A Start Up Trek – Now Official Part 2

Geek Culture

Box of legal documents.Box of legal documents.

Legal Documents. Original picture by ifindkarma. Creative Commons License.

I am starting a new public accessible prototyping lab in Huntsville, Alabama, called MindGear Labs based on the fab lab model. I’ve dreamed of becoming an entrepreneur and have done a fair amount of research on the topic. But this is my first attempt at starting a business. Here is where I document weekly my mistakes and successes in creating a business from the ground up.

I’d like to finish the process of registering a new business. I started this discussion two weeks ago but only covered how I decided on which organizational format (Limited Liability Company or LLC) and IRS filing format (subchapter S). I planned on a second part that would cover licenses and other filings which I’ll talk about today. I was going to cover it last week but when my planned location fell through I found myself behind on these filings. In fact, I still haven’t finished some of these filings, because I am still working on a new location. So like last time take anything you read here as my experiences for my situation. If you start a business you’ll find differences based on the kind of business and where you’re located.

Actually all of these permits and licenses are dependent on what sort of business I’m starting. For instance, for a retail store like mine I have to file initial privilege tax forms. These forms allow me to collect sales taxes and send them to the government. Is that a ‘privilege’? In my case I have to collect 3.5% for the State of Alabama, .5% for Madison County, and 4% for the City of Huntsville.

As an aside I’m seriously considering making all my prices round off to the nearest quarter or dollar after sales tax. I’d very much like to not have to deal with lots of change and I consider pennies to be a waste of resources. I have to think our greatest president should be honored in some way other than on a coin that costs more to make than it’s worth. Our neighbors to the north have apparently decided that the penny isn’t worth its weight in, well anything. I know I’m supposed to like pennies because then I can charge $9.99 for something and that looks better than $10.00 and more people will buy it. I wonder though if anyone has done the analysis to determine if the extra sales are worth the additional hassle in tracking, counting and making change with all those (almost) useless coins.

Ok, rant over. Another form I had to file was for a Federal Tax Identification Number, also known as an Employee Identification Number. Mainly you have to request one of these if you’re going to have employees, but there are some other situations as defined by the IRS here. That was an easy one, didn’t cost me anything and I could do it online. A lot of the other forms, like the privilege tax forms required it too.

I thought I would have to file some sort of zoning permit but apparently that gets taken care of by the landlord. I’ll have to make sure of that when I finally settle on a place. Another location specific form would be any building permits should I make modifications. Other permits I know I’ll have to look into once I get a place selected is from the Fire Marshal (making sure people can get out fast enough in an emergency) and possibly a sign permit, but again I think that will be taken care of by the landlord.

If there are any other permits, licenses or other forms I need to file I haven’t heard or read about them yet. I have however read of numerous horror stories of new businesses being shut down for not touching second base before opening. So I continue to do my due diligence and hopefully I’ll keep any surprises to a minimum.

My son has informed me a couple times this weekend that I’m not a businessman. Apparently having a business requires both a location and making money. I think I’ve made about $20 in a money market account while I’m looking for a location so maybe I’m half a businessman. This made me wonder what other pearls of wisdom I might glean from my 10-year-old son. When I asked him what a business is for he responded, “Well, there are two reasons. One is if you’re greedy you just want to make money. Or you might want to make something that people want or need.” He then proceeded to list a long list of stuff that he likes that companies make. Out of curiosity I asked him if video game companies were actually businesses and he said “sort of.” I couldn’t get him to articulate why video game companies weren’t full businesses. I didn’t have the heart to tell him how bad working on video games can get.

He did seem to understand a lot about businesses. I asked him about the roles of different corporate officers. His response for accountants was that they make sure all the money is balanced. Which I thought was pretty good, although his mother is an accountant so he has inside information. My favorite was his description of CEOs. Their job is to make sure everything is going well and to fire people. And he said that running a business requires a lot of paperwork. I couldn’t agree more.

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