Results 1 to 28 of 28
  1. #1
    Join Date
    Apr 2004
    Location
    Laguna Beach, CA
    Posts
    62

    sole proprietorship...

    i am starting up a web hosting business. i registered my business license under sole proprietorship.

    would any recommend not using sole proprietorship?

    is it easy to change to an LLC if my business grows?

    thanks

  2. #2
    I would highly recommend registering your business as a subchapter S corporation.

    If you are registered under sole proprietorship and someone sues you then they can sue you personally.

    If you are registered as a sub chapter S corporation

  3. #3
    Join Date
    Apr 2004
    Location
    Laguna Beach, CA
    Posts
    62
    what things will people sue a local web host for?

  4. #4
    Join Date
    Apr 2002
    Location
    South Carolina
    Posts
    497
    losing data, lots of stuff. I've never been sued in over 2 years in business and I am listed as a sole proprietorship.
    Carolina Hosting Services
    http://www.carolinahosting.net | @CarolinaHosting | Facebook.com/CarolinaHosting
    VMware | cPanel | Linux | Softaculous | 16 Years Hosting Experience

  5. #5
    Join Date
    Aug 2003
    Location
    EU
    Posts
    1,671
    Well, I don't think you should worry about beeing sued. Your clients will usually just leave without paying if that is the case. And of course, you won't have clients hosting sensible data on your servers, so no worry there.
    Lorand R. Minyo
    Co-Founder @ Neveli

  6. #6
    yeah and not to mention the cost in going corp, for now sole proprietor should be fine, just get some liablilty insurance.

  7. #7
    Join Date
    Feb 2002
    Posts
    68
    I would stay sole proprietor initially.
    --

  8. #8
    How do you know this ?

    "you won't have clients hosting sensible data on your servers, so no worry there"

    A database of client names and contacts. . .



    LLC minimum. Even if you think you are not ever going to get sued, you never know what the client is capable of doing. Lost of data, contracts, etc. Also gives you that peace of mind that if you are sued, which can happened they won't be able to take your car/house/other property.

    Do it, it's worth the investment.
    Datums Internet Solutions, LLC
    Systems Engineering & Managed Hosting Services
    Complex Hosting Consultants

  9. #9
    Join Date
    Apr 2001
    Location
    Il
    Posts
    448

    I would highly recommend registering your business as a subchapter S corporation.
    Totaly agree with this.
    http://www.realwebhost.net
    http://www.realwebhost.net/vps.php
    ICQ 120397604 |MSN : hotmail.com | AIM : rwhsupport | Yahoo: rwhmax

  10. #10
    Join Date
    Aug 2000
    Location
    NYC
    Posts
    6,627
    Originally posted by zinet
    I would highly recommend registering your business as a subchapter S corporation.

    If you are registered under sole proprietorship and someone sues you then they can sue you personally.
    This is the kind of question that none of us can answer authoritatively without knowing more about the situation of the person asking the question. For example, say he has no real assets. The small risk of being sued becomes even smaller... a lot of legal advisors would recommend you don't even worry about it unless you own a home or something of similar value.

    As for the recommendation of an S-corp, he mentioned in the original post that he was considering an LLC, which would bring all of the protections against personal liability that an S-corp would and the same option for pass-through taxation. Without knowing more about his plans for the business, who the owners would be, if he's raising startup capital and how, it's impossible to say whether the particular advantages of a corporation outweight those of an LLC.

    In short, rysolag, you should have no problems starting out as a sole proprietor... and yes, it's relatively simple if you want to start up an LLC or corporation later,
    Specializing in SEO and PPC management.

  11. #11
    Join Date
    May 2004
    Location
    San Francisco, CA
    Posts
    1,273
    But those state taxes for an LLC (I'm in CA) really bite. They ask for $800, franchise tax I believe.

    There are some great "Special" Business Liability Insurance plans out there. Some are Technology Services Errors & Omissions Liability, Cyberspace Liability, Employment Practices Liability, and more. Check it out. State Farm Insurance offers it.

  12. #12
    I went the LLC route, Subchapter S is too much of a pain in the arse and you get the same protection.

    Justin

  13. #13
    Join Date
    Aug 2000
    Location
    NYC
    Posts
    6,627
    Originally posted by Azn_Chic
    But those state taxes for an LLC (I'm in CA) really bite. They ask for $800, franchise tax I believe.
    Yep, that can be a very compelling reason to start as a sole proprietorship. If the business takes off, you can formalize things later.

    On the other hand, if for example you're raising money to start the business even just among friends and relatives, you'd probably want a formal business structure from the beginning. If you'll have a number of owners, it might be that one or more of them wouldn't want the tax-through taxation that a Subchapter S as recommended above would bring (and, of course, it's possible that a single owner would be better off without it). Again, that kind of thing is why I was saying that it's not possible to make a recommendation without knowing the specific situation.]
    Specializing in SEO and PPC management.

  14. #14
    Join Date
    Jan 2002
    Location
    USA
    Posts
    708
    Talk to a CPA who can go before the IRS.
    Not a lawyer, but the above type of CPA.
    Under the law for example:
    I do not do business in the State I live in.
    The State the server is in is the real place of business.
    Some business types only are refferal under the IRS laws.
    The list goes on.
    Get a GOOD CPA and work with them.





    * This is not legal advice.

    Based only upon my personal dealings with the IRS.(I am a LLC) Which allows losses or profits to go between the members.
    Keep ever scrap of paper! Power bills if a home business. Gas, insurance, everything.
    Set one room aside for the business and run it as such. Show that it is not a hobby.
    Again, a GOOD CPA can guide you. Not H and R Block and places like that!
    No, it is not me!
    No, I did not do it!

  15. #15
    Join Date
    Apr 2004
    Location
    Laguna Beach, CA
    Posts
    62
    thanks all

    my details:
    i live in CA, USA.
    i dont need to raise any money I have ~$5000.
    i dont own a house.
    i live w/parents.
    i plan to approach local businesses in person to get sign-ups.
    and stay local.

    let me know if these details let you provide more specific advise.

    thanks again

  16. #16
    Join Date
    May 2004
    Location
    San Francisco, CA
    Posts
    1,273
    Originally posted by rysolag
    thanks all

    i plan to approach local businesses in person to get sign-ups.
    and stay local.

    That is kind of my approach as well! Except I'm in the Bay Area

  17. #17
    Join Date
    Apr 2004
    Location
    Laguna Beach, CA
    Posts
    62
    how does that work for you?

    i hope that i can just convert people over from their existing host to me. just tell them that im local and that ill provide them with really good support, that ill give them my personal cell phone and have it on 24/7.

  18. #18
    Join Date
    May 2003
    Location
    Florida
    Posts
    877
    Originally posted by rysolag
    what things will people sue a local web host for?
    You can never tell how/when you might be sued. While good business practices and a good TOS might make it difficult, anybody is a potential target for a lawsuit. Check out http://www.webhostingtalk.com/showth...hreadid=273186 for an example.

  19. #19

    *

    I'm going to throw this information out there for those of you who have no clue about it and are starting out because finding the information in a nutshell is pretty difficult when going the sole proprietor route.....go to the county clerk's office in your city say I want to file my business name. Sometimes it costs as little as $1 but may vary depending on where you live. After you do this they will give you a FBN (fictitious business name) or DBA (doing business as) piece of paper (simply says who the owners are and the name you are doing business under). You will simply take this to your bank and should be able to open up an account. Larger banks like Wachovia aren't as willing to let you open an account using DBA but smaller banks should greet you warmly (instead of snubbing their nose as you) and set you up with a checking account ASAP. But if you are simply running card transactions you can deposit usually into a personal checking account without any problem (authorize.net resellers but will require a credit check and underwriting). You can get merchant accounts through banks or from many providers on the internet. Just make sure that you are doing things honestly and you should have no problem.

  20. #20
    Originally posted by clemzonguy
    *snip*arger banks like Wachovia aren't as willing to let you open an account using DBA but smaller banks should greet you warmly (instead of snubbing their nose as you) and set you up with a checking account ASAP. *snip*
    I've never dealt with Wachovia, but Washington Mutual will give you no hassle whatsoever if you open a checking account with only a DBA. As a matter of fact, I've never heard of any major bank (other then now Wachovia) refusing to open a checking account for someone with only a DBA.

    Regards,
    Aaron

  21. #21
    Join Date
    Apr 2004
    Location
    Laguna Beach, CA
    Posts
    62
    Originally posted by clemzonguy
    I'm going to throw this information out there for those of you who have no clue about it and are starting out because finding the information in a nutshell is pretty difficult when going the sole proprietor route.....go to the county clerk's office in your city say I want to file my business name. Sometimes it costs as little as $1 but may vary depending on where you live. After you do this they will give you a FBN (fictitious business name) or DBA (doing business as) piece of paper (simply says who the owners are and the name you are doing business under). You will simply take this to your bank and should be able to open up an account. Larger banks like Wachovia aren't as willing to let you open an account using DBA but smaller banks should greet you warmly (instead of snubbing their nose as you) and set you up with a checking account ASAP. But if you are simply running card transactions you can deposit usually into a personal checking account without any problem (authorize.net resellers but will require a credit check and underwriting). You can get merchant accounts through banks or from many providers on the internet. Just make sure that you are doing things honestly and you should have no problem.
    ive done exactly what you said already. am using paypal with my existing personal checking.

    ill probably start selling in a week.

    thanks

  22. #22
    Join Date
    Oct 2002
    Location
    Under Your Skin
    Posts
    5,875
    It is better during tax season to have an account for business and another for personal... makes it easier to get your deductions... and simply doing your taxes. the more legit you look the better you can claim other household deductions and not worry when (if) you get audited.
    Windows 10 to Linux and Mac OSX: I'm PARSECs better than you. Eat my dust!!!

  23. #23
    Join Date
    Jan 2001
    Location
    Illinois, USA
    Posts
    7,147
    Moved to RWHB

  24. #24
    Greetings:

    While various legal entities like corporations exist in order to shield the shareholders from law suits, please talk with your lawyer if there are legal concerns.

    I can share with you that as a principal founder who is involved with managing the business that I’ve often been asked to personally sign documents.

    And it has been shared with me by our own legal council that even signing something as “CEO” can make me personally responsible.

    My personal understanding is a lot of the investor shields are meant for your investors rather than officers (who may only be slightly shielded).

    Thank you.
    ---
    Peter M. Abraham
    LinkedIn Profile

  25. #25
    Join Date
    Aug 2000
    Location
    NYC
    Posts
    6,627
    Originally posted by dynamicnet
    I can share with you that as a principal founder who is involved with managing the business that I’ve often been asked to personally sign documents.

    And it has been shared with me by our own legal council that even signing something as “CEO” can make me personally responsible.
    Absolutely. Two things:

    The liability protections of incorporation protect you only by separating the corporation's financial liabilities from your own. You're still responsible for your actions in running the corporation; it brings no protection in cases of fraud or negligence, and if you're an officer and owner you can also be held responsible for the actions of your employees under the principle of "vicarious liability."

    And unless your corporation is very well established and fiscally strong, you'll very often be required to personally guarantee large financial obligations -- an office lease, a financed equipment purchase, even sometimes a server lease agreement.
    Specializing in SEO and PPC management.

  26. #26
    Join Date
    Oct 2002
    Location
    New York
    Posts
    1,063
    Word your AUP and TOS correctly to Idemificate yourself from any loses your customer could incur from using your services.

    Hosting is like any other service, things can go wrong, and if the customer agreed to these terms, they have no case.
    The Hostworks:: Offering Managed and Unmanaged VPS
    Shared Web Hosting and Managed E-Mail security services.
    24/7 Support :: 10 year anniversary coming soon!

  27. #27
    How much can you responsible for if you are a web hosting reseller and do not provide the infrastructure or support?
    AroundTheWeb.com - Submit to our directory today and save 50% for a limited time only

    SEO-Forums.com - Search Engine Optimization Forum and Help Center.

  28. #28
    Join Date
    Aug 2003
    Location
    Chesapeake, VA
    Posts
    3,379
    How much? There isn't any set cap. If someone is merely seeking to get a refund on a hosting package or design work, it could be hundreds of dollars or a few thousand.

    If you are dealing with something significantly more substantial and a serious financial loss occurs, then you could be talking about a much larger amount.

    Setting up as a corporation or LLC will provide a definite level of shielding to you as long as you also maintain a clear separation between business & personal dealings and you keep your corporate books in good, clean order.

    If you fail to do this, then there can be a "piercing of the corporate veil" in which case your corporate shell is invalidated.

    Having a strong TOS and other contractual protections are a good start but once your business grows to the right level, investing in some E&O (error and ommissions) coverage and other policies can certainly be beneficial.
    CDGcommerce.com - Trusted Merchant Account Solutions since 1998
    Many thousands of successful, growing businesses benefit from our expertise every day. You can, too!
    We help merchants to eliminate gateway costs, reduce & mitigate fraud and achieve streamlined PCI compliance.
    Learn more today at http://www.cdgcommerce.com - we look forward to helping your business grow!

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •