You have finally started that business you have been dreaming about. You have the idea, the name of your business, who you will be selling to and what you will be selling. Now you are ready to begin to take over the world and make your millions, right? Not quite. Now it is time to get your affairs in order and properly set up and establish your business. This stage of putting together a business is very critical as it will have significant impact on you personally (financially speaking) and your business if not done properly- that is registering and setting up your business.
Have no fear, listed below are a few key things that can help you get started.
1. Register your business (sba.gov)
2. Understand the business structure you are filing under
3. Set up a Business Bank account
4. Set up more than one business bank account
5. Set up accounting software
6. Get with an accountant/tax accountant
I call these “The 6 Business Completions”. Not having all or missing one of these six items, will be the beginning of financial turmoil, and a series of legal issues you do not want to have. These are the basis for what I think will get you in the right direction. Let’s dive into each.
Register your business.
To properly, conduct business in the United States of America, you should have a registered business. Why? Because it’s the law. Not exactly, but there could be serious implications if you are running a business that should be registered, that isn’t. We will get into that later. Registering your business, provides certain benefits such as limited liability, certain tax breaks or benefits (depending on the structure you registered), and makes it easier to receive loans and capital for your business.
Understanding your Tax Filing
When you go to file your business, you will have a few business structures to choose. The most common are LLC, Sole proprietor, Corporation, non-profit, Partnership, and S Corporation. Each of these entities have very different tax liabilities and you will want to familiarize yourself with each. Some ideas to help you decide, are the industry you are considering building your business, the tax liability, and benefits and how you can earn and pay yourself.
Setting up a Business Bank Account
I encourage you to shop around when deciding what company should hold your business banking. For the most part most all banks operate the same and offer the same packages with minor differences. But those minor differences can make a difference on your cash flow and overall finances. You will want to pay attention to fees, minimum balances, services offered, flexibility, integration with other software, locations, and accessibility. Nothing like having a bank account that does not work in your favor. If you are a business that will be dealing with a lot of cash. You will want to know what your daily cash limits for withdrawal and if you can increase that amount.
Set up one or more Business Bank Accounts
In my experience working with companies, I noticed they would have several different bank accounts for specific purposes. When you are just starting out, having multiple bank accounts might not be best, but as your business grows you will want to keep in your mind creating other accounts to keep track of your cash inflows and outflows. For examples, you may have an account that is designed to only receive payments and one that is only for paying bills. This helps keep down the activity and makes it easier to track down for discrepancies, easy to reconcile and simply easy to manage.
Setting up Accounting Software
Most banks that you set up an account with now a day will have some feature or added benefit that allows you to track your cash inflows and outflows. This is a good tool to have and review for high level purposes. However, this tool, fundamentally does not replace accounting. Accounting involves tracking and recording transactions, and compiling that information into reports, financial statements, and tax purposes. There are a lot of good accounting software for small businesses to get started to help manage day to day, month to month and year to year profit and loss.
Work with an Accountant.
Working with an accountant help prevent you for making costly mistakes. I mentioned in the section above, on setting your business up with accounting software. Although you can perform some accounting functions yourself, nothing proceeds a professional accountant, whose primary job is to know and understand rules, regulations, and proper accounting procedures. In that same token, it is not a bad idea to consult with a Lawyer as well to make sure all loose ends are tied up from a legal perspective and to make sure you are following tax laws and protocols for a startup business.
Erington Boyd, Owner
The Black Diamond Accounting Group, LLC
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