Let’s start your business!

And if you have not done all these things let’s fix that now, it’s not too late.

Starting a business can feel intimidating, but it’s not impossible. In fact, there are more than 30 million small businesses in the U.S. If those business owners can do it, you can too!

1. Decide On A Business Structure

When you’re starting a business, one of the first things you have to think of is its legal business structure. The most common types are the following:

Sole Proprietor: A sole proprietorship is a small business that’s run and owned by a single person. Examples include freelance designers, tutors and financial advisers. You can use your name as your business name, or you can use a “doing business as” (DBA) name.

If you decide to become a sole proprietor, you’ll have complete control over your business and handle all the financial decisions. Preparing taxes shouldn’t be too difficult since the business is not a separate entity from the owner. As long as you file your personal taxes, then you should be good to go.

One downside to being a sole proprietor is that you can be held personally liable for the debts and obligations of the business. Banks and lenders are also hesitant to lend money to sole proprietors.

Limited Liability Company (LLC): If you want to separate your personal assets (such as your house, vehicle and savings) from your business assets, you can create a LLC.

In this business structure, profits and losses will be recorded as your personal income, and you won’t be required to pay corporate taxes. However, you’re considered self-employed and must pay self-employment taxes.

Protect Your Personal Assets by Forming the Business as a Corporation or LLC

Many experts do not recommending start a business as a “sole proprietorship,” which can result in your personal assets being at risk for the debts and liabilities of the business. 

• Always use the corporate name. The name of the corporation should be used in full, including “Inc.” or “Corp.” on all contracts, invoices, or documents used by the corporation. This clearly indicates the existence of the corporation as a separate entity.
• Always use proper signature. This means that you will sign on behalf of the corporation, using the name of the corporation and your title. 

Once you have decided on your structure you need to register your business name with your State government. 

2. Obtain a Tax ID

You will need to get a tax ID from the IRS for your company. This is also known as an “Employer Identification Number” (EIN), and it’s similar to a Social Security number, but for business. 

Banks will ask for your EIN when you open a company bank account. 

You can get an EIN online FOR FREE through the IRS website. Let me repeat FOR FREE. Do not fall for the online scams that you need someone to do this for you and pay $100s of dollars for it.

It is instantaneous online.

3. Next Apply for Licenses and Permits

Small businesses need to get licenses and permits from state agencies. You can visit your state’s website to see the permits and licenses you’ll need.

If you sell products you will need to collect state sales tax from your customers and then remit that sales tax to the State.

The frequency that you have to remit that sales tax is different and may change over time. So don’t be alarmed if one business is different from another. Remember this is not your money but your customers paid this sales tax to you and you hold on to it temporarily before you pay it to the state.

If you will have employees, you need to register with the State Department of Labor. You can register online. They will provide you with employer tax numbers as you will need to withhold payroll taxes from your employees paychecks and send that money to the state also on a periodic basis. They will let you know how often you have to pass that money on. It could be every paycheck or monthly or quarterly.

Remember to allow a few weeks for all the paperwork to be examined and approved. Don’t wait until the last minute.

Now you see why many businesses hire a bookkeeper or accountant to process all this for you. It is very detailed work and has many deadlines. 

4. Set up a Business Bank Account

Opening up a business bank account is necessary once you’re ready to start accepting payment for your products and services.

You can only open a business bank account once you’ve registered your business name and obtained an EIN. Usually, you’ll want a business bank account for the following:

• Checking account
• Savings account
• Credit card account
• Merchant services account (this allows you to accept credit and debit transactions)

It might be tempting to use your personal account for your business, but there are several benefits that come with opening a bank account under your business name, such as:

• Professionalism: Customers will feel more confident about using their credit or debit cards if they’re paying your business instead of sending their money to a personal account.
• Purchasing power: Having a business credit card makes it easy for you to buy equipment or inventory for your startup.
• Protection: Keeping a business bank account forces you to separate your personal funds from the money you make from doing business. This protects you from personal liability in the event you run into financial issues.
• Tax considerations: Keeping all your business transactions separate will help you identify items that are tax-deductible.
• Easier accounting: Linking your business bank account to accounting software makes it easy to plan budgets and generate financial reports.

When you’re opening a business checking or savings account, always check their interest rates, transaction fees and minimum balance fees. Meanwhile, always check the transaction fees and monthly minimum fees for a merchant services account.

5. Set Up a Good Accounting and Bookkeeping System

You will need to set up a bookkeeping/accounting system to keep track of your finances — income and expenses. This is important in order to understand your business’s cash flow situation and also for tax-filing purposes.

There are a number of online software solutions that can be helpful in this regard, I use and recommend QuickBooks Online. 

6. GET YOUR BUSINESS INSURED

Even if you have a solid business plan, starting a business can be risky. Make sure to purchase insurance for your business before you start.

Here are some of the types of insurance you should consider getting:

• Professional liability insurance: This offers protection against negligence claims.
• Property insurance: This helps you recover when your equipment, inventory or furniture is damaged by a fire or a storm. It also protects you against theft.
• Product liability insurance: This provides protection in case someone files a lawsuit due to damages caused by your products.
• Business interruption insurance: If you don’t want to lose income due to events that interrupt the normal course of business, you can file for business interruption insurance.
• Vehicle insurance: Getting comprehensive vehicle insurance will offer you protection in case your business vehicles are involved in accidents or injuries.

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Building a startup from the ground isn’t easy, but it’s a rewarding and worthwhile endeavor. Depending on how successful your business becomes, you can eventually make your startup your main source of income.

The Best Time to Start Your Business Is Now