We know how exciting starting a new business can be! But something that tends to happen with new entrepreneurs of small companies is that they get too excited about the creative and fun aspects and leave behind some important basic steps of starting a successful business.
If you are one of those people who got excited and jumped in, here are six important business steps to take and make your business official:
- Get Business Insurance
Proper insurance coverage is a necessity for any business big or small. It protects your business in many different ways. One way it helps is protecting your property such as offices, buildings, and everything inside of them–from theft, damage, or natural disasters. Business liability insurance covers you if something happens to someone visiting your location, and worker’s compensation pays employees wages and or medical expenses in case of an accident.
Coverage is also something that would come in handy if there is a fire, storm, or other occurrence that causes a temporary shutdown by having lost income insurance. This will reimburse you some lost revenue while closed.
- Open a Business Bank Account
The next thing that is important for you to do is to open a bank account in your business name keeping everything professional and personal separate while saving you a lot of time and frustration. One reason to keep them separate is to be able to get a credit card for your business.
This is especially important for tax season. When it rolls around, it is much more complicated to search through all your bank statements to pick our income and business expenses if everything is combined. It also is helpful if you are ever audited by the IRS.
Another reason that this could be helpful is if you sell things that you make such as art, jewelry, and sewn goods. This makes your business look more legitimate.
- Request a Tax ID Number
Another important step that can be done in minutes is to procure an EIN–Employer Identification Number–from the IRS; this is also known as a Federal Tax ID Number. While this is not always required of sole proprietors, it is another way to raise your level or legitimacy and professionalism.
In addition, this also can protect you from identity theft. Those who do not request an EIN use their personal Social Security Number on their business forms, but this opens you up to many more possibilities of having your identity stolen. If someone steals your EIN, they cannot do personal damage to you.
- Implement the Right Business Structure
An important step is to make sure that you implement the correct business model for you and your company. The business structure you choose will determine the way you file taxes, how many people can be owners in a company, and who is liable for debts in the company. Here are four of the most common structures you can choose from:
- Sole proprietor — This is the most common structure for a small business owned by a single person. The biggest downside to this model is that liabilities tend to fall on you due to the mix of personal and business assets.
- Partnership — This is similar to the previous model, but is owned by two people that share liability. The percentage of liability per person is determined when setting up the partnership.
- Limited liability company (LLC) — An LLC allows for a person to own a business while also being able to separate personal and professional assets, but is not as advanced or complex as a corporation.
- Corporation —Corporations are defined by letters–for example B, C, and S. Each one of these kinds has their own specific rules and regulations. While a corporation typically offers the most protection from liability, it also includes the most administration and cost than the other models
We recommend that you always get a professional opinion on which model will suit you and your state requirements best and can recommend someone to help if you need further assistance.
- Hire a Bookkeeper/Accountant
Many small business owners do their own bookkeeping when they first start out. A lot of them believe that it will be fairly simple and not worth the cost for outside assistance. However, hiring a bookkeeper can save you hours a week on tedious math and headaches and prevent mistakes. Instead you will be able to focus on generating more business and income, and growing your business.
While accountants are trained on how to save you the most money during tax season and crunch the numbers quickly and accurately, you are not. In the end, the cost is worth it and can even balance out with higher savings during that tax season.
- Procure Official Stamps of Approval
Last, but not at all least, is to find out if your state requires a license or certification for your certain type of business. If they do, you want to acquire it as soon as possible.
Having proper credentials not only helps you legally, but it is another great way to show your customers the legitimacy of your business, much like having business insurance. For example, if you need work done by a contractor on your home, you are more likely to look for a licensed and credentialed contractor to do the work because it helps you know that they are professionals and trustworthy.
While some of these tips might seem unnecessary for small businesses and more appropriate for big corporations, they are steps that will greatly help your success. We recommend following them from the beginning, but if your business is already started, it isn’t too late! Get these tasks done as soon as possible and start standing out professionally. As always, feel free to reach out to us with any questions or help you might need. We can be reached at 310-534-5577 or [email protected].
