New laptop $2379.56
Workstation memory upgrade $207.90
Blank DVDs and sleeves $100.65
Beginning Java Databases $39.99
Beginning Java 2 $49.99
Java Visual Blueprint $26.99
Hacking Exposed $49.99
MySQL & PHP $29.99
Learning Perl $29.95
Perl 5 by Example $39.99
PHP and MySQL Web Development $49.99
Hacker’s Challenge $6.98
Million Dollar Consulting $15.95
Rules for Revolutionaries $16.00
Perl and CGI $18.99
Adobe Photoshop 7.0 $530.00
Adobe Illustrator 9.0 $190.00
Adobe Pagemaker 6.5 225.00

Total cash value: $6628.27

Partner 2
Cash $0.00
Dell Workstation $640.44
D-link firewall/router 106.00
D-link wireless NIC 52.99
Cellular Phone 79.00
Open Source XML Toolkit 15.95
Creating Web Pages w/HTML 24.00


Total cash value: $918.38 $918.38


5. Profit and Loss Allocation
The Partners will share business profits and losses as follows:
The net profits of the partnership shall be divided equally between the partners and the net losses shall be borne equally by them. A separate income account shall be maintained on books for each partner. Partnership profits and losses shall be charged or credited to the separate income account of each partner. If a partner has no credit balance in his income account, losses shall be charged to his capital account.
6. Salaries and Drawings
The Partners will receive salaries and drawings in the following way
Neither partner shall receive any salary for services rendered to the partnership. Each partner may, from time to time, withdraw the credit balance in his income account.

7. Management of Partnership Business
The Partners will have the following management powers and responsibilities:
The partners shall have equal rights in the management of the partnership business, and each partner shall devote his entire time to the conduct of the business. Without the consent of the other partner neither partner shall on behalf of the partnership borrow or lend money, or make, deliver, or accept any commercial paper, or execute any mortgage, security agreement, bond, or lease, or purchase or contract to purchase, or sell or contract to sell any property for or of the partnership other than the type of property bought and sold in the regular course of its business.

7. Addition of a Partner
A new Partner may be added to the Partnership under the following conditions:
[ x] unanimous vote of all Partners

8. Departure of a Partner
A Partner can be expelled by:
[ x] majority vote of the other Partners.
Any Partner who leaves voluntarily will give at least 30 days’ written notice.
If any Partner leaves the Partnership for any reason, including voluntary withdrawal, expulsion, or death, the Partnership will [ x] survive [ ] dissolve.
If the Partnership survives, the remaining Partner(s) will pay, within a reasonable time, the departing Partner, or the deceased Partner’s estate, the fair market value of the departing Partner’s share of the business as of the date of his or her departure. The Partnership’s accountant will determine the fair market value of the departing Partner’s share of the business according to the following method:
The assets of the partnership business shall be used and distributed in the following order: (a) to pay or provide for the payment of all partnership liabilities and liquidating expenses and obligations; (b) to equalize the income accounts of the partners; (c) to discharge the balance of the income accounts of the partners; (d) to equalize the capital accounts of the partners; and (e) to discharge the balance of the capital accounts of the partners.

9. Death
The death of a partner will be handled in the following manner:
Upon the death of either partner, the surviving partner(s) shall have the right either to purchase the interest of the decedent in the partnership or to terminate and liquidate the partnership business. If the surviving partner elects to purchase the decedent's interest, he shall serve notice in writing of such election, within three months after the death of the decedent, upon the executor or administrator of the decedent, or, if at the time of such election no legal representative has been appointed, upon any one of the known legal heirs of the decedent at the last-known address of such heir. (a) If the surviving partner elects to purchase the interest of the decedent in the partnership, the purchase price shall be equal to the decedent's capital account as at the date of his death plus the decedent's income account as at the end of the prior fiscal year, increased by his share of partnership profits or decreased by his share of partnership losses for the period from the beginning of the fiscal year in which his death occurred until the end of the calendar month in which his death occurred, and decreased by withdrawals charged to his income account during such period. No allowance shall be made for goodwill, trade name, patents, or other intangible assets, except as those assets have been reflected on the partnership books immediately prior to the decedent's death; but the survivor shall nevertheless be entitled to use the trade name of the partnership. (b) Except as herein otherwise stated, the procedure as to liquidation and distribution of the assets of the partnership business shall be the same as stated in paragraph 10 with reference to voluntary termination.

10. Dispute Resolution
If a dispute arises under this Agreement, the Partners agree to first try to resolve the dispute with the help of a mutually agreed-on mediator. Any costs and fees other than attorney fees will be shared equally by the Partners. If it is impossible to arrive at a mutually satisfactory solution, the Partners agree to submit the dispute to binding arbitration in the same city or region, conducted on a confidential basis pursuant to the Commercial Arbitration Rules of the American Arbitration Association.

11. Amendment of Agreement
This agreement cannot be amended without the written consent of all Partners.





12. Partner Signatures
Name: ____________________________________
__________________________________________
Signature
Date: _____________________________________
Address: __________________________________
__________________________________________
Social Security # ____________________________

Name: ____________________________________
__________________________________________
Signature
Date: _____________________________________
Address: __________________________________
__________________________________________
Social Security # ____________________________

[Bluemotorcycle]

Originally Posted by Evan

.
For the third question, it depends on your entity. If you want a partnership, then next tax year you'd file 1040 (instead of 1040A or 1040EZ) to report partnership income. The partnership would file 1065 to report income which is then divided on to your individual returns. (So if you make 1000, and you split it 50/50, you each claim 500 on your individual return. If you have a loss, that is also split, depending how you set it up.)

In addition to this, if you form a partnership, corp, or LLC, you will need to file a Schedule K-1. Here is a lik that explains. It is fairly simple to do.

http://www.irs.gov/newsroom/article/...122581,00.html

[Hedley]

Thnx guys, this is very helpful =) will keep in touch to report my progress