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Start online businesses simply, grow slowly

September 08, 2009|Karen E. Klein

Dear Karen: How do I bootstrap an online business start-up?

Answer: Start simply and build slowly.

"Don't get tied up in creating a store with all the packages and multitude of options," said Robin Kohli, founder of E-junkie, a software provider.

Create a blog where you can publicize your product or industry.

List your products on Internet shopping sites such as EBay, Kohli said, but don't link from your site to those larger marketplaces.

"You are paying their fee so they can generate sales for you, not the other way round," he said.

Add an affiliate program that will provide incentives and turn your customers into evangelists for your company.

Research affordable e-commerce platforms, looking for an easy-to-use turnkey system, said Mark Thomson of HostingOC.com.

"Many systems are too difficult for the average person to maintain," he said.

Ask suppliers for cash flow help

Dear Karen: My company is struggling with uneven cash flow. What do you advise?

Answer: Try to negotiate favorable trade terms with your long-term suppliers. This will be easier if you have good credit and existing supplier relationships, said Richard Flynn, senior vice president of American Express Open.

Trade terms might offer you a discount of 1% to 2% for early payment and the option to pay a percentage of a bill upfront and extend full payment.

"If you can't secure trade terms, consider consolidating your business with a single vendor when possible," Flynn said. "If your business represents significant volume for a vendor, you are more likely to be rewarded with trade terms."

LLC can shield you from liability

Dear Karen: Does an LLC really protect a company from lawsuits?

Answer: Forming an LLC (limited liability company) or corporate entity does not mean that your company cannot be sued. But it makes it possible for you to obtain some protection from personal liability if it is.

"The protection -- particularly for one-person businesses -- is not absolute but is better than no protection at all, which is what you will have if you conduct your business as a sole proprietorship," said Richard M. Leisner, an attorney with Trenam Kemker in Tampa, Fla.

To maximize the protection of a corporation or LLC, make sure you keep formal business records, file your withholding and other taxes on time and separate your personal funds from your business bank accounts. Put all the company accounts and financial transactions under the corporate name -- not under your own name.

"Often, business owners think these formalities are not important, but the details are important in order to avoid the risk of a court disregarding the corporation or LLC," Leisner said.

"If that happens, it's just about the same thing as operating as a sole proprietorship."

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Got a question about running or starting a small enterprise? E-mail it to inbox.business @latimes.com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.

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