Business Plan Question

[Woodspan]

Hello everyone

First off I want to thank all those who supply just an extraordinary amount of information about this industry. I have been lurking on this board for over two months before I registered and am amazed at the openness of those in the industry to share their knowledge. Thank you so much!

After 15 years working a job I absolutely hated, I finally gave them the heave ho last June and went back to school studying web development. I also enrolled in the small business program at my school with the intention of working for myself. Needing to do things the correct way and having a plan from the get go is paramount. This leads me to my first question of many I have lined up for the experts on this board.

I have a trusted professor who I had a meeting with yesterday. We discussed my intentions and my desire for a clear business plan. His knowledge is in the brick and mortar world of which he is very successful. I needed to educate him somewhat about the adult affiliate programs etc.

We will be building this plan up over the next few weeks or so. My question at the moment is what types of insurances are you using to protect yourself from liability? Considering the subject matter we determined this would be a good first step. Also, for those more established, have you set up sole proprietorships, LLC's or other arrangements to protect your personal assets?

Thank you in advance if you can help me in any way here. As mentioned earlier, these are only two of many I'll be seeking advice on.

Thank you
Woodspan

[Bill]

Unlike brick and mortar businesses, where you need insurance against trip-and-falls and the like, most adult affiliate businesses have fairly little risks from customers.

Most people "insure" themselves by socking away money for potential future legal fees, because potential lawsuits and defense costs constitute the most likely risk - but pure affiliates usually don't face either, I can't think of a single case in my years of doing this.

Protecting assets? well, the s corp is common, but again, I can't think of a single case in which the protections offered by a corp really were needed.

It all depends on how much debt you are thinking of incurring.

[walrus]

What Bill said...but the reasons to inc. aren't for liabilty so much as they are for the IRS. A lot of things that seemed to cause them tons of concerns when I was a sole, disappeared when I incorporated. While I haven't been doing the adult thing that long now, I have been in business for myself for about 6 years.

[Bill]

What caused them concerns as a sole prop that disappeared as a corp?

My experience has been the opposite, in general.

[walrus]

Maybe it was that I just got on the wrong side of an auditor or two but I don't get the questions about depreciating equipment, cars, etc. I used to as a sole. Also, since I travel a lot, I haven't been asked about those expenses as much. It seemed like as a sole, every 7 day business trip..or 14 or multiple there of got questioned as to amount of personal time.

Before I incorporated I was audited every year. Since, I have not suffered through a single audit.

[Bill]

That could explain it, even in my offline businesses I didn't do a lot of travel and entertainment expenseing. And since I don't go to the conventions I haven't had such expenses for my online business. Travel and entertainment are audit bait - so I tend not to expense the few things that I legally could.

So far I've not been audited - I guess that means I'm not being agressive enough in my expenseing. ;-}

[walrus]

I would compare an IRS audit to being analy raped by a cactus.

[SirMoby]

The IRS has cut back on auditing large corporations and instead is focusing more and more one small businesses such as S corps.

[chadknowslaw]

I got audited. I had my records in order, and after all that time and effort spent examining me the IRS wanted an extra $50. I almost laughed when I paid it--and they haven't been back since.
I have my taxes prepared by an outside preparer and I give her everything so I have an honest return. I have no fear of audits anymore-bring 'em on!!! Once they check you and see that you have a honest set of books, they won't be back for a long time unless you start making big donations to the Democratic Party or buy stock for any company that competes with Halliburton.

As far as the business plan goes, there are going to be differences between online and on main street. Make sure you take into account all the extra variables and need for flexibility in a web based business.

[MonsterPartners]

There is such a huge difference between online and brick and mortar that they almost can't be compared.