Are you thinking of starting a business? How exciting! There are a handful of basic things you should know before you jump right in.
In today’s episode, I share some useful tips and tricks that I’ve found to be crucial first steps when starting your own business. I speak from my own experience when it comes to starting a business and share some things that you should definitely consider when planning to start or after you’ve started your business. These steps range from general preparedness to specific structuring for your business to other essential details to iron out early on.
The financial aspect of starting a business can be confusing and seemingly difficult to navigate. With my background and experience, I offer key accounting and bookkeeping tips that allow you to organize your business well from the get-go. I share why these tips are so important and how they impact the success of your business.
They say hindsight is 20-20, and I certainly learned a lot after starting my own business. My hope is to help my community of mamas have all the tools in their toolkit to start their businesses successfully!
P.S. If you’re a boss babe and want to join a community of driven women, make sure you check out the Business Minded Mama Facebook group. Here you’ll find advice, support, and like-minded women!
For all of my READERS out there, here is the podcast transcript!
Hey there, and welcome to episode five. The last four episodes I’ve really dug into my purpose here, a little bit about me. And, of course, episode four was just showing more of my passion and why I think it’s so important to invest in yourself, but now it’s time to get to some business. And so my hope here is to keep this light and fun as much as I can. I know business isn’t pretty. Talking accounting and talking business can be a little boring but I want to make sure that you understand the basics before you move forward with your business. Today we start off with the five first steps of creating your business and I get to tell you that I didn’t go in this order, so it’s okay if you’re already on a step four or step two and you skipped a step, there isn’t a perfect order.
These are just five of the things I think you should consider when wanting to start a business. And if you’ve already created that business, you’ve already started it already made income, you’ve already had expenses and you haven’t done some of these things. It’s not too late, but they’re definitely things you should consider now. So let’s dive in with number one. This may seem obvious, but I think sometimes we look it over and I kind of did a little bit. I was just presented with an opportunity and said yes without really thinking about it. So step one, decide what you’re going to do. Take the time to really think about it. How do you want to proceed? Maybe even create a simple business plan or a detailed business plan, whatever you think makes the most for what you’re going to try to accomplish, but really take the time to reflect, pray and hone in on your passions and your skills and what do you want to do with those?
Now you don’t have to have it all figured out. It’s okay. Like I said, I didn’t have it figured out and I’ve over the years gotten there. But I do think you can get to the result you want quicker if you’ve taken the time to really think about it. Now that you know what you’re going to do, step two, you need to think about what business structure is best for your business. I will say that the most common is probably an LLC, limited liability corporation. You can have a single member LLC, just as a sole proprietor, a mompreneur and what this does for you, it legitimizes your business. So it gives you that credibility of, Hey, yeah, I’m a real business. And too, it protects you personally. So that’s why I usually recommend this. Now do you have to actually form an LLC?
No, you don’t. You can just do your thing without filing the LLC in your state and be a sole proprietorship. You would still file your taxes the same way on a schedule C. So that’s okay. But you need to know that because you’re doing that, you do have some personal liability there. Now like I said, the LLC is registered within your state and each state has different rules. So I’m not really going to touch on those because I don’t know all the rules of every state. But the first place to start is your secretary of state, most likely in your state. Go to that website and they will have some sort of guide on how to make your business an LLC. Now the other business structure that you may consider and maybe not even right away, maybe down the line, is an S-corp.
This is another common one that I see and a lot of times this makes sense as you grow, as you add on employees. And really all this does, it does have some tax benefits depending on your company, but it has you pay yourself payroll and then in turn you’re basically going to pay less self employment taxes. There are other things to consider with an S-Corp. These are just the basics. Like I say, I want to keep it simple and basic for you. So those are things to consider between the different structures. I’m going to say, and you’ll hear me say this a lot, I am not a CPA. I did not make the decision to go for my CPA. So please consult with your CPA or your tax professional. Now reflecting back on my business law course during college and also a friendly reminder from a legal professional here and a friend, you need to make sure you have a good operating agreement.
And I will say that when creating the LLC through my state it’s not something that pops up. They will most likely give you articles of organization that you can keep in your files but then you’ll also want to consider an operating agreement, which basically will just summarize what you plan to do. So my advice here is you can seek some free resources on the internet or perhaps take the step of having a lawyer or legal professional help you out with this. That is what I chose to do just to make sure I have all my ducks in a row because I am service-based. I want to make sure I am covered to the fullest. Step three. So now that you’ve decided your business structure and let’s say you’ve decided to be an LLC, it would be important now to go register for your EIN.
This is an identification number with the IRS. So this is how you will file your taxes. You will use this number instead of your social security number for any sort of documentation that you may have to fill out in the future. And also as a way to file your taxes with your most likely schedule C as an LLC. So this is free if you do it yourself. There are service providers out there that will charge you a small fee. It is a very simple task to do. So I recommend you just go to the IRS website and follow the simple steps and get it done free for yourself. And I’m going to circle back really quick to step two because I did not mention this, but most likely your state will charge you a small fee for registering. And I just wanted to make that known so that there aren’t any surprises later.
Okay. So now on to step four, and this is where it gets really into my skill set. And so now that you’ve got all that set up, the next step that I think is the most important is to have a separate business bank account. This becomes really important for a lot of reasons, but I will say that it’s going to save you a lot of time as well on the bookkeeping side of things. If you are only having business transactions out of your account, so that only is it going to save you time. But it becomes important when you get questioned about your business. And let’s just say that you happen to be chosen for an audit. It’s going to make things easier. It’s going to make you more legitimate. It’s going to help prove to them that you are a business and that you are functioning as a business.
And while that may seem maybe a little silly to you, this small thing can prove to be a very big thing and impact your business in big ways. So I highly, highly encourage you to set up a separate business bank account and only use it for business transactions. Now, if you happen to use it for personal use one day because you grabbed the wrong card, that is not a big deal. You will just have to classify and code that properly in your books. But I don’t want you to stress about that at all. I just want you to focus on having that separate bank account and really trying to run everything business related through that. I promise you this will make your life so much easier. Now my last recommended step, step five, here when beginning your business is to set up your accounting system right away.
So day one and as I mentioned earlier, it’s okay if you have skipped this step and you are already a business, you are just going to have to invest more time to get caught up. So day one or day zero, before you do a single thing, make sure you have an accounting system in place. I am a big proponent of QuickBooks more specifically QuickBooks online and you will hear me talk about this program here on this podcast or on my blog because I do think it is super user friendly and it is very reasonably priced. So I know that a lot of the push back I get from clients is the cost but you can get it for under $10 a month. It is reasonable and if there is one thing you should spend your money on it is that because if you don’t have a good accounting system in place, if you don’t have accurate financials, how will you ever know how your business is doing?
Let’s say you want to grow in the future too. How will you ever prove to the bank that you need the business loan and that you’re doing well? It is so important and crucial for any successful business to have an accounting system in place. So invest in that on day one. So there are many other things you could consider when starting your business, especially given different industries and paths that each of you may take. But these are my five basics. The things I definitely think you should either consider or do when starting your business, setting it up the right way at the beginning. This will save you a lot of time and heartache later. As always, I hope these are helpful and if there is anything I can help you with, make sure you go to our Facebook group, Business Minded Mama, and join there so that we can share tips with each other and grow together as businesses. I will be in there each day looking to see if anyone has a question or needs some advice and I will try to show up with some other basic tips and knowledge for you each week so that you can continue to grow and chase your dreams.
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