Online retail seller wants to know how to set up his business so it will be profitable. He’s going to have to do some homework!

QUESTION.
I have a few questions I hope you can assist with. Let me summarize the business first: I am reselling unusual luxury items (virtual butler, custom perfume, etc.) online.

1–How do you suggest I create credibility–or the illusion of it–when I have no formal experience working online or with luxury? Credibility towards hopeful affiliates, I mean.

2–I will be working from home and I believe my business license must list that address. However, I want the public and partners to see another, more professional address. How do I formally change my address to that of a business building or similar? I know its possible, but I’m not sure exactly how to do it.

3–When I make a sale, I will be billing my partner’s consumers upfront, discounting my portion and forwarding the rest of the money. I want partners to feel secure about that and so I would like to obtain some sort of insurance that covers partners in case of nonpayment, deceit, etc. I feel this is necessary as our relationships are new and large amounts of money will be handled. Do you know what kind of insurance I’m seeking?

ANSWER.
Books 7 and 8 on the following list may be of help to you? See PAY-PER-CLICK AND AFFILIATE MARKETING.
 1. You get credibility by knowing what you are doing. You also get credibility by getting testimonials and posting those testimonials on your Web site.
 
2. When you work online you don’t need a storefront. Nobody is going to visit your address. Go ahead on use your home address. Just don’t market your business as one that does “offline” work.
 
3. It costs a little bit of change to set up a Web site with an affiliate sales system. I studied it once upon a time. But determined it wasn’t worth my time or effort. There just aren’t enough vendors out there that get traffic who are willing to become affiliates. And it is equally hard figuring out if a site gets enough traffic to warrant you accepting them as an affiliate. Your partners will feel secure if you set up an open and clear system for them to work within.
 
I recommend you find the SCORE chapter closest to you and schedule an appointment to meet with two SCORE volunteers face-to-face for an hour to discuss your idea for a business. You need to write a sound business plan. If you can, then you will have no problem starting your business. I expect you won’t be able to write one, though. Affiliate marketing online is hyped. It’s not worth the effort. At least that is my opinion. I believe your efforts will be better spend starting something else.
 
A close cousin to affiliate marketing is network marketing. Some of those systems work well for some people. Maybe you should look into that?
 
I hope my comments are helpful to you. Good luck! Regards, -Jeff

Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Getting “affiliates” to sell your product, or you becoming an “affiliate” with a company, is a great way to increase sales if done correctly. But the circumstances have to be just right for all to benefit.

QUESTION.
My question concerns business contract(s). I am an entrepreneur in need of a formal agreement binding partners and I. I recruit partners as affiliates, offer their products as my own and collect commission. Everything is done online and involves national/international sales. Can you please tell me what kind of contract I am seeking? Also, can you please tell me where to obtain a template?

ANSWER.
Affiliates by definition are NOT partners – they are affiliates. Affiliates are basically sales representatives. Just about any sales rep contract will do. You may want to read about Amazon.com’s affiliate program and use it as a model for whatever it is you are involved in. See http://affiliate-program.amazon.com/gp/associates/join
 
I hope my comments are helpful to you. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

If you run your own nonprofit, then you’d better learn how to do some basic things like fill out IRS forms!

QUESTION.
I need some help fulling out the IRS’ non-profit 501(3)(c) application form. There are many items that I am unsure about the answer or how it applies to my company.  Also, can I get help with finalizing my business plan?

ANSWER.
I don’t help with filling out applications. And finalizing business plans is something SCORE counselors do at face-to-face counseling sessions. Email counseling is for simple pointed questions to help a client move forward.
 
You can contact them and schedule a free 1-hour counseling session with two volunteers. Go to http://www.score.org/findscore/chapter_maps.html and type your home zip code in the appropriate blank.
 
Also, consider taking a look at the following links. See
 
http://www.irs.gov/pub/irs-pdf/p557.pdf
http://www.irs.gov/pub/irs-pdf/f1023.pdf
http://www.irs.gov/pub/irs-pdf/i1023.pdf
 
I hope my comments are helpful to you. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Another story of a guy who wants to mix running a nonprofit with a for-profit, and he will have a financial interest in both. What a no-no!

QUESTION.
A few months ago I was asked to provide a service and product for an educational institution for free. This service my company would normally charge $50 to $100 dollars an hour and the products range in price from $500 and up. I accepted the
request which ended up costing my company $3000 for the product and I offered my service for free. Soon after though, I was asked by other public educational institutions if I could give them the same free service and product. In my mind I thought, well, I could probably afford to do this for a few more places but eventually it could put a pretty big burden on my company related to cost. The service I offer is not at all common in a public educational institution but the benefits to its educational purpose are tremendous. I came to the conclusion I might be able to afford it if I was able to recieve minimal compensation so that at least cost were covered along with a hourly labor compensation. This of course wouldn’t be normal compensation that I would normally get for this service because its for a good cause. But enough to make it possible to be repeated and sustainable while being reasonable.

Could I set up a not for profit and bring in some members from other not for profit organizations to create a callaborative effort to make this service and product be possible for a large amount of public educational institutions. It would bring in money from grants and donations to pay for educational curriculum that would show how to best utilize the service and product being donated. Funds would also be used to compensate officers of the corporation for time and expenses along with paying any other fees related to operational cost of the not for profit.

My big delemma which I probably could have stated from the very beginning is this. Can I be an officer and founder of the not for profit while also being the owner of the company which it employees to be able to carry out some of its services. Obviously I’m not trying to make a killing but I know I can’t support myself if I give away all my services and products. But I also see that these public educational institutions benefit greatly from the services and products I have given so far. I would be glad to do it for more but I must have assistance.

ANSWER.
You seem to have the wrong idea about nonprofits. They are in the business of providing a service for the public good but which the public generally can’t or won’t pay a going market rate for. Examples of non-arts based nonprofits are animal shelters, people shelters, legal aid, medical aid, and many schools. But nonprofits often purchase goods and services at market price from for-profit companies.
 
Your company should not have been giving you goods and services away. You should have been charging market rate and the nonprofits that you were donating to should have been paying you market rate. The nonprofit aspect of your services and product is their problem – not yours. You own a for-profit business and you should be running it as such. What you have described is one nonprofit convinced you to make a donation of your product and services. I hope you got a tax write-off for that donation! Then the word got out and other nonprofits started taking advantage of you. You keep giving your company’s goods and services away for free. The old line holds true for nonprofits: If you don’t ask then you won’t receive. However, you are supposed to be smart enough to say NO.
 
My recommendation is to run your business like a business and make a profit that the market will allow you to make. If you want to change your company to a nonprofit, then do so. But you can’t do both a for-profit and a nonprofit at the same time. It is unethical. You would be viewed as trying to profit by associating with a nonprofit. That is hard to explain to potential donors to your nonprofit. And if you don’t need donors, then you are not really a nonprofit.
 
Keep in mind that nonprofit organizations have to show a profit. The key to a nonprofit is that they don’t operate to make a profit. They operate to fill a need for the public good. The CEO of Salvation Army probably earns more money each year that he reports on a W-2 than 99% of Americans. He’s making a very good living doing that, too. And yet, he is working for a nonprofit. The same goes for university presidents. They make lots of money working by working for a nonprofit. So, do you see, nonprofits are not about making no profit.
 
I think I have answered your question. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com

Business woman and wife of convicted drug dealer better be careful about her business assets or she could run into trouble with the law.

QUESTION.
I am a small business owner. My husband is a convicted criminal and in jail serving time for his crimes. A writ of execution has been imposed on all my bank accounts and properties as a result of restitution agreements my husband entered into. One of the bank accounts executed on is directly linked to my business’ credit card merchant account. And all sales are being grabbed by the authorities. I am a sole propreitor.  There was no service to me nor any hearing in defense.  I have an existing post nuptial aggreement seperating my assets from my husband’s which was in effect long before he was convicted.  He has never been on any of my accounts, or had anything to do with my business or real property. The sieizure has shut down my company and all source of income to me.  I cannot not even use my office which is in my home. And they have taken over my bank accounts. 

I am assumed guilty by association only. I was in no way even questioned about his criminal behavior.  I cannot even get the State’s attorney general to issue an emergency session to redeem myself and reopen my business. My attorney says there is nothing that can be done unless the State decides to give me a hearing. I believe that the State has violated my basic rights as a citizen to work and the right to a fair and hasty trial. Closing my doors is costing me thousands daily.  Is there truly nothing I can do because I did not incorporate?  Please advise.

ANSWER.
Sounds like you already have an attorney. He knows the facts better than I do. However, if the bank account or accounts were in your name only, then a writ of execution related to a judgment in your husband’s name only should not have been valid as against your accounts.
 
To get around the problem, based on the facts you have presented, just open a new bank account in your name alone and switch your merchant account to it. As far as the house situation, you may have to move into new quarters. Sounds like a drug case since there are all kinds of crazy laws on the books for forfeiture when drugs are involved in a criminal matter.
 
I hope my comments are helpful. As a SCORE counselor I’m not supposed to provide legal advice. And I’m certainly not supposed to get involved if you already have legal counsel. Good luck! Regards, -Jeff
 
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com