Archive for 'Consultancy'

I’ve done it! I’ve successfully created a Single Member LLC in the great state of Arizona! w00t!!!1! Okay… sooooo… now what?

If you recall in the first part of the first episode of this series over on my old blog and the second part of the first episode posted on this blog, my direction when creating my own business was aimed more at being a consultant or contractor. In fact, the impetus for me to start a business was because a friend needed a technical manager for an upstart website and wanted to contract me. To be contracted I needed to be a business entity. As a result, I chose to form as a simple sole-proprietorship.

In the second episode, I reconsidered my assumptions about how to form my business and chose to form an LLC which gives me greater legal protection. It also future-proofed me if I decided to create a more significant business in the future.

But was I going to make a more significant business? As I considered owning a business and the possible directions I could take it, I had a moment of clarity: I don’t like working for people.

Maybe that’s a bit harsh. I actually enjoy working and interacting with people of all kinds, in all departments and with all temperaments. That’s the truth. It’s not that I don’t like working for people as much as I really enjoy designing, implementing, maintaining and optimizing systems. That’s not something that I can be guaranteed to have the opportunity to do if I work for any ol’ company.

I like to call the shots and design things exactly how my engineering mind is convinced is the best way. I don’t like to be hobbled by the potential for a Sr. manager or director being hornswaggled by a salesman or his nephew that’s “really good with computers” giving bad advice. If I’m going to be called out for poor design, Id rather it be by a fellow SysAdmin who knows why I’m making a mistake rather than a director who doesn’t think I’m buzzword compliant.

Prior to starting a business I was looking around at higher-responsibility jobs and feeling tense. I really wanted to be part of an organization that was proactive and progressive in their view of IT. However, I worried about being in a department that was stifled and choked. Thinking about doing all the footwork and research to find a good company to work in was a bit overwhelming. Plus, I’m a bit mis-trusting of IT headhunters. (Any angelic IT headhunters out there reading this, please forgive me)

After beginning to start a a business merely to be contracted by my friend (which was intended to be a part-time job), I considered becoming a full-time contractor. However, the stories of what IT contractors often have to endure frightened me. “You’re Mr. High-Priced-Contractor, you’re supposed to know everything yesterday and work 80 hours a week for your whole 12 month term!!”

I then considered starting a MSP. After some thought, I realized that staring at a management console (GFI Max, for example) and shuttling around town doing what amounted to overpriced help desk work made me weep in agony. Plus, there was far more of an initial investment in equipment, software and salesmanship than I felt I could afford. Especially the salesmanship part.

So how could I land a job doing what I like to do and ensure that it was in a great environment? I don’t even have to have free food and massages! Is that too much to ask?! It seemed like it was. Woe! Woe unto me!

Then an inspired idea came to me: Why don’t I make my own job? I know what I like the most and where my strengths lie. I know where and how I’d like to develop my professional skills. I could choose to design and implement exactly what I wanted to work with (provided my funds and the market were favorable).

I started to think about it deeper. All of the articles I’ve read over the last year and a half were all aflutter about outsourcing, SaaS and cloud computing. Many analysts have been cogently arguing that SaaS and cloud computing are changing the face of the SysAdmin profession. Those concepts and others are seen as continually pushing IT workers out of internal IT departments and into departmental units or service providers.

If you want to read more about it, you can see my articles “Corporate IT – More Suggestions of the Changing Role of the SysAdmin” and “Avoiding SysAdmin Obsolescence; The Only Thing We Have to Fear is Telepathic Robot Drones” among others on this blog.

It all made sense, but was scary and made me just a little sad at first. I had held onto the idea of working as a member of a traditional internal IT department. However, in the last year or so, especially the last few months, I’ve been convinced that the SysAdmin role is changing. Changing right now as I type this. And it’s a change that is logical, needed and one that isn’t going to turn back. I’m convinced that much of the future of Systems Administration is in SaaS, cloud and service providers. It was time to live what I believed. From those convictions, my company is born.

I am starting a hosted services company. I also have some smaller business ventures that will hopefully create a modest revenue stream so I can save and then invest in the creation of my first hosted service. I hope to begin setting up the first hosted service later this year (2010).

So what service am I going to start with? What’s my company name? Where’s my website?! What are my prices?!?

I’m not going to tell you! At least, not yet anyway. I don’t want to turn this blog into some kind of marketing channel or advertisement for my services. I want to stay as indie as possible. In all likelihood, I’ll mention my company name at some point in this blog’s lifetime. Just not right now. Maybe not for a while. Anyway, it probably wouldn’t be that hard for someone to find out what my company is named if they searched a few public records databases.

As far as the services that I will eventually be offering, those are much more likely to be discussed to some degree in the future. Probably not in reference to my company, or prices or general business chit-chat. It will most likely be exposed in a more editorial or troubleshooting sense. You see, I like to write. I like to share what I know (as much of a nublet as I am). I’ll most certainly share my experiences as I troubleshoot and evaluate various systems and engineering feats.

That’s my professional life as it stands now. This is one SysAdmin who has ditched the notion of internal IT and embraced the external service provider role. I have officially had a paradigm shift. Now I get to choose the technology I work with, call the shots and have all the fun. I get to work the budgets, approve the projects and eat all the M&Ms from the candy dish. Of course, I have to pay for those M&Ms, but I can live with that. I’ll also get all the blame if things go horribly wrong, but I think I can avoid that as well as anyone else that enjoys this job.

I’ll almost certainly be hiring help in the future as my projects get bigger and need more support and engineering roles. Who knows? Maybe you’ll be filling a position at my company in a few years. Are you willing to depart from internal IT to embrace a different SysAdmin paradigm?

Furthermore, do you think I’m daft in taking this leap? Is my business patently doomed to failure or mediocrity? Let me know what you think! It’s going to be an exciting several decades until retirement.

In my previous posts concerning my efforts at starting an IT business in my new home state of Arizona (Episode 0, part 1 and part 2), I had decided that a simple sole proprietorship was the way to go. However, I began to reconsider that course of action when I realized the liabilities involved in sole proprietorship (SP).

As a SP, all of my personal assets can be auctioned off to settle a debt. A Limited Liability Company (LLC) affords some protection to my personal assets. Furthermore, I began to have grand ideas of creating an actual business rather than simply acting as a hired gun. MSP, ISV, ASP, SaaS providor? It is all within the realm of possibilities… and it’s all suggesting an even greater need for some liability limitation. I figured it would be best to preempt the future and make an LLC now.

I found a law office in Arizona that has a ton of great information concerning the formation of LLCs in the state. While it’s specific to Arizona law, I believe that the information provided is still useful in general if you’re looking to form an LLC.

The basic information to take away is that LLCs are considered a “liability deflecting entity” that can and should be formed around any business venture. Some folks that own and rent property even create a separate LLC for each and every rental so the liabilities of one won’t threaten the others.

While LLCs can mitigate the risk of personal liability and increase the likelihood of creditors working out a deal with you, they are not bulletproof. If not formed correctly and with enough due diligence given to its continued operation, a court can “Pierce the Corporate Veil” and hold individuals accountable.

Depending on the state you live in, part of the due diligence of operating an LLC can include, but is not limited to (great, I’m sounding like a lawyer) not using corporate money to pay shareholder debts or expenses, not creating Articles of Organization, failing to hold director / manager meetings and keep minutes or filing actions by unanimous consent.

All of the specifics of the LLC formation process are dependent upon the state (or country) that you live in. Really, you should talk to a lawyer and have them set your paperwork in order.

Once you fill out the initial paperwork to establish your LLC, your state may require you to publish some kind of notice in a newspaper or on a public board and then send in an affidavit to your state’s corporate commission. For example, as of the time of this blog post Ohio and Arizona require all three steps, whereas Kentucky is one of many that doesn’t need a notice of publication.

At this point you’re finished or very near to it (depending on your state). You can then elect to receive an EIN number (again, this is specific to the USA) to use when creating business bank accounts. Business finances is a whole ‘nuther can of worms so I will leave you to consult with a tax and finance  professional (like I’ll be doing shortly).

As of this writing in May of 2010 my own LLC papers have been filed, accepted and are awaiting my Notice for Publication papers to be filed at a newspaper. once that is finished, I will have my very own LLC and will be free to take the business where I see fit.

Whew! What a responsibility. Have any of you readers trod this ground before me? Any advice would be greatly appreciated.

(Post updated to include backlinks to previous blog posts on my efforts to start a business. Thanks to Jon Angliss!)

It’s been a while since I continued this topic. The proverbial 100 hour workweek has taken its toll. Picking up where I left off, I have 5 more points to go through in the www.Business.gov article “10 Steps to Starting a Business”.

Step 6: Register a Business Name (“Doing Business As”)

By default, your business name is the same as your full personal name. If you want to use something other than that, you must file for what is variably known as a “Fictitious Name”, “Assumed Name”, “Trade Name” or DBA (“Doing Business As”, not the DBA that we IT pros think of).

The ways you go about registering your fictitious name vary depending on the state or even the county in which you live as well as what type of business you’re setting up. LLCs and Corporations have different methods for filing business names. For me, as a sole proprietor, things are relatively simple.

As for my state and county’s regulations, Step 6’s page has a complete listing of all 50 states, their filing requirements and links to the appropriate sites. No guarantee on how up to date those links are kept though.

Interestingly, my state (Arizona) does not require a formal registration of a business name, however it is “an accepted business practice” and is necessary to avoid someone else using your business name in the future. I have to file with the Arizona Secretary of State’s office.

And now comes a somewhat amusing part of the story. About two or three years ago while living in Ohio I had picked out an informal business name that I never registered. At the time, I merely searched for registered domain names to see if anyone else was using the name. I found that someone else had registered that name as a .com but not as a .net or .org.

I didn’t think much of it, realizing that two businesses can have the same name if they’re in different states. I registered the .net and continued to informally use it when registering for webinars or filling out questionnaires. I never actually made any money or hired myself out under that name, however.

Now, after moving to Arizona and attempting to develop a business name in earnest, I looked closer at that web site / individual that had been using the same business name that I wanted..

It turns out that the person using that business name has a fairly successful website for consumer electronics and not only lives in Arizona, but in Phoenix at an address just a few miles from where I now live! Furthermore, his profession is in the IT industry and his job title is “IT Systems Engineer”.

No. Way. Ever.

Technically, the business name that he uses for his website is not registered in the state of Arizona, however I wasn’t down with using the name that he has been using for years… especially not with him living in the same town and working in the same profession and having the same first name. That just wouldn’t be nice of me.

Back to the drawing board for business names. Fortunately, the state of Arizona has a nice search feature to help when looking for already registered business names. That tool helped me realize that it’s very, very hard to be original these days. Well… “sdgkj2$G4h” is original, so let me qualify that a bit better. It’s hard to be original and good these days.

It’s also worth noting that the rules surrounding accepted characters, abbreviations, offensive words and even World Wide Web based prefixes and suffixes (such as .com) within a business name can be rather complex. Make sure you read up on your state’s trade name standards. As an example, this is Arizona’s standards document.

After some pondering, I came up with what I believe is a decent business name, somewhat similar to the old one, certainly not original (a few dozen other companies in the Phoenix area have the same basic name, but none of them are in the IT field) but certainly not bad. Crisis averted.

Step 7: Get a Tax Identification Number

Two things being certain in this world, death and taxes (although I’m certain taxes are even more unavoidable), you knew something like this was coming.

There is an EIN, which is your federal tax ID (also known as an Employer Tax ID and a Form SS-4), is used to identify a business in the eyes of the IRS. Almost every business entity needs one, with one notable exception. If you can answer “No” to all six of these questions, you don’t need an EIN.

As my understanding goes, as a sole proprietor with no employees who does not file any excise of pension tax returns, I do not need an EIN. Instead, my social security number will suffice. However! Some will recommend getting an EIN even as an independent contractor because 1)It keeps your social security number off of more paperwork than it needs to be on, 2)It’s easier to open bank account in the name of your business and 3)It makes it so that the IRS can’t classify you as an employee (reference).

Fortunately, the IRS makes it oh-so-easy to get an EIN number. You can apply online!

Step 8: Register for State and Local Taxes

The Federal government isn’t the only ones who require a few ounces of flesh from you. Each state has its own tax structure, so check out Business.gov’s list of all 50 states and links to their specific business tax information pages.

Unfortunately, two of the four referenced links for my state, Arizona, were broken. However, I was able to find a lot if good information at www.AZTaxes.gov (gotta love that domain name).

Part of the state tax process in Arizona and I’m assuming other states is to get a business license. However, not all business require a business license and other need multiple license. Further complicating things, there are three types of business licenses that you may or may not need a combination of.

I’ll leave you to figure out the specifics of your state and personal situation, however you may want to take the advice of my state’s tax website and “Consult your attorney”.

Step 9: Obtain Business Licenses and Permits

This is in many ways a repeat of the previous point. Getting a business license and permit seems to be part and parcel of getting a tax license. Stepping through the mire that is part 8 will get you to many of the same places that you will end up in part 9.

Step 10: Employer Responsibilities

If you decide to become an employer and you further decide to hire people on an employee basis rather than a contractor basis, weep in agony, poor soul.

It is an expensive and complicated thing to have an employee. Forms such as W-2s, W-4s, Copy A’s, I-9s, New Hire Reports, Forms 941 or 944 and who knows how many state level documents have to be filled out. Furthermore, you start paying things like Unemployment Insurance taxes, Workers Compensation Insurance and possibly Disability Insurance. Did I mention Form 940 and FUTA?

Oh yes, you open up a whole can of worm and the government opens up a different kind of can on you, especially if you get something wrong. For me, I’m not planning on employing anyone soon – especially considering the flaming hoops and minefields you have to be careful of. I’ll stick with hiring contractors if I need some extra work done, thankyouverymuch.

So that’s it! Simple, no? No.

Annoyingly, I haven’t even made it past step 6. Furthermore, I’ve decided to pursue a different business structure! If you followed my previous post that chronicled the first 5 points of the Business.gov 10-step program, you know that I had originally decided on a Sole Proprietorship.

I started to consider what that meant. I’d really like to branch out past this initial contract that a friend offered me. I’m even considering becoming a MSP and/or hosted services provider. If I do something daft at a customer site like knock an email server over or mash up a CRM database, I will be personally liable for all damages. That means all personal goods can go up on the auction block to pay damages. House, car, clothes, heirlooms, pets, you name it.

However, if I become an LLC that scenario no longer exists. All business assets can be auctioned, but nothing personal. I previously thought I could simply convert to an LLC from a sole proprietorship when the time came. Then a thought came to me: “Why wait?”

My previous hesitation at becoming an LLC was due to the additional paperwork required, but seeing the imminent deforestation that will be required for steps 8, 9 and 10 (should I ever do 10) pretty much makes it improbable that a few extra slices of paper will make the load much more unbearable.

With that determination in mind, I set off on a slightly different course: Becoming an LLC! Any insights are greatly appreciated.