Declassified SCAD Survival Guide

Business

Getting Started

Desmond Du

Introduction

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Starting and running a business doesn't have to be daunting. It's not just about renting an office space or hiring employees. To me, it's about getting the official license and registration to do what you love and get paid for it. And setting up your own business? It's a breeze! If you can sign up for account for Adobe, gaming, utilities, etc., you can start an business just as easily. Here is a short guide to help you get started with forming your own LLC.

What is an LLC?

A Limited Liability Company (LLC) limits the liability of its owners to their investment in the company, protecting their personal assets from legal actions. This structure is popular with smaller businesses as it combines the protections of a corporation with the flexibility of a partnership. This protection, known as the "Corporate Veil," shields the owners' personal assets unless the LLC is used for fraud or poor practices, like mixing personal and business finances or underfunding the company. Keeping clear, separate financial records is crucial to maintain this protection.

Do I need an LLC to freelance?

Technically, no. A sole proprietorship is the default business structure when you do work in exchange for money, with no need for setup or formation. It offers simplicity—no legal paperwork or complex decisions since you are the sole owner. However, the major drawback is that there is no protection of personal assets; you are personally liable for all debts and legal claims against the business. You can register a DBA ("Doing Business As") to use a business name, but you must follow state-specific rules and ensure the name doesn't infringe on existing trademarks.

Why register your own business (LLC)?

Separation of Finances. Opening a business bank account allows you to keep your personal and business finances separate. This makes it easier to track income and expenses, simplifying bookkeeping, tax preparation, and overall financial management.

Dividing Financial Risk: In some business structures, like corporations or partnerships, shareholders, partners, and directors share the risks involved in running the business. This can be appealing because it spreads the financial responsibility among several people, reducing the burden on any one individual.

Avoiding personal Lawsuits: As a company structure, particularly a corporation, is treated as a separate legal entity, it can be sued for issues like breach of contract or intellectual property violations. In these cases, the corporation itself, not the individual owners, is responsible for paying any damages.

1. Business Formation

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When delving into business formation, think of it like this: an EIN is your business's personal license plate, while the LLC is the vehicle itself. Just as a license plate uniquely identifies a car, an EIN distinguishes your business for tax purposes. And much like how a car is recognized by its license plate, an LLC operates under its own unique legal identity provided by state registration.

EIN (Employer Identification Number)

An EIN is a unique nine-digit number assigned by the IRS for tax purposes. Just think of it as a SSN for businesses. While not mandatory for LLCs, it's often needed for banking, taxes, and other business activities. Just

To apply for EIN, provide your business's legal and trade names, entity type, reason for applying, principal address, contact information, responsible party's SSN or ITIN, business type, estimated employee count (if applicable), start date, and accounting year closing month.

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Apply for EIN

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LLC Business Registration

To register a Limited Liability Company (LLC), you'll need to provide the business name, registered agent, business address, ownership details, purpose of the LLC, NAICS code, and filing fee (~$125). Consider drafting an operating agreement to outline internal workings. Check state-specific requirements and consult legal advice if necessary.

In New Jersey, you can register your business online through the New Jersey Business Formation portal:

New Jersey Business Formation⁠

Registered Agent

What steps should I take if I plan to start an LLC in New York or another state while currently living in Savannah, with the intention to relocate later?

If you're starting an LLC in New York from Savannah but plan to move there later, appoint a registered agent in New York. They'll receive legal documents on behalf of your LLC, as required by state law. Choose someone reliable with a physical address in New York to fulfill this role.

Alternatively, there are many companies that offer this for a small fee such as

Northwest Registered Agent⁠

LLC Filing Services

If you find the LLC formation daunting and are willing to pay for services to get a quick start, you can try:

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ZenBusiness⁠

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LegalZoom

S-Corp

In unique arrangement, setting S-Corp is beneficial because instead of the business paying taxes on its profits and the owner paying taxes on their income, an S-Corp lets the profit “passed through” to the owner, who only pay personal income tax on it. However, this might involved more research and paperwork to be filed.

2. Financial Infrastructure

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After setting up your business, you need to set up banking and financial infrastructure that helps with accepting and making payments, bookkeeping, and accounting. Below is what I recommend.

Business Checking Banking

Capital One Spark Business

Chase Business Complete Banking

Business Credit Card (Optional)

Chase Business Ink

Invoicing & Accounting Software

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`Wave`⁠
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Wave is great for invoicing because it's free, user-friendly, offers customizable templates, automated reminders, various payment options, secure transactions, integrates with accounting software, and includes expense tracking.

3. Hiring & Payroll

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If you plan to hire someone who is an international under STEM Extension, do read up on on how to make your company E-verify

here⁠

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Gusto⁠

is a recommended platform for hiring and payroll. It can help with:

Hiring & Onboarding

Onboarding new hires with offer letters and e-signatures

Filing new hire reports with state agencies

Payroll & Taxes

Setting up and managing regular and off-cycle payroll (eg. bonuses)

Handling federal, state, and local tax filings

Creating and sending W-2s and 1099s

Time tracking and PTO management

Benefits & HR Management

Managing employee benefits (health, dental, vision, 401(k), etc.)

Ensuring labor law compliance and providing HR resources

Integrations & Employee Access

Integrating with accounting tools like QuickBooks and Xero

Offering employee self-service access to paystubs and documents

Please use my referral link if you plan to use Gusto:
`https://gusto.com/d/desmondfc1a536a`⁠
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4. Tax Reporting

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Get an accountant! They will make your life easier and give you a peace of mind, check our the accountant I used

here⁠

9. FAQs

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Do I need an LLC to freelance?

Short answer, no. But it’s better to have one so it reduces your personal liability and allow you to separate personal from business finances, which is better for bookkeeping, reduces your tax liability, and easier tax reporting.

What are the benefits for international students in starting their own LLC?

As a student on F1-visa and OPT, you can start and own a business.

This allows you to stop the 90 day unemployment clock,

and it also allow you to make a business bank account to separate your business and personal funds.

What to do after you start an LLC to retain your OPT status

Update on the SEVIS website

Inform ISSO that you have formed an LLC and provide your Employer Identification Number (EIN) for your business They will enter the number into your employer entry in the SEVIS System in your record

When in doubt, always consult ISSO.

Can you make your LLC E-verify?

Yes, but you can't do a STEM extension for yourself; an employer-employee relationship is required.

Some have transferred LLC ownership to a business partner to qualify for the STEM extension under their company.

References

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Choosing a production entity.pdf

69.7 kB

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