Starting your Own Business, First Things
The things you need to do when starting a business
Tealfeed Guest Blog
Whenever someone dreams of starting a business, they are driven by the desire expressed in the title image above and their mind runs rampant with visions of hanging with their buds, having fun, doing the thing they love! Like you see in the photo below. Neither are usually true at the outset. Often, neither ever become true. But if you do the hard work first, you might be able to achieve doing the great things you’ve been dreaming of. Sometimes you even learn to enjoy the work, like you imagined as well. But it all starts like this…
I’ve been self-employed in some fashion or other for the past thirty-one years. I’ve owned several businesses throughout those years. Although not every company I started was a major success, they all essentially required the same steps in the beginning. That’s what this story is about.
There are many aspects to owning a business, but this story is focused solely on the tasks you need to do in the beginning to both protect yourself and succeed.
Before we walk the yellow-brick-road to starting a business, let me be clear. I’m am neither an attorney nor a CPA. So, the recommendations in this story that touch on those areas of expertise are based on my experience and not professional advice. I highly recommend finding a CPA for taxes and identifying who your lawyer will be when you need one — someday.
I like to layout the path before we travel it. The topics we will cover in the article are:
- choosing a physical address
- creating a legal entity for your business
- obtaining a Federal Employer Identification Number
- opening a bank account
- preparing to receive payment
- creating a website for your business
I know these topics are not the most exciting to consider when starting a business, but they are important and relatively easy to accomplish, if you know what you’re doing.
Choosing a physical address
One of the repeated statements on the initial forms you’ll be filling out when setting up your business is “physical address required (no PO Boxes)”. I’m not sure what the world has against PO Boxes, but you are going to be required to supply a physical address when creating a legal entity and filing for your Federal Employee Identification Number.
Many people use their home address as the physical address, but this means when the world looks at your company name, they are going to find your physical address too. In addition to the increased junk mail you’ll begin to receive, it’s nice to create a little obfuscation between your home and your business — even when you office out of the house.
Of course, if you are starting your business with enough money that you’ve secured an office space outside the house, your physical address problem is solved. If not, I recommend you find a service that doubles as your physical address. A good example is The UPS Store.
You can rent a mailbox (just like a PO Box), but you can use the physical address of your local UPS Store as your physical address. Of course, there are other local co-work spaces that provide this same service. Look around and find one that suits you.
Creating a legal entity for your business
According to the US Government, a corporation is the same as a person. That’s why creating a corporate entity for your business is both smart and important. Should someone sue you and you do not have a legal entity for your business, they will need to sue you personally. This places all your personal property and assets at risk. But with a legal entity for your company, the company is who they will sue and only the company’s assets are at risk.
There are several types of legal entities to consider. Common options are a Limited Liability Company (LLC) or a corporation. Either provides the needed protection. With an LLC, you will need to declare yourself as either a partnership or be an LLC with an individual member. According to my CPA, the partnership is preferred, but you will need at least two owners to file as a partnership.
Since this declaration doesn’t take place until you request a Federal Employer Identification Number, you can file with your local secretary of state to create the legal entity and worry about the partnership portion later.
LLCs are good for most service-based businesses. Corporations are better for a company you expect to have high growth and valuation that you intend to sell to others when it’s larger and worth something. Also, you must choose a state to file the LLC in, if here in the USA. Your home state works unless you expect your company to have high growth and anticipate selling with massive earnings from the sale. If that is the case, I suggest incorporating in Delaware based on the advice of my attorney.
If you are curious for details on the benefits of incorporating in Delaware, you can Google “Why should I incorporate in Delaware?” Once you type the i in incorporate, autofill will complete your question. It’s a popular search.
When filing for a legal entity you will need to provide a unique company name and a physical address for the business. See why we discussed physical address options first? Just fill out the forms and pay the fee. While there is some variation, most states have an easy online form and minimal fee required to create a legal entity.
Obtaining a FEIN
Now that you have a legal entity for your business, you will want to obtain a Federal Employer Identification Number from the IRS. Using a FEIN is a better option than your Social Security Number on various forms when dealing with customers, filing taxes and opening business accounts at the bank.
This is all good news. The price is right, it’s free. The application is available online and you can get the FEIN immediately. So, it should just take about 5 minutes for you to open your browser and complete the correct form. Seriously, it couldn’t be easier.
Opening your business bank account
Most banks take about twenty to thirty minutes to open a business account. Your job is to answer a few questions and be patient. I have no idea why it still takes banks this long to open an account, but that’s been my experience. So, until the banking industry steps into the modern era, you will need to block about half an hour to open your business account.
When you open your account take your certificate of incorporation from the state. As a matter of fact, I recommend taking all the paperwork you received when you created your business’ legal entity. And take your FEIN paperwork too. The bank will need both the legal entity paperwork and the FEIN number itself. Some banks want the FEIN paperwork; other banks just want the number.
I highly recommend a separate business account for your company. It keeps everything clean between your personal funds and the company’s funds. I assume you plan to move as much money from the business to your personal account as you can. That’s why you are starting a business, right? Keeping the accounts separate will make everything easier when it comes time for filing your taxes and even just a little growth quickly muddies the financial waters when using your personal account for both.
Once you begin receiving payments from customers and the company begins paying for things itself, you won’t run a risk having your personal account directly tied to either process.
Preparing to receive payments
At least this part of the discussion is fun! We are finally talking about making some money! You will need to decide the various ways you’re willing to receive payment from your customers. Cash is always nice, but most likely requiring cash payment from every customer is not going to work. If you’re running a lawn mowing business that might fly, but even then — don’t you want to give your customers the option of paying with any method they prefer?
I recommend accepting cash, checks, and credit cards at a minimum. If you can arrange payment through other platforms as well, do it. But the three to begin with are cash, checks, and credit cards. Since you opened your bank account, credit cards are the only thing you won’t already be able to accept.
Your bank may offer to process credit cards and you are welcome to research their rates. But the payments processing industry isn’t the best at keeping rates consistent. So even if they offer you a low introductory rate, it will likely rise rapidly in the near future. I find the easiest way to accept credit card payments is through Square or Stripe. The rates are upfront and signing up is super easy.
When you create your Square account, you’ll need your bank’s routing number and the account number of your newly established business checking account. Other than the typical information, like business name and address, you will also want your FEIN handy. Once your account is created, there are several ways to take an actual credit card payment.
If your business provides you the opportunity to take payment in person by swiping the customer’s card, it will save you some money on the processing fees. But you can also process without swiping for just a little more percentage of the payment.
Creating a website for your business
If your service is something you provide virtually, then you already know you need a website. But honestly, today, every company needs a website. It may not seem like much more than a glorified brochure, but it is. Your website will present you and your company to everyone seeking more information about you. Whether they search for you online, find you on social media, or typed in your site name because a friend recommended you — they will want to know more about you.
What about calling you? That’s so passé! Calling to learn more about a business is definitely not the first move people make today. Anyone under the age of sixty and many over the age of sixty are only going to investigate you via their smartphone or home computer. If you can’t be found and there are others that can be found, they will move on to the others.
Having your own website also gives you the chance to take the prospective client on a journey through your story. Create the site in a way that leads them sequentially through each step of the story you want to tell about your company. This story telling process can easily be accomplished with a single page website. Find some examples of sites that appeal to you and borrow the ideas you like best.
Great news! Today, it’s very easy to create your own website with almost zero technical ability. Some easy to use services are Wix, Square Space, and Wordpress.com. These each have built in web site creation software. Just drag and drop what you want into place. Some of them even have online shop capabilities in case you want to sell things right from your site.
The thing to remember is don’t stress over it. Pick a template, edit the content, and perhaps, choose a few stock photos that speak to you. Then, hit publish! One thing you will need to select, however, is your domain name. This is your address on the internet. Sites like Wix all let you pick a name as part of the service they offer, but pick something easy to spell, easy to remember, and not too long.
These are the basics that you need to setup before you jump headfirst into your own business. They are easy and should take you much less than one week to complete. Where do you go from here?
Although this article isn’t about these next steps, let me outline just a few of the important ones I’ll be covering in an upcoming story:
- consider your brand
- establish social media accounts
- create a regular cadence of sharing content on social media, directing people to your website and business
- begin networking with as many people as possible, both in your local real-world business community and online
- remind yourself it’s likely going to take months before your new business gets enough momentum to create viability
Even though it’s plenty of hard work and much of it isn’t glamorous, owning my own business is one of the most rewarding and fulfilling things I’ve done. Good luck! And go get ‘em! Don’t hesitate to reach out to me with questions and comments!
This article was originally published by rod castor on medium.
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