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 about 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. Those tasks 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 ‘not really scary stuff’. The process is pretty straightforward. Let’s tackle each one at a time:
1. Define Business Name (5-10 min.) Search to see if your business name is already trademarked/taken.
a. Do a basic google/bing search for the name you’re thinking of
b. Search TESS (Trademark Electronic Search System) database: try your search several different ways (singular, plural).
c. If you don’t find it great…things just got a lot easier
d. If you do find another business with the same name, don’t give up yet.
i. If they are in a different business industry than you, you may still be able to use that name.
ii. If they are in the same industry, you may just make a slight adjustment to the name to differentiate it.
iii. 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)
2. Determine your Legal Entity (10 min.) Determining which legal entity you want to use depends a lot on the level of liability separation you want from 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).
3. Establish your Legal Entity with State & Federal (10-15 min.) 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! Everything’s online. A few clicks on the computer and you will instantly have your own EIN number (as long as you fill out the form between 7 am to 10 pm EST Mon – Fri)…it’s like a social security number for your business!
a. Next, you have to set up a DBA…which is also known as the ‘fictitious name’ or ‘doing business as’. This allows you to conduct business in another name other than your given legal name. You can do this for between $20 to $50 (depending on the state) at your local county courthouse or state agency.
b. 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 is really a couple of more online files that can be completed in a few minutes. This process has a little more of a significant fee (I’ve seen between $50 – $800 depending on the state to start and then an annual fee thereafter (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.
4. Secure your web presence (15 min.) 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 that’s 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.
5. Establish your Business Banking (30 min.) 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 set up 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 set up 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.
6. Get your Business Systems & Accounting together (30 min.) 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 chock full of functionality (for my level of business), with great support, and great integration with other software. Now if you have a complex business model, then you may want to use something like Quickbooks. I also use ActiveCampaign for my customer relationship management system. I also think it’s important to keep a close eye on your customer pipeline; how many people you’re working into, working on, and migrating out of your business.
So that’s it…in the matter of less than 1 day you could go from 0 to Boss!