Multiple Profit Centers?

[fidgiegirl]

I have read Barbara Winter's Making a Living Without a Job and am intrigued by the idea of Multiple Profit Centers. I have a ton of ideas and am eager to get going.

One thing that I am thinking about is how to organize the business. Does anyone have ideas for this? I read up on different ways to organize a business like sole proprietorship and LLC and all that, but I am unclear about how the MPCs work with it. Do I have to do a different assumed name for every profit center?

Any ideas appreciated.

[iris lily]

How is this different from multiple streams of income? I guess it probably isn't. Look, I don't know any formal/legal answers, and I know that making up LLCs is the rule of the day, but I am skeptical that all of those LLCs make any real sense. I think the LLC thing is about legal liability and that's about it.

Let's look to someone we all know who is the Queen of multiple streams of income: Diana in Wisconsin. She has a job, but she also sells books online, has an little egg business, and probably is doing 2 or 3 others things by now. I"m sure that she hasn't set up a legal entity for each little biz.

I saw my freind set up legal LLCs etc for all of her business endeavers and now she is broke. They didn't do her any good at all.

DH, on the other hand, is a simple little sole proprietorship and he merrily goes along in his handyman business keeping busy and having to turn down business.

At the beginning, I wouldn't be concerned about formal methods of organizing, I'd concentrate on the actual business and making money. The trappings of the business won't make it successful.

[Float On]

If you love paperwork - have fun. I can tell you that being Incorporated added hours of paperwork to my schedule. Because we travel to other states to set up and sell, being incorporated sometimes means additional tax paperwork that a sole propiertorship doesn't have to do. Yes there have been some tax benefits....but at the risk of my sanity and marriage at times.

[fidgiegirl]

At the beginning, I wouldn't be concerned about formal methods of organizing, I'd concentrate on the actual business and making money. The trappings of the business won't make it successful.

Unfortunately, I already agreed to a joint venture, albeit small (a one-day Halloween Bazaar) with my sister and she insists we have everything in order. I am not wild about having to worry about that yet, because like you said, I'd rather do some experimenting with business itself. But there will be no dissuading her.

Everybody, I do not want to do more paperwork than necessary, but if I would like to quit my job at some point from income I earn from different side businesses I do feel it would be better to figure this out sooner rather than later.

I am imagining one filing, the simplest available like sole proprietorship (how does it work for married people if my husband would be involved in some ventures, too?) with DBAs as needed for different profit centers. Let's say we end up renting our house out. We wouldn't need a DBA for that, a renter could just make the check out to us. And maybe even if I have an Etsy store. But maybe if I develop my curriculum sales idea that one would have a business name. And perhaps if we had an eBay by consignment business that we used a business name to operate that one would have a DBA, too. Does that sound right?

There is just zero guidance, it seems, at least in Google land. All the materials are written for people who are going to organize THE BUSINESS of their lives. I have yet to consult the library. I have our state's small business guide and that was the most helpful so far but way overwhelming.

[Bugeah]

I used the state business guide to get my LLC going, but I need to back through it for some things. If you want your husband involved in the business then you can do a partnership. Or you can get a sole proprietorship and then create a partnership between your sole proprietorship and him (I think that's how it works). You will need an assumed business name for each business name if you are going to have more than one. That will get rather expensive. I did a LLC with my business name and I'm using the same business name for multiple things (eBay, Etsy, blogging and product reviews, etc.) The clothing and accessories line that I sell on Etsy will be copyrighted as soon as I can afford it. In the mean time we sent the name to ourselves in a letter so it will work as a copyright until then. We still sell stuff as Bugeah, but the name of the accessories is Re:Threads. We just can't accept payment as Re:Threads because it's just a copyrighted name. I hope this helps a little.

[Zoebird]

It really depends upon the laws in your area.

I ran my yoga and thai massage business as a sole proprietorship for years, but the holistic health center is an LLC. We have multiple streams of income: on-site corporate clients; practitioners who sublease rooms from us; and then my own yoga/massage business (which includes teaching classes, workshops, private lessons, giving massages and teacher training -- all of which are independent revenue streams). We are working on developing this business as a franchise, which will also provide income for us.

It's all under one LLC. It didn't increase our paperwork, we just have to have a meeting once a year to make some decisions and then file one form with the government (this reminds me I need to submit that this week).

[benhyr]

I am not a lawyer and it might be worth talking to one before you proceed. One of the benefits of an LLC is that you separate your personal from your professional. As long as you do business as the LLC and take care not to intermix personal and professional work (don't buy groceries directly from the business checking account) then you are reasonably sure that, should your business be sued, it will terminate at the business and not affect your personal assets.

There are also various types of ways you can go about... filing as a C-corp, an S-corp, or an LLC. The overhead is simplest (imo) with the LLC. Profits and loss flow directly through to your personal return so tax time is pretty straightforward. Like Zoebird said, there's some minimal paperwork, but nothing that'll consume your life. There are some drawbacks also which probably wouldn't apply. (and I'm not sure I remember them all correctly)

But, bottom line, it's mainly (in my mind) about perceived or real liability and asset protection. I'd say it might be worth having one LLC but, unless you can justify it, not worth having an LLC for each profit center. Maybe a DBA for each so you can call yourself by multiple names.

NOLO has some great books on LLCs that may be available through your library. Also, be sure to check out your secretary of state's website as they'll likely have a lot of information.

eta: I realize I really rambled. What I mean is that an LLC is good to the extent you feel you need to separate your business liability from your personal liability. Multiple LLCs are only useful to the extent that you feel you need to separate business liability from each other.

[Zigzagman]

In my opinion the idea of a profit center versus a cost center is the creation of "late 20th century" MBA's. If you are in business and only consider the bottom line "profit" then you business will never succeed. What happens is that the cost center has very little incentive for profit - that is not there problem - it becomes all about metrics.

Segregation of cost vs profit centers is a recipe for short term gain and long term failure. If you don't have profit accountability in the equation then expense becomes relative.

The idea of multiple LLC's is a clear indication of poor management.

I say this based upon 33 years as a Operations Manager in the last century. This new economy is based more on accounting rules than service or product. God help us.

Peace

[fidgiegirl]

Ruh roh. I REALLY didn't put my question right, I think. I am not thinking of setting up like seven corporations. I just want to know that if I have, say, a tax ID number and I sell homemade Halloween costumes on Etsy and I like that and it's going well and then I decide I want to expand into selling elementary Spanish curriculum, can I use the same number? And what if I want to call the Halloween Costumes "Kelli's Halloween Costumes" and the curriculum thing "Kelli's Awesome Spanish Materials." Can it be under the same business? Well, anyway, maybe I do need to see an accountant or something.

[benhyr]

Yep, you can do everything as the same LLC but you'll want to file a doing business as (DBA) with the secretary of state for each name you want to use after the first one. Cost is nominal and won't complicate your accounting at all.

[Zoebird]

this is why some companies have the name "fidgiegirl enterprises." this is so that basically all of the business transactions within many revenue streams (businesses) are all taking place within one business entity.

Fiserv is a HUGE company that eats smaller companies. It buys multiples of the same kind (often competitors) and calls them "product lines." So, for example, Fiserv has an automotive component. They sell former-competing products as "product options" now. They also have multiple credit union software companies (my husband worked for this area). Obviously, not related. Anyway, there were two major competitors of the cmpany my husband worked for before it was bought by fiserv -- fiserv bought all of them. They are now Fiserv's credit union software line.

So, Fidgiegirl Enterprises could have different areas: Costumes, Home wares, Homeschool/Tutoring Curricula, etc etc etc. It's still all one business.

[fidgiegirl]

I have gotten a lot of good ideas from you guys. I thank you so much!

I made an appointment with a SCORE mentor on someone's recommendation from an earlier business thread.

I have also prepared a form for an eBay on Consignment business. My DH will do most of the dealing with eBay part, but he likes that. We have been talking about doing it for a long time just as a side thing. People we know are interested, but we never firmed up our pricing so no one would ever really commit. Now we know what we will charge and why.

Now to figure out small business accounting . . .