Red Tape and the Cost of Doing Business (Long) - Posted by Tony-VA
Posted by Tony-VA on March 06, 2000 at 10:43:35:
Yes, I did start a corporation to do these lonnie deals. I don’t recall Lonnie ever saying not to start a company to do these, but I guess I could
be wrong. Lonnie himself does these through a corporation. Lonnie does not dispense legal advice so I would be surprised if he made a emphatic statement either way.
Asset protection is a part of business. Most any good legal advice will tell you to separate your personal assets from you business assets. This helps prevent people from suing your business, and winning your personal assets as well. I highly recommend you read some of Bill Bronchick’s info at this site. Click on the “Legal Forum” in the upper left corner of the
creonline home page.
As for licensing. It can be expensive but licensing is a part of doing business. If you want to be considered professional, you need to be licensed as one, in my opinion. This same feeling applies with using a company. The company provides you with a formal legal entity that lends credibility to your business.
For me in VA, the licensing fee is expensive as well but I would hazard a guess that the savings in sales tax alone would pay for the licensing in even a moderate volumn of sales.
For example. Here the start up costs were about $300 in license fees. Some states require a bond of say $20,000. This I have been told costs about $500. In VA, they simply charge us $500 the first year and put that money into a pool to act the same as a bond.
So roughly $800 the first year, $200 or so each year thereafter I believe, maybe $300. But by being a licensed “Broker”, we don’t pay sales tax on the homes we buy and simply transfer title directly and legally to out buyer who pays sales tax on what we sell to them for.
VA did not specifically say that I could have a home office either. They seem to believe that our sales would be treated as a dealership and that I am going to have homes parked out in my front yard.
I went through the back door to comply with all their requirements. I simply asked them to send me a copy of their definition of an “Office” and what space requirements they had. They humbly advised “Well we don’t really
have a definition of an office, I guess you would have to have your local (County) zoning approve your office space.” So off I went to zoning. I inquired about the zoning in my area for home offices. I then tailored my application to there definitions. I described
my sales business…phone, fax, computer, no buyers coming to the “office” and no inventory or parts stored openly in the yard etc. The county issued
me a home office permit for about $10.
The licensing agency wanted a photo of the business sign permanently attached to the property. I bought a nice $20 metal sign with my company name printed on it. I bolted it to my garage and took a photo.
I made up a nice 3 ring binder for my application. I broke down the application in sections. I individually addressed each requirment the licensing agency wanted, using a copy of the “home office” permit, a copy of my companies “Articles of Incorporation”, the photos of the required sign
etc. The agency also wanted profit and loss type paperwork and financial statements. I wrote that my company had just been formed, referenced the Articles of Incorporation date, and supplied copies of the business bank statements.
I sent this package directly to the person I spoke with at the agency. I included the check for the entire amount of all fees, writen on a company
check. The license was quicklyl approved.
It all boils down to making it impossible for them to say NO. Make it a no brainer for them to say YES. They just want the money and have you jump through hoops. I just jumped through the hoops using my own approach. Nothing I did was in violation of their rules. Rules are for interpetation. I interpetted them and provided legal evidence of my compliance with them.
Don’t be afraid of the red tape. Think creatively.
And to answer your question, at first I did these deals by myself without a license as my state allows you to do 2 deals without a license within a 12
month period. Check out your state and do a couple on your own if they permit to be sure that this investing is for you before you spend a lot of money on licensing.