How I formed my company in 6 steps
Today is International Women's Day. And as I am in the early stages of being a woman-entrepreneur, I thought I'd share some insights into how I formed All That Yazz LLC.
I realized that if I needed to sell my soaps, it couldn't just happen on its own. In order to legitimately be paid, I had to form a company. It sounded so grown-up and a little intimidating. Despite the fact that we live in a digital-age, where almost any information seems to be only a search engine away, it was not quite so straightforward.
There didn't seem to be a 1-stop shop telling you all the steps needed to form a legal entity. I scoured the internet, read different sites, and got thoroughly confused. It seemed that my options were to either be a sole proprietor, or to form a limited liability company. A partnership wouldn't work, as my husband would rather spend his time fishing than making soap. And having watched The Corporation many years ago, I knew that my soap business would never be that.
As a sole proprietor, there would be low start-up costs, and no need to register the company as a separate entity. On the other hand, it would mean being personally liable for every debt and obligation of the company. The alternative (a Limited Liability Company), meant I had to pay to get the company registered, get a tax ID number, and create Articles of Organization. More work. I came across this helpful chart that was useful reading.
In weighing the pros and cons, I opted to form an LLC. Being based in Arlington, VA I had to take the following steps:
3. Register my business on the Arlington County Customer Assessment and Payment Portal (CAPP) (look at the right column, halfway down the page) and get a Federal Tax Number
4. Get a Sales State Tax Number through the Virginia Department of Taxation
I learned that if I was planning on selling at farmer's markets and at craft fairs, steps1-5 would be sufficient to get me started, as all vendors are covered by the business license of a farmer's market. However, as one's network expands, if I was planning on selling in additional ways, (eg on-line), I had to get an additional business license as identified in step 6 below.
6. Get a Business License - and for Arlington County this can be obtained here: Business License from the Business Tax Division located on the 2nd floor of 2100 Clarendon Blvd, Suite 208.
It was important to do the steps laid out above, in that specific order, since by the time I reached Step 3 to register the business and obtain a Federal Tax Number, I already had to have the formation of the company as an LLC, and also have the FEIN/EIN number ready (BTW the FEIN is the same as the EIN). Step 5 was a user-friendly easy form: I applied on line, and received the permit within 48 hours in my email.
Since I was planning on selling my soaps only at craft fairs and at farmer's markets, neither a vendor's permit nor a vendor's tag was required. (Just as well - the vendor permit is affordable at $20, but a vendor's tag is in the range of $500.)
To be sure that I had completed everything correctly, I called the Arlington County Treasurer's office and spoke to a courteous official. He confirmed that I had taken appropriate steps to start my business, wished me luck on my soap-making journey, and reminded me that if I made more than $10,000 in gross receipts, I would have to pay taxes. I laughed and said, "I hope I make that much!"
And speaking of which, my next market run will be at Stone Bridge High School, Ashburn, VA on Saturday March 25th between 11.00a.m.-2.00p.m. Please come visit the Bulldog Bazaar craft fair and look for my stall "All That Yazz"!