Starting a wristband business. What type of corporate entity should we create?


1

My friends and I are committed to promoting a very specific cause and we have decided to sell wristbands to promote this cause and raise awareness.

We intend to set up a website where people will learn more about the cause and buy the wristband. Nothing fancy. However, we don't know exactly what type of legal entity should we create. Maybe an LLC, sole propietorship, or a non-profit? We are not in this for the money and we don't know exactly how many wristbands we'll sell. I think we'll be lucky if we sell 1,000 units, which at $2 each will mean a total revenue of $2000.

Thank you.

Getting Started Legal

asked Jan 4 '11 at 06:12
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A. Garcia
1,601 points

3 Answers


3

Best to consult a lawyer, since your (and your friends) situation may require an alternative approach. School fund raisers, for example, are (legally) easier to manage than a corp-to-corp partnership.

If you do go the incorporation route, NPO's sound like the best alternative - you need to select the appropriate type of 501-(c) for your effort, and submit the proper incorporation / tax exemptions.

NPO's do take time to get approved, so if your wristband effort is a one time shot, perhaps you can partner up with an existing NPO in your area and leverage their existing status. Given that your revenue target is around $2K, this would be a likely avenue to explore.

answered Jan 4 '11 at 09:54
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Jim Galley
9,952 points
  • FYI - NPO means non profit orginization for those like me take a second before it dawns on them. Great suggestions. +1 – John Bogrand 8 years ago
  • Thanks a lot for your advice. Much appreciated. – A. Garcia 8 years ago

3

If you intend to make 2K, you should probably start out without forming an entity first. If you form an LLC or S Corporation, you'll need to pay the annual $800 franchise tax that accompanies the business. Moreover, if you form a non-profit, you'll have to 1) Register with the Secretary of State and 2) Qualify with the IRS 3) Qualify with the State taxing authority. If you don't have any rush or anyone who you think will sue you in the near future, this is probably your best bet for now.

answered Jan 4 '11 at 12:21
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Alex Naegele Lawyer
653 points
  • Thank you for your help. – A. Garcia 8 years ago

1

Formally creating a business means you'll have to pay taxes, franchise, income and possibly an agent fee in a state where you register. Given that this is such small project, why don't you just do it as a hobby and if indeed you sell $2K worth of the wristbands -- just pay taxes when you file your personal.

You don't need to form a business to set up a website or sell online.

However, if you intend to raise funds once in a while for that cause and this is just a first attempt -- consider forming a non-profit organization.

Best of luck.

answered Jan 4 '11 at 11:24
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Usabilitest
1,698 points
  • Thank you for your advice. – A. Garcia 8 years ago

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