Continuing our series on beginning and running a small business, in this post I will touch on three first steps to take.
Structure
C-corp, S-corp, LLC? Many people make a mistake here by going too far. They think the first step to starting a business is to visit a lawyer, spending thousands of dollars, and filling out tons of paperwork. This is simply not the case. While there are times to seek legal counsel, if you are providing a service or selling a product you create at home, the steps can be quite simple. If your company name is different than your name, all you may need to do is file a single sheet of paper at the county courthouse called a D/B/A (for “Doing Business As – as in, John Smith d/b/a John’s GunSmithing”). In most cases, you do not need to create a new entity for tax filing, at least not as a startup.
Bank Account
This is a big one. I have known several people who have made this mistake. Keep a separate bank account for your business activity only. NO PERSONAL TRANSACTIONS! It is important to keep your personal and business activity separate, so you can know if you are making money and to avoid any “corporate veil” issues.
Accounting System
Whether it be QuickBooks Online, FreshBooks, or some other software package, it is imperative to have a tool for analyzing your information. You can have great fun selling your product and building your empire, but if you don’t know your most basic financial numbers, you could be in big trouble. At a minimum, you should know your cash on hand, accounts receivable, and accounts payable.
Like most things, putting down a solid foundation helps ensure success in the long run. Start with these building blocks, ask for help when needed (I’m around), and let’s get started! Leave a comment below with anything you think should be considered a first step.
Please note: I reserve the right to delete comments that are offensive or off-topic.