Four Reasons to Register Your Gift Basket Business
Lucy asks: “What comes first: Starting my gift basket business or applying for a business license? Does it matter?”
Once you know, without a doubt, that the business of gift baskets are your passion and you will be making them for income purposes, it’s best to apply for your business license first.
Here’s why:
1. The license commits you to starting this business for real. You’ll have to submit any taxes collected when you get orders from people within your state, which is one task that hobbyists don’t want to complete (it’s a simple process to tally your sales and submit sales tax).
2. You’ll pay no sales tax to retail companies that have supplies you wish to buy. A.C. Moore and Michaels, as examples, may have baskets or floral supplies discounted at a cost so low that it makes sense to buy from them. When you have a license, you can register your business with those retailers so you pay no sales tax on the items purchased.
3. You will qualify for state assistance, contests, and other incentives and support because you registered your business as a bona fide entity regarded highly by institutions that are willing to assist you free of charge (places such as the Small Business Development Center).
4. There will be lots of confusion if someone else has registered the business name you want to use and you don’t notify the proper state or country officials beforehand. In addition, you will most likely have to change your business name and all marketing materials when you finally register.
The low cost of legal registration provides you with lots of rewards and money-saving opportunities. That’s why it’s wise to take care of the paperwork before you officially open for business.
Hotels, Agreements, and Contracts
Angel asks:
I’m in the process of confirming a deal with a local hotel in providing baskets for their VIP guests.
Do you advise a contract because the number of baskets may change from time to time?
I would like to consider them my corporate client. Please share your suggestions and comments. Thank you very much.
It’s critical that all agreements, specifically for multiple baskets or components, are sealed with a contract whether your order is with a hotel, retail store, or private firm.
Because you’re working with a hotel, this status automatically puts them into the corporate client category.
I once worked with a woman who was in charge of the entire head start program in my city. The quantity of her orders, all made for friends and family members, also placed her into corporate status because of volume and not because of her profession.
Another designer asked about contracts. You’ll find my response here.
It’s wise to consult an attorney to make sure your contract favors you in all conditions. You’ll also find contract samples in books and online, but investing in an attorney’s counsel will let you sleep at night.
Which Business Structure for Your Gift Basket Business?
Flora asks:
“Is it necessary to hire a lawyer with help setting up an LLC? I’ve heard that you can save money by setting it up yourself.”
An expert (I don’t remember the person’s expertise) who recently responded to a newspaper Q&A discouraged against incorporating a business without legal assistance.
I can understand that, but in my opinion, registering a company as an LLC (limited liability company) is not as complicated, so depending on your ability and willingness to review documents with meticulous care, I believe it’s possible to set up an LLC without legal assistance.
I do, however, suggest that you review the pros and cons of sole proprietorship, LLC, and incorporation to make sure you’ll be satisfied with your business structure choice. You’ll find a handy chart comparing each structure on the Nolo.com site.
Some states may not recognize LLC formation, and other states may make the process so complicated that hiring a lawyer to complete the job is preferred.
For example, New Jersey once did not recognize LLCs, but now they do. I was able to apply for and complete the paperwork online and pay a nominal, one-time fee, all without legal assistance.
California, as another example, provides business structure information on this page, making it easy for business owners to determine each step.
The book, How to Start a Home-Based Gift Basket Business, also introduces you to business structure options. Even if it’s not as detailed as updated state and country sites, it still provides a blueprint for one to consider before registration.
After you review the LLC formation details, you’ll know if it’s right to proceed without a lawyer or if one’s help is mandatory.
