Plan Your Home Business
Legal and Tax Considerations
(Note: The following information assumes that you are operating a business in the United States.
If not, consult with a lawyer and/or accountant.)
There are 3 basic business structure:
- sole proprietorship
- partnership
- corporation
Sole Proprietorship - This is the simplest of the 3 business structures. It is definitely the way that
you will wish to start. There are no special legal considerations unless you use a
fictitious name (such as Online Sales Co.) instead of your real name. Your profits
are treated as regular income just like the wages from your job. Basically you just
hang up your "Open for Business" sign and go.
Partnership - I you are going into business with someone else you will need a
partnership agreement. This will require a lawyer. He or she can explain your
rights and obligations in a partnership better than I can. Your portion of the
profits are treated as regular income just as in a sole proprietorship.
Corporation - The advantages and disadvantages of incorporating are too complex to
address here. Consult your lawyer (and probably an accountant as well) if you are
considering incorporating.
The Small Business Administration and the IRS have put together a very useful CD-ROM
that gives detailed information on tax and bookkeeping considerations for small
businesses as well as resources available from the federal government. Best of all,
it is FREE! (Well, actually you paid for it with your tax dollars!)
Click here for the free CD-Rom.
Be sure to check with your state and local government to see what resources they may
have available.
Bookkeeping
Accurate bookkeeping is essential for any business. You need accurate records of your
income and expenses. This information is vital if you want to maximize your profits!
And don't forget that the government will want an accurate accounting of what you owe
them!
By far the most popular bookkeeping software for small businesses is
QuickBooks.
At the very
beginning of your business you can simply keep track of your records on paper.
But as your income and expenses rise, you will find the bookkeeping features of
QuickBooks to be quite a time saver. This is a powerful business tool!
Whether you use a computer program or paper, you should learn the minimum basics of
bookkeeping.
The 3 Ways to Make Money Online
Basically there are 3 ways to make money online (or anywhere else, for that
matter):
- selling a product
- selling a service
- selling someone else's product or service for a commission
Selling a Product
The top selling products on the internet are information products: software, e-books,
e-zines and newsletters. The cost to produce and distribute these products
is very low, so they have a high profit potential.
Software is the single best selling online product. Since everyone online has a computer,
everyone online needs software.
E-books: Everybody has some knowledge that someone else would find useful.
How-to books are a big business. With a program like Adobe Acrobat you can produce your own
e-book at an extremely low cost. And the cost to distribute an e-book by downloading from
your web page is almost non-existent.
E-zines & Newletters: Perhaps your area of knowledge lends itself more to an ongoing
dialogue than to a book. In that case you might consider a subscription e-zine or newsletter.
For example, there are some investment experts making as much income from their subscription
newsletters as from their own investment advice. (I suspect some of them make more money from
their newsletters.)
If you want to produce and sell any kind of information product you will need a copy of
Make Your Knowledge Sell!
by Ken Evoy and Monique Harris. It shows
you how to turn the knowledge in your head into a profitable product. It takes you step by
step through the process of creating your product and selling it online. And it comes with
some very worthwhile free bonuses.
They have also created a free e-mail course (The InfoProducts Masters Course)
that shows you how to easily create a how-to e-booklet. It's an intensive 5-Day e-mail course on creating, producing and online-selling your very own infoproduct.
Drop shipping: This is an easy, low cost way to create an online
store. What is drop shipping? It is when the wholesale
distributor ships each individual product directly to your customer
AFTER your customer buys the product from you. That means you get paid
for the product before you pay the distributor for it!
And you do not have to store or ship any of the product yourself. It's
simply the least expensive way to retail products.
I have set up a seperate
Drop Shipping page for a more detailed explanation of how to
set up an online store using drop ship suppliers.
Selling a Service
Starting a serice business is relatively easy and inexpensive. All you need is a web page and
a skill that someone will pay for. You can do typing, bookkeeping or secretarial work online.
There are astrologers, numerologists and even palm readers online. Maybe you have specialized
knowledge or skills that would qualify you to be an online consultant. The possibilities are
limited only by your imagination!
The one drawback to a service business is the time it consumes. If you are already working a
full-time job it can be hard to find the time to properly serve your clients. And your income
will be limited by the number of hours you can spend working.
Why You Need A Merchant Account
If you are selling a product or service online you must be able to accept credit cards.
To do this you will need a merchant account. People online are in a hurry.
They do not want to take the time to write a check and mail it to you. And if you
don't take credit cards they can easily find a competitor who will.
A merchant account will generally cost you 2%-3% per transaction plus a US$0.25-0.30
transaction fee. There may also be one-time set-up charges of US$100.00-200.00.
This is assuming you have a good credit history and a moderate number of monthly
transactions.
Let's take an example. If a customer buys an item for US$10.00 the credit card company
would keep US$0.20 (2% x US$10.00) plus a US$0.25 transaction fee or a total of US$0.45.
Dr. Ralph Wilson has just published a thoroughly researched ebook on payment gateways
(the interface between your website and merchant account) called
The Merchants Guide To Payment Gateways.
If you just don't know where to start with a merchant accounts and payment gateways. If you don't even
know if your really need either, then you need to read this ebook.
It includes information on 90 payment gateways
such as VeriSign, Authorize.net, and WorldPay with candid user comments
from 72 readers in 15 countries. The report also includes a chapter
entitled, "At What Point Is a Merchant Account Better Than PayPal or CCNow?"
Selling Other Peoples' Products and Services
The fastest and easiest way to make money online is through affiliate programs. You basically
sell someone else's product for a commission. All you need is a website. You do not need a
merchant account. You do not need to ship or track inventory. Your only job is to send
potential customers to the web sites of your merchant partners. They do the selling, process
the order and ship it out. You just collect your commission on each sale!
Some companies run their own affiliate programs and some use affiliate management companies.
These companies provide a central location where you can sign up to sell products for several
companies. The top affiliate management programs are:
It costs nothing to join these programs and they give you a wide range of products and
services to choose from.
Some companies run their own affiliate programs. If there is a specific product you are
interested in selling, go to that products website and look for a link that says "affiliates"
or "partners."
Affiliate programs vary widely, so make sure you read any affiliate agreement carefully.
A good affiliate program should have these features:
- free to join
- 15%-25% commission
- ability to track repeat customers (so you get commissions when your customer buys again)
- good affiliate support (prompt answers to your questions; ideas for boosting sales)
If you are interested in affiliate programs you absolutely must get Ken Evoy's Affiliate
Master Course. This FREE intensive 5-Day e-mail course will show you how to
become a high-earning affiliate champion.
It runs over 150 pages and covers everything you
need to know to become a successful affiliate. This is top quality information. Frankly,
I can't believe that he gives this away.
Now, on to step 3 - Planning your Website
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