People think you need a lot of money to start a business. But I started mine back in 2017 with just $500. And all of that money went straight in to the stock that I was going to sell! So how can you start a business with so little? Read on and find out.
If you're looking to start a business with little to no money, you should consider working from home. Most local tax offices will allow you to work from home provided your business does not take up most of the domicile. Some may even allow public businesses, where customers come and go from your house. But most people will want to start small, and working from home is the best way to start. You also have no major overhead - paying rent for an actual commercial property!
But keep in mind that some wholesalers out there will not sell to a business in a residential address. There are ways around this, and for that I highly recommend doing some research to find out exactly what the wholesaler requires.
Renting business space is also possible, and commercial land owners don't always require money up-front to start a lease. Most do, but you'll have to look around for the ones that don't. Consider some of the more "old and worn out" properties that don't have anything special in the area anymore. Perhaps a large box store moved away, and the area is full of mostly smaller, personally owned businesses.
Now that you've figured out where it will go, decide on a name. Your name must be final! It takes a lot of paperwork and some fees to change your name, so I highly recommend you find something you plan to stick with!
Once you have a name in mind, decide what type of business it will be. An LLC is the most common for small business owners, as it separates the business from your personal self. Most legal and financial things that happen with the business do not affect you personally, and vice versa. But becoming an LLC requires you to register with your local Secretary of State and often requires a filing fee. Where I am, the filing fee is $100, but it will vary from state to state.
When I first started with my business, I went with Sole Proprietor. This gives no special benefits or rules like an LLC, but you usually don't have to register with your Secretary of State's office. But for someone just starting out, it might help not to have fees to pay. You can always change to an LLC later, as well.
If you choose to go with an LLC, simply use your internet to search for your local Secretary of State's office. They will have links for you to apply for an LLC. You do not have to pay someone to do this for you! Not to mention they will charge a fee of their own on top of the actual filing fees, so you're only paying for something that is very easy to do by yourself! Just keep in mind when you search for your local Secretary of State's website, you want to find a site that ends in .gov! If it ends with .org, .com, .net, or anything else, you're only going to end up on the site of someone selling you the services of filing the LLC for you!
So whether you go with Sole Proprietor or LLC, your next step is to get an EIN or Employer Identification Number. This number is REQUIRED whether you actually hire anyone or not, but it is free to obtain one. YOU DO NOT HAVE TO PAY FOR THIS! To get yours, visit the IRS site at IRS.gov. Again, don't go with any other site, especially those ending with .com, .net, and .org! The number is completely free, but other websites will make you think you need to pay hundreds of dollars to get one! Just go straight to the IRS website itself.
On the IRS website, in the upper left, mouse over the word "File" and select Business and Self Employed. (If the site has changed layout since this posting, just find the search function and type in "EIN" in the search box.) Go to the EIN portion of their website and follow the instructions for applying for one. You can do it online and you'll have your EIN within minutes after submitting the application! But keep in mind that if you later register as an LLC, you will have to file papers to change the official listing with the IRS to include the suffix in your business name. This is most often LLC, but may be Ltd., Limited Liability Corporation, Ltd LC, etc.
Your next step is also usually free. Do a search in your web browser for your state's tax office. Once again, you need an address that ends in .gov. Search for any link that says "register a new business" or "obtain tax ID" or something similar to those phrases. The idea here is to obtain a certificate for tax purposes by registering your business with the state. This certificate will require you to charge sales tax on the retail side, but it will also EXEMPT you from paying taxes on items you buy for the business or for resale. This is the number that most of your wholesalers will want so do not skip this step! Even if you craft things at home, you may want to buy the materials wholesale, so this is a very important step! The state usually offers it for free because they expect you to pay taxes to them with each item you sell.
Once you get tax ID number from your state, you'll want to obtain a "Certificate of Tax Exemption" for your state. This is a form that is usually available somewhere on your state tax office's website. You don't have to pay for it - you don't even have to register it with the state. But your wholesalers will need a copy of one specific to them.
Some locations require a specific one for your state, while others have a blanket form that can be used for all states. Getting the one specific to your state will not require you to fill out the blanket form later. Your wholesalers can take the state-specific form. I usually send my state-specific form to wholesalers with all of my information filled out and signed, and tell them to fill in their own company information as needed. Most don't like that - the ones they offer for me to fill out are already filled out with THEIR information. But I remind them that I already sent in a Tax Exempt Certificate and they usually relent. Either way, it's a free item that wholesalers do require, both sides just have to fill out their part. If you want to use the one the wholesaler provides, go for it. Or send your state-specific form to them when applying for wholesale access. It doesn't matter.
Now you're almost done. If you have chosen to register an LLC, that's the only fee you have paid so far. If you went with Sole Proprietor you haven't paid anything yet! And your business is almost ready to go!
But there is one more step and this one almost always requires a fee. Your county or city will want you to register the business with them as well, for a license. So, once again, do a web search for your local county or city website and look for one that ends in .gov. What you'll want to search for on this site is typically an "Occupational Tax" certificate or registration.
But look closely. My local county tax office allowed veterans (which I am) to get a license for free! So you don't always need to pay a fee for this! Read all of their notes about the occupational tax, and read through the application as well. If there is a special provision, see if you qualify for it to get a free or reduced-fee license. Sometimes they will inspect the business location before they'll issue a license, and let you know if you need to change anything to comply with any ordinances. For mine, all I needed to do was buy a fire extinguisher!
Beyond this, you might need other inspections, licenses, etc., depending on the type of business you're running. For example, a food business might need inspections from the Health Department, and any business selling live animals (including fish) might need a license with the state Department of Agriculture. But again, stick with websites that end with .gov so you don't end up paying someone excessive amounts of money to do something you can do by yourself!
Now you're all set to run your own business with little or no money spent! Getting a lawyer for your business isn't necessary, as most people seem to believe. It is a good idea - especially as your business grows - but not necessary. Everything I have mentioned above makes you a completely legal business entity. Now all you have to do is invest in the items you want to sell!
Once you are hopefully earning money, you can look into other things, such as registering as an LLC, if you initially chose Sole Proprietor, growing and upgrading the size of your business with the county/city tax office, and perhaps even hiring that lawyer to keep on standby. But by then you should be earning money with your business so you can afford these things with ease!
