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Essay editing

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Essay editing [#permalink] New post 01 Apr 2011, 05:52
Hi all,

Having gone through the application process with relative success, I want to start up a small low-cost essay editing service. I don't plan on taking too many clients or being too ambitious about it. I will probably make less than a $2K at first, just to test the waters. The question is, do I need to incorporate this service before I can collect any funds? What is the typical cost of incorporation?

Sorry these questions may seem silly but I'm totally inexperienced at entrepreneurship.

Thanks
cwhs
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Re: Essay editing [#permalink] New post 01 Apr 2011, 06:13
No. You don't have to incorporate the business. You need to hire a lawyer or do it yourself online (via services like LegalZoom.com or something) and check to see if your business name is available in the state and register your business name. (if you wanna start a legitimate business, that is - otherwise, it will be a side venture, like generating income via baby-sitting or something. Probably recommend that route until you have a business that you can sustain like other essay or admission consulting services)

Choice of entity issue revolves mainly around 3 factors:

1) liability
2) taxation
3) transfer of ownership in the future or admitting new partners.

Even if you don't do anything (like registering as corporation), by default, your entity is a pass-through entity (i.e. - self proprietorship, partnership, etc).

Let's say that you will be doing this without any partners (in your business).... and you generate $2,000 in your first yr. You will be reporting that income on Schedule C of regular individual tax return. You will probably have to file Schedule SE as well for medicare and social security. In addition, if this will be your only source of income while in bschool, you will have to make quarterly tax payments. (It's been awhile I read the tax code but I think the rule is either 100% of what you paid last yr or estimate your tax liability for the yr and pay 90% of it in quarterly payments) to avoid penalties with IRS. (don't have to worry about this unless your income exceeds combination of standard deduction and exemption)

In terms of limiting liability issues, I think for 1st yr essay editing service, you can just stay as self-proprietor. Otherwise, popular options are LLC or LLP, which requires you to bring in a general partner or general member who will run the day-to-day business while you concentrate on bringing in revenue. General partner or member will have liability issue but limited partner or member will have limited liability (usually never more than your share of capital interest, but rule varies by state).
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Current Student
User avatar
Joined: 02 Feb 2010
Posts: 246
Schools: Stern '13
Followers: 8

Kudos [?]: 42 [0], given: 16

GMAT Tests User
Re: Essay editing [#permalink] New post 01 Apr 2011, 06:22
nink wrote:
No. You don't have to incorporate the business. You need to hire a lawyer or do it yourself online (via services like LegalZoom.com or something) and check to see if your business name is available in the state and register your business name. (if you wanna start a legitimate business, that is - otherwise, it will be a side venture, like generating income via baby-sitting or something. Probably recommend that route until you have a business that you can sustain like other essay or admission consulting services)

Choice of entity issue revolves mainly around 3 factors:

1) liability
2) taxation
3) transfer of ownership in the future or admitting new partners.

Even if you don't do anything (like registering as corporation), by default, your entity is a pass-through entity (i.e. - self proprietorship, partnership, etc).

Let's say that you will be doing this without any partners (in your business).... and you generate $2,000 in your first yr. You will be reporting that income on Schedule C of regular individual tax return. You will probably have to file Schedule SE as well for medicare and social security. In addition, if this will be your only source of income while in bschool, you will have to make quarterly tax payments. (It's been awhile I read the tax code but I think the rule is either 100% of what you paid last yr or estimate your tax liability for the yr and pay 90% of it in quarterly payments) to avoid penalties with IRS.

In terms of limiting liability issues, I think for 1st yr essay editing service, you can just stay as self-proprietor. Otherwise, popular options are LLC or LLP, which requires you to bring in a general partner or general member who will run the day-to-day business while you concentrate on bringing in revenue. General partner or member will have liability issue but limited partner or member will have limited liability (usually never more than your share of capital interest, but rule varies by state).


Thank you nink. It sounds like a lot of work for $2K. Maybe I should test the market for demand first.
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Re: Essay editing   [#permalink] 01 Apr 2011, 06:22
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