Starting your business isn’t a barrier…It’s simpler than you think!
One of the more common questions I continue to get is: “What do I do to establish my business?” There’s a lot of confusion and uncertainty around what it takes to make a business official. I should know…I had that same intimidation and confusion, but I’m here to tell you, it’s soooo much easier than you think. Now granted…when you write it all out in words, it seems like a lot, but I’m telling you, from start to finish, the whole thing can take no more than half a day.
Now recognize that time frame assumes that you already know what you want to do (i.e. what product or service you want to sell) and have a business name in mind at least. With that comes developing your mission statement and possibly even a business plan which, of course, takes a lot longer than 15-60 minutes. Those could take up their own series of blog posts for sure, but unfortunately, a lot of people make it a lot more complicated than it needs to be and I’ll certainly be dedicating some posts to getting out of your own way with that!
But enough of the actual scary stuff…let’s get to the ‘seems scary but not really scary stuff’. The process is pretty straightforward. Let’s tackle each one at a time:
First, do a basic google/bing search for the name you’re thinking of is already trademarked/taken. Search TESS (Trademark Electronic Search System) database: try your search several different ways (singular, plural). If you don’t find it great…things just got all that much easier. If you do find another business with the same name as the one you want, don’t give up yet. If they are in a different business industry than you, you may still be able to use that name. If they are in the same industry, you may just make a slight adjustment to the name to differentiate it, just make sure it can’t be confused with the other business’ name. Even if your name sounds like the name of another company, it still may be off limits ex. (Fit U vs. Fit You vs. You Fit all being health clubs).
Determining which legal entity you want to use depends much on the level of separation you want from liability for your business and your desired tax liability. Now would be a good time to let you know I’m not a tax advisor and you should seek wise, tax counsel to make a more sound decision about the tax implications of selecting an entity. Most commonly, just starting out, you’ll probably choose either a sole proprietorship or limited liability type entity (LLC, or LLP). You can also choose S-corp or C-corp but the establishment of these types of entities are significantly more complex and expensive than the previous 2. The sole proprietorship is the simplest of them all but provides the least protection from, say, a lawsuit or business debt. The easy part is that you can just file your normal, itemized taxes to include your business expenses. With an LLC, your business is a separate legal entity than yourself. That means if someone sues your business….your personal assets are relatively safe. You do have to file slightly more complex taxes (i.e. Schedule C in addition to Schedule A itemized deduction).
Once you make the Sole P vs. LLC(P) decision, it’s time to actually establish your chosen entity with the Federal government. Now, this part of the process was dead easy! Now everything’s online and a few taps and clicks on the computer and (as long as you fill it out the form between 7 am to 10 pm EST Mon – Fri) you will instantly have your own EIN number…it’s like a social security number for your business!
Then you have to setup a DBA…which is also known as the ‘fictitious name’ or ‘doing business as’. This allows you to perform business in another name other than your own. You can do this for about $20 to maybe even $50 or more (depending on the state) at your local county courthouse or state agency.
Last thing…if you do decide on an LLC then you have to register it with the state, which means filing articles of organization and your annual report. These are intimidating sounding titles for what are really a couple of more online files that can be completed in a few minutes. This process has a little more significant fee (I’ve seen between $50 – $800 depending on the state to start and then an annual fee of that’s usually lower than the startup fee…In NC it’s $125 but again that depends on the state). A little research will help you plan financially for your state’s LLC expenses and avoid some common mistakes.
If you have a business, you need to be online…somewhere. Studies show that 91% of consumers use the internet to search for goods and services and 84% believe that a business that has a website is more credible than a business without one. But if getting online is new to you, you may even be confused by all the terminology like domains and hosting etc. The first thing you need to do is secure your domain name, maybe even multiple domain names to make sure your clients aren’t confused. Of course, you have to makes sure the domain name you want to use is available. Simply type the domain name you want to use in the address bar of your web browser and see what comes up. If something comes up…then start thinking of another domain name…maybe just a slight adjustment and try again. Domain names ending in .com are the most popular so if you can secure one of these primo names is the best.
Now just because a website doesn’t come up when you type it in, doesn’t mean it’s available. You’ll need to take a deeper look by going to something like Namecheap.com or Whois.net. The reality is that sometimes people have bought specific and/or popular domain names to either sell them or to make sure no one else can use it. For example, my company name is Digital Made Simple but if you type digitalmadesimple.com in, no website comes up but someone has bought that name and taken it off the market so now my site lives at digital-madesimple.com. You may want to register your name in singular and plural form so that ‘mydesign.com’ and ‘mydesigns.com’ are both safe and sound.
Then there’s hosting. Once you’ve got a domain name, you’ll need to host it so that your website will show up when someone types it into their browser. Some hosting providers are better than others. Like, I’m seriously thinking of not accepting any clients who are hosted by GoDaddy. My first choice would be Siteground and 2nd to that is Bluehost. Again, these are my personal preferences. Full disclosure, I’m an affiliate for both Siteground and Bluehost, but I don’t join programs that I don’t use and stand by. Now what you put on that website (i.e. the web design) clearly takes much longer and requires a much higher level of investment depending on your business. Just make sure you’re not committing these 7 Deadly Website Sins when you’re getting your site designed.
Once you get all these ducks in a row, you’ll need somewhere to catch all the dough that will be rolling in. It’s time for a trip to the bank, with DBA and EIN in hand. You can setup an account in the name of your business and start making sure that you keep your personal and business cash flow separate. I don’t have any particular recommendation on which bank or financial establishment you should use, but the factors that weighed into my decision was: keeping fees low, flexibility in withdrawing and transferring funds, and customer service (I’m big on customer service). You may also want to setup a business PayPal, Stripe, or Square account. Your accounting/point of sale system may require one of these systems to facilitate payment from your customers They all have similar fee structures so it’s just a matter of what systems you’re integrating with.
This is one thing that I recommend you start early and keep up with diligently. Come tax time, your accounting system is going to make or break how easy that is and whether you can maximize your returns. Additionally, you want to know how well your business is doing based on the revenue/financial goals you should be setting for yourself. Depending on the complexity and type of business you’re running there are several considerations you may want to use in your decision making. Some of the popular systems include Quickbooks, Quicken, Freshbooks, Freeagent, and Wave. I use Wave personally because, first of all, it’s free. Now I don’t mean free as in cheap and lacking functionality, but I find Wave to be chocked full of functionality (for my level of business), with great support, and great integration with other software. Now if you have several employees or a complex business model, then you may want to use something like Quickbooks. I also use 17hats for my customer relationship management system. It also has an accounting system in it, but it’s a little bare bones, even for me.
So that’s it…
in the matter of less than 1 day, you could go from 0 to Boss! I’m always encouraging my clients to not let themselves get bogged down in artificial barriers. There are definitely some challenges and some significant complexities that come along with starting and running a business. Establishing your business as a legitimate ‘thing’ shouldn’t be one of them. Now recognize, this post is intended to be a high-level overview of what it takes, and there may be circumstances (permits, certifications, etc.) that are needed for your particular business situation that I didn’t cover here so keep that in mind.
On December 31, 2014, instead of preparing for a turned up New Year’s Eve celebration, I was celebrating in much different way. I took that day to officially launch my new graphic design and digital strategy business. This accomplishment was at least 2.5 years in the making and had I known how simple and straightforward it was, I may have done this long before that New Year’s holiday. Now, I’m not saying it’s a no brainer because if I had a chance to do it over again, I would have made some different choices, but once you have those choices laid out, the rest is pretty academic.
Did this guide help you see a clearer path to planting and nurturing your business? I’d love to hear your thoughts in the comments below.