Results for 'create online business'

How to Create a Million-Dollar Business in 5 Easy Steps

Over the weekend, Tim Ferriss posted an extremely useful article by Noah Kagan, an entrepreneur who built two…

Over the weekend, Tim Ferriss posted an extremely useful article by Noah Kagan, an entrepreneur who built two multi-million dollar online businesses before turning 28. Noah was employee #30 at Facebook, #4 at Mint, he helped create Gambit, and most recently co-founded AppSumo. He's really smart, and the article is spreading like wildfire across the internet.

Noah's article is a step-by-step guide on how to create a million dollar online store. It's equipped with practical advice, screenshots, and a contest that's open to all Shopify Build-A-Business competitors. Read it here.

The Prize

$1,000 credit from AppSumo.com
Roundtrip flight to Austin, Texas, to have "the most delicious tacos in the world" with Noah Kagan

Here's how to win: Whoever starts a new online business and generates the most profit (not just revenue) by October 8th, 2011 will win. If you're competing in our Build-A-Business Contest, it will be your increase in profit over the next 2 weeks vs. the prior 2 weeks. If you want to share some taco's with Noah, you'll have to prove your profit or profit increase, so please read all the contest details at the bottom of Kagan's post.

You Inc. The Benefits & Costs of Incorporating Your Business

Many new online business owners aren't sure if they should incorporate, what their business structure options are, what…

feature

Many new online business owners aren't sure if they should incorporate, what their business structure options are, what incorporation might mean for the business, or even what they need to do to form a company.

This guide is a 'company formation 101' and will explain the benefits and disadvantages of incorporating, lay out the various options you have to officially form a business in the United States, and give you a few easy first steps.

What is Business Incorporation?

Incorporation describes the process of creating a new business structure where that business becomes a recognized entity or person under the law. Once created, this new legal entity can be treated separately from its founders or shareholders, potentially reducing liability for it's shareholders and gaining other benefits that could help the business grow and thrive long term.

In the United States, corporations must pay a fee between $25 and $1,000 depending on which state, and choose an operating name. A 'corporate name' must have a legal ending, like “Inc.,” “Corp.,” or "Ltd." which stand for “incorporated,” “corporation,” and "limited" respectively. The process of registering your company as one of the business structures that we're going to outline below is different in each state.

Benefits of Incorporation

There are plenty of benefits to incorporating your business. Here are the most important you should be aware of:

Protection of personal assets
Transferable ownership
Pay less taxes
Increased durability
Separate credit rating regardless of an owners personal score
Easier to create retirement plans

Each of the 6 primary business structures come with different benefits, and we'll outline them in more detail after going over a few of the disadvantages of incorproation.

Disadvantages of Incorporation

Of course there are disadvantages of incorporation as well - especially to small business owners. Here are a few you should consider:

Tons of paperwork!
You'll have to pay fees
Liability protection isn't guaranteed

Now that you know the pros and cons of incorporating your business, lets go over your options.

6 Possible Business Structures

There are six primary business models or structures that a company may choose in the United States. These include a sole proprietorship, a limited liability company (LLC), a partnership, a cooperative, a corporation, or an S corporation. Here's a rundown on all of your options:

What is Sole Proprietorship?

This is by far the most common and popular form of business in the United States - mostly because it's easy to start and manage. Simply put, a sole proprietorship is an unincorporated business where there is no legal distinction between the company and the individual who owns it and runs it. This is the business model most ecommerce merchants are using.

This business type is especially good for new ecommerce companies that have a low risk of liability. The company does not need to file taxes, startup costs are very low, and the owner has complete control over the business. Get a business license your local state or county, perhaps register a name, and the business is up and running. The sole proprietorship can evolve into another business type later, but is the fastest and easiest way to start.

Note though, that taxes do need to be filed under the individual owning the sole proprietorship. The risk here is that because there is no difference between the individual and the company, the individual is personally liable for everything the company does. Thus, the individual's personal assets are on the line. Also, once the business grows to more than one person, it can no longer be a sole proprietorship.

What is LLC? (Limited Liability Company)

A lot of people don't know what an LLC is, or how to get an LLC. Now it's important to note that LLCs can differ from one state to another, but generally speaking they are a hybrid business structure, combining the ease of a partnership with the liability protection found in corporations. Owners, frequently called members, pay taxes on the LLCs profits directly and the LLC itself does not file taxes as a separate legal entity.

LLCs require a lot less record keeping than corporations do, provide some protection for the member’s personal property, and are burdened with fewer profit sharing requirements than corporations. Conversely, LLC members will have to file additional forms for both federal and state taxes depending on the number of members, local laws, or even the LLC’s articles of organization. Often the members of an LLC pay payroll tax too.

Depending on the state, LLCs may also have a limited lifetime. In some jurisdictions when a member leaves the LLC, that LLC is dissolved. Starting an LLC requires significantly more effort than forming a partnership and a business will probably want to employ a lawyer or at least consult a certified public accountant.

What is a Partnership?

Partnerships are single businesses that have two or more owners. Each of these owners or partners contributes to the business either with funding, property, labor, skill, or similar.

A general partnership assumes that the business is evenly divided or that specific percentages of ownership are documented if there is a partnership agreement. A limited partnership can limit both control and liability for specified partners.

Partnerships will require registration, but are still relatively easy to set up. Partners share responsibility and profits. Each state will have slightly different requirements for forming a partnership, but in many, if not most cases, it is a matter of filling out a form and paying a small fee.

What is a Cooperative?

It would be somewhat unusual to find an ecommerce store merchant organized as a cooperative, but it's not impossible. Cooperatives are businesses created to service and benefit the owners. Put another way, its customers are its owners.

One possible example would be a labor union that operated an online uniform store, so that the union members could purchase work clothing at or near wholesale.

What is a Corporation?

The corporation is a legal entity separate from any “natural” person, meaning that its owners are generally free from personal liability - which can save your butt if things go awry.

Each state has particular rules for corporations, but in general you'll need to register a company to be considered a corporation. Once you're registered, corporations will need to pay local, state, and federal taxes that are filed separately from its shareholders. It will need to acquire a particular tax ID number, and abide by all applicable rules, regulations, and laws for its industry.

The primary benefit of forming a corporation is that regarding the corporation’s assets or debts, a shareholder’s personal property is protected.

Example: If a customer sued a retail corporation, and won, the corporation could be forced to pay, but if the corporation ran out of money, the shareholders would not have to make up the difference.

Corporations are also more easily transferred compared to other business structures, may sell shares to raise capital, and may be more attractive to employees, who can be compensated — in part — with shares in the corporation.

Corporations are relatively more difficult to form and maintain than the other options. If the corporation’s records are not properly maintained, it is possible to lose the limited liability. When attorneys sue corporations and demonstrate that the corporate records were not maintained and that the corporation was not, in fact, acting like a separate legal entity, they have “pierced the corporate veil”, and the protection for personal property is lost.

Corporations may or may not pay lower taxes than individuals. This differs state by state, so it is a good idea to compare individual tax rates, which would apply for sole proprietorships, partnerships, or LLCs, with corporate tax rates. In many cases, the corporation will pay less.

In some cases, shareholders of small companies may get taxed twice. Specifically, the corporation will pay taxes on its profits, and then the shareholders will pay taxes on their share of the profits in the form of personal income.

What is an S Corporation?

An S corporation is formed through a special U.S. Internal Revenue Service (IRS) tax election and is specifically built to avoid the double tax problem mentioned above. The owners of an S Corporation still have limited liability, although not to the same extent as with a regular corporation, but pay taxes just once.

The S corporation has the same or similar record keeping and regulatory restrictions of a corporation, which can be a burden for some small retailers.

Which Business Structure is Best for me?

Unfortunately, there isn't an easy answer or formula that every new business can follow when selecting a business structure. Most online retailers start as sole proprietorships or partnerships, and only go on to incorporate when the company’s potential liability makes protecting personal assets attractive or when being able to sell shares of the business would help it grow.

Right now, over 70% of US businesses are owned by sole proprietors and operate successfully without incorporating. Knowing that, it's safe to say that most ecommerce merchants won't need to go through the hassles of incorporation. But if you're more than a couple people strong, and you're growing in size, then you should start weighing your options now - and contacting an attorney will be the safest way to decide which business structure is best for you and your company.

How do I Incorporate my Business?

Each state has a different process to get your business incorporated. Search and apply for your state license here.

If you're not in the US, we'll be publishing a similar guide for other countries in the coming weeks. Let me know in the comments if you have anything specific you want me to address.

Interviewing Edward: Thoughts on Small Business and Ecommerce

Hi there! This is Edward, the Developer Advocate who runs the App Store. I’m in charge of cool-hunting…

Hi there! This is Edward, the Developer Advocate who runs the App Store. I’m in charge of cool-hunting awesome tech then mashing up API’s and business plans into Shopify apps that make merchants money and add further functionality to merchants online stores.

I recently spoke at a panel on ecommerce at Ottawa’s main public library and wanted to share some notes I took while answering questions from the audience and from the kind librarians who set up the event.

(A huge thanks goes out to librarians Jill Hawken and Amy Hoffmann for putting everything together. MARC records 4 ever!)

“If I already have a website, how do I use Shopify?”

This has got to be the question I’m asked the most often.

You can keep your existing website and copy the look over to your store. Shopify was designed to have a super flexible front-end that lets you make it look like anything. This is a good option for someone like GE Healthcare, who has a ton of infrastructure sitting at http://gehealthcare.com and can’t have the shop sit there. Instead, they created a subdomain with their registrar, copied over the look, and made http://vscanultrasound.gehealthcare.com/

However, many stores opt to move their entire web presence to Shopify’s hosting – it comes with a blog (there’s a free app for importing existing Wordpress accounts), a content management system, the cart (duh), and free content distribution network support – one of the coolest features in my opinion.

What’s a content distribution network? It’s a thing that saves versions of your site's images and files on servers all around the world, close to wherever your customers are. It means that your shoppers get served *super* quickly instead of leaving your site because it took too long to load. Did I mention that these things usually costs zillions of dollars to operate and Shopify provides it for free to its customers? Seriously – you want one of these when trying to sell things online.

“What has been the biggest challenge you’ve faced in running an online business?”

Without a doubt, it’s marketing. What kind of product should you create? How do you price it? How do you place it in the market? How are you going to promote it?

(This is actually great promotional material for a particular kind of crazy people like myself.)

Here’s a story about promotion: Marketing is typically really expensive and a mushy thing that’s hard to measure and predict. Having a business on the internet means it’s easier to track sales conversion funnels and effectiveness of Google Adword spends, but sometimes you’ve got to go back to traditional approaches and update them for the web.

As a business, Shopify’s strategy is to increase signups and retain customers. The first really successful promotion we made to further this goal was the Build a Business Contest in 2010. We weren’t sure about how effective it was going to be, but we were sure that it was going to cost us a whole bunch ($120k in prizes alone!) to run.

To make sure it was successful we really leaned on Twitter by being super responsive to questions (Hootsuite and other similar social media management platforms really helped) and made it super interesting for potential Shopify customers.

It also happened to be the exact sort of thing media wanted to tell people about in an economic downturn where more folks are looking to start their own business and need just a tiny kick in the pants to do it.

That tiny kick in the pants happened to be delivered by none other than Tim Ferriss who wrote the book on doing just that.

This is the second year we’ve done it and we’re giving away $500k in prizes along with personal advising from Tim Ferriss, Gary Vaynerchuk, and Seth Godin. To put it lightly, this promotion has been pretty successful at increasing signups and holding on to customers.

The lesson learned here is to know what your goal is and come up with a great set of tactics (like this promotion) to make that happen.

For a quick guide to marketing, definitely check out Unbounce’s Noob Guide to Online Marketing infographic. Don’t let the name get to you – it’s a really great resource for those new to the game.

“What do you love most about your job?”

The trust in execution. Shopify’s management practices are to give or build you all the resources and tools you need to do your job and then get out of your way.

That and the other folks who work here – every person at Shopify is the kind of person you would be ok with being stuck in a car/train/ferry/tundra buggy with for 3 weeks with and not be bored. This actually just happened to me as I travelled to Churchill with Willem in the Data Team.

“What has been the biggest surprise in running your business?”

The cool stuff customers send us! We have all these eBoy posters and pillows, Tattly tattoos, The Oatmeal everythings, and all the other beautiful, random interesting things around the office our customers have sent us as thanks for having a really kickass platform. I really didn’t expect that coming in, but they’ve all been really welcome surprises.

“What was the most useful piece of advice you were given when starting up your businesses?”

Do one thing really, really well. Say no to things that are not that one thing. I’ve watched Tobi, Cody, and Daniel do that since Shopify was just a tiny little company and it’s certainly worked out.

For more advice like this, you should really crib some notes from Fab’s 21 things they’ve learned as a business; it’s a great list.

(Spending time looking at the small stuff in front of you means you miss the real things just outside.)

“Which social media platforms do you recommend using for marketing?”

The big names are FaceBook, Twitter, YouTube/Vimeo, and LinkedIn (InShares are surprisingly huge for industry nerds).

Use a social media management tool. Even if it’s just Tweetdeck running on a monitor on the side while you do your thing, it’s a great way to get a pulse on how your customers are doing. A personalized message that looks like it was written just for one person goes a long way.

What you might not expect:

Tumblr! Check out and ask Of A Kind! Two brilliant ladies in NYC turned a fashion blog into a booming business dealing in small-run boutique items. Not only are they sharp content writers and producers, but they’re also riding the wave of Tumblr follows and reshares which happen to be right up the alley of many of their customers.

Last thing about social stuff: don’t forget about email - start collecting emails for your list as soon as possible. Launchrock, Mailchimp, etc. are easy ways to start doing this and the sooner you can tell customers about great reasons (discounts! new cool stuff!) to come back and visit your shop, the better.

“Do I have to set up as an exporting business when I am selling goods online to customers in other countries?”

Mike Freeman of both Shopify and Dempsey Press fame had to set up a wholesale account for his business but it wasn’t a lot of paperwork and mostly just required a call to the CRA to have them give him a wholesale business number.

Again, when it comes to matters like these, ask your accountant for their professional advice – it might end up saving you money and time.

“Do you recommend PayPal? If not, what system would you recommend for payment?”

PayPal is a great option for those just starting out or for businesses who don’t want to wait for the weeks it’ll take your bank to set up a merchant account for you so you can use other payment gateways like Authorized.net or Braintree.

Either way, be sure to use tools like FeeFighters.com to help you do your homework and make comparisons. Check out the Shopify FAQ for a list of the major gateways. Definitely worth spending time researching on especially if you do any amount of volume.

“I have a website design business. How do I market to customers in other countries?”

Check out Shopify Experts! It’s the new go-to place for Shopify merchants to seek professional designers, developers, and other professionals to help them build their business.

In the meantime, build out your network for work by checking out local events like Winnipeg’s Secret Handshake or Ottawa’s Blackhole Sessions – the best and easiest way to build out your contract business is usually right in town. Be sure to trawl through Meetup.com for your own city and don’t be afraid to ask around.

“What do I do when I can’t find royalty free images for my blog?”

Go somewhere awesome for your vacation and pray that the reader can’t tell you’re just posting pictures from your trip. Here’s a picture of the sun rising over the Canadian plains taken from a moving train: