Keeping it real with bootstrap approach

Filed in archive Bootstrapper Tips on December 13, 2007

Yes, bootstrapping can mean starting a business with nothing or almost nothing, but two bloggers urge bootstrap entrepreneurs to also be realistic when it comes to necessities for a startup.

• Don't engage in unprotected bootstrapping. Mike Smith of Free Fall Creative suggests looking into incorporation when starting your company to protect your personal assets. Mike recommends a Limited Liability Company through a service like My New Company with a cost of between $204 and $379 depending on the state in which you incorporate. (Another simple filing resource is LegalZoom.com so you may want to do some price comparisons and research.) But as Dane Carlson suggests in a related post, incorporating may not be the first things you want to do when starting a business. Even minimal incorporation costs may add significantly to your bottom line in the beginning at a time when you haven't even sold a product or interacted with a customer.
• Always deduct your bootstrapping efforts. Carlene Hawn at Found Read suggests this article in Crain's Chicago Business where Russell Romanelli, tax partner at Wolf & Co. LLP, recommends loaning your company money as a way to claim a higher tax deduction as the end of the year approaches. (The advice would be applicable if your company happens to be an S corporation or LLC as discussed above because Romanelli says the law won't let investors deduct losses equivalent to a total capital investment so the same idea may not apply to single proprietorships or partnerships)

For more on choosing the shape your bootstrap venture should take check out Choosing a Form For Your Business at ExpertLaw.com.