From: rs8k+@andrew.cmu.edu (Ramakrishnan Srinivasan)
Newsgroups: misc.jobs.contract
Subject: Startup tips
Date: 30 Jul 92 20:52:31 GMT
Organization: Carnegie Mellon, Pittsburgh, PA


Hi guys,

Few weeks ago, I had posted a note asking for advice on dealing with
a *huge* company that will not deal directly with me for various
reasons.  In the spirit of thanking all those that replied, I have
compiled this. Hopefully, it will serve as tips for people with
(stable/unstable) permenantly employement, looking towards
independant consulting.

First thing, of course, is to have signs of contract at least for six
months (or may be one year, depending on your level of other income).
Typically, *big* companies tend to be suspicious of startups for
various reasons. The main reason, I learnt was that their purchasing
department is used to dealing with a handful of contractors and they
do not want to include you as yet another. They tend to ward you off
saying other things: 'it takes several weeks to incorporate, set up
various types of insurances and accounting systems and it will be too
late for their project'. My advise is: do rigorous homework. None of
these things are difficult. When you want to setup all these things,
YOU are the customer to various entities, including the government
and they are glad to help you. On an optimistic scale you can be all
those things in less than a week, if you have all the information and
are 'educated' about them already.  (which may be through
conversations or bboards like this)

File an article of incorporation with your state (state department),
get your federal id from the federal government number over
telephone, visit your city office personally to register your
business. All these people automatically send you literature (not
surprisingly) on taxes and how to pay them etc. Bank accounts,
letterheads, business cards and envelopes are less than half a days
work at your local office store. While you are there, get some expense
forms, invoices etc. etc.  for your day-to-day business activity .

File an election for S-Coporation, since it is a structure
similar to sole prop and is a lot simpler than the C-Corporation.
This election must be filed with both state and federal governments.
Get a *good* CPA, ask him for advise on what coporate structure to
use (S or C) depending on numbers that apply to you. The CPA's
typically cost about $1000 /year for your tax returns and misc
questions. (I have worked out an yearly deal with mine)

Make sure to identify all your real world expenses (rent, car, phone)
and dummy employees (like your spouse, children etc) before you go to
your accountant.  These will help in determining the split of income
between you and the company and what to classify as 'business
expenses'. You should ask him how to account for these things so that
they will be business expenses. The Dome simplified weekly accounting
book is more than adequate to maintain accounts for one-man type
operations (single-entry, cash based accounting). Everyone (CPSs, IRS)
likes receipts for 'expenses' and keep them handy.

Insurance is where one 'wastes' more time, since there is more
choice. Typical business insurances including workmans comp and
business liability are likely to be less than $1000 per year for
one-man payroll. If your client is a large company, it may require
that you show proof of you having one. (doesnt make sense to me, but
should go with the flow, I guess).  Life insurances worth $100,000
should cost less than $200 per year, unless you are one of those
'high risk' types. Health insurance is a tough one. It is a lot
better if the spouse is working or a student. 

Refrain from making large payments as salary in the middle of the
year from your company to you, if you can afford it. Instead, let it
pay for your 'expenses'.  This way you can even altogether avoid
estimated quarterly payments on personal income tax. From what I
understand, the company (*S corp*) does not have to file anything else
with state or fed, except yearly dummy returns, (but it has to file
with city quarterly) if you have no employees.

There you go! You are in business. 

I welcome comments and refinements on the net or personal mail.


Srini

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