Starting your own business is an exciting and daunting process. It’s difficult to figure out what needs to be done when you’re constantly worrying about making money. That’s why, before you start offering your services or products to the general public, you should set everything up properly so your company operates efficiently once it officially opens for business.
1. Decide whether or not you should incorporate.
As a business owner, you have the option to incorporate, which provides some advantages and disadvantages. If you decide not to incorporate, you’ll be classified as a sole proprietor. Filing as a corporation subjects you to extra taxes, since you’ll pay taxes as both a business and an individual. However, it also protects your personal assets from any liability issues that may arise.
If your company will be dealing with other people’s property or finances on a regular basis, you’ll definitely want to absolve yourself from liability by filing as a corporation. Otherwise, though, you’re probably better off as a sole proprietor. Your taxes will be much easier (and cheaper) to file that way.
2. Set up a separate bank account.
You should always have a separate bank account for your business assets. One of the first rules of accounting is to keep your personal income separate from your business income. Otherwise, income taxes and budgeting will be way more complicated than necessary.
3. Get an Employer Identification Number.
If you plan to have any employees, you’ll need an EIN. You can file for this easily online. You may also need an EIN for other purposes, like opening a business checking account. It’s free and easy to obtain, so it’s best to get one, just in case you need it down the road.
4. Request sales and use tax forms.
If you buy and sell items through your business, you’ll need to set your books up for sales and use taxes, which are typically due each quarter. To find out the requirements in your area, call your state’s department of revenue. They can help you get set up and will send you forms in the mail. You may also need to file city and/or county taxes, so call those offices, as well.
5. Request a business license.
Most jurisdictions require a business license to operate within city or county limits. To get a license, you’ll need to fill out a form or two and pay a fee. Sometimes this fee is a few hundred dollars or more, and sometimes it’s much less expensive. Don’t skip this step, though; many jurisdictions charge a hefty fee if they catch you operating a business without a license.
6. Obtain the appropriate licensees.
Certain professions require the appropriate licensees to perform services. For example, almost every profession in the construction industry requires a license to show that you’ve been trained in a particular skill. Make sure you have these licenses before you start working.
Since some licenses require a test, you should complete this step as soon as possible. Many areas only hold tests on certain days throughout the year. You need to sign up as soon as possible to ensure yourself a spot. Also, as you’re hiring employees, you’ll need to look for ones who already hold certain licensees to save yourself time and money down the road.
7. Sign up for liability insurance.
Even if you file as a corporation, you should also request liability insurance if it’s possible that you’ll be held responsible for an accident in the future. Many different types of companies need liability insurance. Without it, you may even have trouble getting certain jobs or customers. Some companies require proof of liability insurance before they’ll hire your services.
8. Set up bookkeeping and filing system.
Whether you do it yourself or hire someone else, you should have your bookkeeping and filing system set up before you open your doors for business. Otherwise, it’s easy to fall behind on the financial aspects of your business, which are often the most important. At the minimum, you need some bookkeeping software and a simple filing system. You can tweak the system as necessary down the road.
If you know little to nothing about accounting, this is one area you may need help with. However, it’s not always necessary to hire a full or even part-time employee to handle your books. Many accountants work on a contract basis, charging a minimal fee each month for their services. When your company is small, the books will likely be quite simple. The fee will increase as your company gets larger, but you’ll also be making more money then, so it’s a win-win situation for everyone.
9. Prepare to advertise.
Most companies don’t succeed without a little advertising, but you probably won’t have a lot of money to advertise in the beginning. That’s why you need to have a plan. Before you actually advertise your services, decide on a plan of attack. Figure out all the free avenues of advertising you have available and which ones you plan to use. Then you can decide how you’d like to spend the limited advertising money you have available. Planning ahead ensures that your method is as effective as possible, earning you the most money possible.
Also Read: The Architecture of the Meeting Venue London
10. Decide how to pay yourself.
There are many different ways to handle your personal paycheck once you become self-employed. Since many companies require a lot for startup, you may need to limit your personal income at first. However, this isn’t always possible. Whether you decide to split the profits 50/50 between the business and your personal account, or you want to pay yourself a flat amount each month, it’s best to decide that now so there’s no confusion down the road.
You don’t have to spend a lot of time working on these steps. In fact, with a little determination, you can complete the entire process in just a week or so. Once you have everything you need set up and ready to go, it’s time to start advertising and get those first customers in the door. The quicker you get started, the faster you’ll be making money, which is what self-employment is all about.