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  1. #1

    Starting a web hosting business

    Hello everyone,

    I have been thinking for awhile and I have planned on starting my own web hosting business. I have had some experience as I have previously helped a friend out with his web hosting business. I've gotten a lot of experience dealing with customers, managing servers, and handling support tickets. Here's a list of what I'm going to require for my business. Please do add to the list if I'm missing anything:

    Managed VPS from KnownHost
    DirectAdmin Control Panel
    WHMCS Billing Script
    Installatron Script Installer
    .com, .net, and .org domains
    SSL Certificate
    Custom web layout
    1-2 employees

    I also plan on registering my business with the state of California as that's where I reside. However, I am not sure where to go to register my company. Also, how much would it cost to register my company with the state of California? I also require a Terms of Service to be written up but I do not know of a good place with a reasonable price.

    Any comments/suggestions would be appreciated.

    Thanks
    -Johnson

  2. #2
    Join Date
    May 2006
    Location
    San Francisco
    Posts
    7,200
    I can tell you that with your current list you're on the right track here and with some good business sense, you may absolutely have something going. We started off with a very similar foundation last year. CA is one of the more expensive states to register a LLC in as it has a $800 franchise fee every year so you might or might not want to consider another formation such as an S-Corp. Definitely talk to a lawyer about that.

    Good luck.

  3. #3
    Join Date
    Oct 2006
    Location
    Pittsburgh, PA
    Posts
    242
    Add to your list possibly a toll free (or regular number) for support/sales inquiries, customers usually like talking to a person via phone
    Jon Stephenson

  4. #4
    Payment processors, domain reseller account if you want to sell domains, and a lot of money if you plan to pay those employees.

    Do you really need employees at first? I think you might be overestimating what you actually need. There is no point to have 2 people on staff if you have no customers - And I guarantee you that if you are just starting up, it will take you at least a year before you even need 1 employee.
    Download my eBook + Videos: Starting your own successful web hosting company.
    Learn from a web host with 7 years of experience.

  5. #5
    Payment processing, I'm thinking about just doing Paypal for now. Would it be wise to just accept credit cards directly? If so, what where would I sign up to do that? Also, I looked into LLC or S-Corp and I'm leaning more towards an S-Corp. I've never started my own business before so how would I go about with paying taxes?

  6. #6
    Join Date
    Feb 2006
    Location
    San Francisco, California
    Posts
    469
    Quote Originally Posted by jwong12 View Post
    Payment processing, I'm thinking about just doing Paypal for now. Would it be wise to just accept credit cards directly? If so, what where would I sign up to do that? Also, I looked into LLC or S-Corp and I'm leaning more towards an S-Corp. I've never started my own business before so how would I go about with paying taxes?

    You can accept credit card payments through CDG commerce. We use them and are very happy, it's easy to set up compared with Authorize.net which we originally started with.

    As far as taxes you'll register, pay your dues and then on the year you have to basically get turbo tax and go through your records and put all that info in. From the "been there done that" prospective find a CPA and pay him the $100/hr to make sure it's all done at the right time and correctly etc. Figuring out taxes on your own, especially if you haven't started LLC's etc before is a big PITA.
    Larry Bly
    Sandbox IT Solutions, LLC.
    www.SandboxITSolutions.com
    Dedicated Servers - Web Hosting - Consulting Services

  7. #7
    Quote Originally Posted by jwong12 View Post
    Payment processing, I'm thinking about just doing Paypal for now. Would it be wise to just accept credit cards directly? If so, what where would I sign up to do that? Also, I looked into LLC or S-Corp and I'm leaning more towards an S-Corp. I've never started my own business before so how would I go about with paying taxes?
    Are you leaning towards the LLC or S-Corp because it sounds cool?

    Just a thought...

    Anyway, one of the downsides about running your own business that you need an accountant. They dont work cheap either - but they will handle all your tax stuff.
    Download my eBook + Videos: Starting your own successful web hosting company.
    Learn from a web host with 7 years of experience.

  8. #8
    S-Corp does sound cool but the reason why I'm leaning more towards it is because I don't plan on having any partners. Even if I do, it won't be right now, it'll be in the future. Is it possible to migrate from an S-Corp to an LLC?

  9. #9
    Quote Originally Posted by jwong12 View Post
    S-Corp does sound cool but the reason why I'm leaning more towards it is because I don't plan on having any partners. Even if I do, it won't be right now, it'll be in the future. Is it possible to migrate from an S-Corp to an LLC?
    So why not start off as a sole proprietor? Cheaper and easier to get.
    Download my eBook + Videos: Starting your own successful web hosting company.
    Learn from a web host with 7 years of experience.

  10. #10
    Join Date
    Jun 2009
    Location
    California
    Posts
    509
    Quote Originally Posted by dbbrock1 View Post
    So why not start off as a sole proprietor? Cheaper and easier to get.
    Self-employment tax.

    You should really talk to a CPA or attorney to help you decide what structure is the best for your company.

    You can convert back and forth, but it is a hassle and just makes more money for your CPA (even worse it can trigger taxable events). Better to do it right the first time.

  11. #11
    Thanks for all the replies. They were really helpful. I have one last question. If I hire 1 employee and I am a first year college student, do you think it would still be possible to run the web hosting company successfully? I mean the VPS's would be mananged to the point where I would be able to just get things handled by submitting a support ticket. I can probably answer support tickets during my free time and during the remainder of the time, I could have the employee handle the rest. I don't think it would be possible to provide 24/7 support unless I hire 2 employees, so I'm thinking of setting business hours. Would that hurt my company? I'm trying to think this through as much as possible so I don't waste money starting a failing company.

  12. #12
    Join Date
    Apr 2001
    Location
    Australia
    Posts
    174
    Creating a business and marketing plan of all these ideas would assist you greatly, more so than an accountant who will charge you for something you should learn and know even before starting a business of any type.

  13. #13
    Join Date
    Mar 2009
    Location
    Toronto, Canada
    Posts
    2,570
    Quote Originally Posted by jwong12 View Post
    Payment processing, I'm thinking about just doing Paypal for now. Would it be wise to just accept credit cards directly?
    You may want to offer 2Checkout along with PayPal to accept credit cards. They've got a very nice fraud checking system and to sign up for an account is a one time fee of $50.

  14. #14
    Join Date
    Jul 2009
    Posts
    41
    You have a phone number? You will also need to consider payment processor's, Google checkout, paypal credit card, for example.

  15. #15
    Join Date
    Mar 2008
    Posts
    1,717
    Quote Originally Posted by Annuit Cúptis View Post
    Self-employment tax.
    I was under the impression you pay self-employment tax on any earnings from a business with pass-through taxation (LLC, S-Corp), because "Self-employment tax" is really just your contributions to medicare/social security that you'd otherwise have your employer paying.
    I used to run the oldest commercial Mumble host.

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