Starting a Business? 3 Steps to a Great Foundation
I’m sure there’s a million articles about setting up your business, making your business legal, choosing a business structure, etc.
I want you to know something.
*YOU CAN START TODAY!*
Without any of those.
That’s right. You can start right now. Without a business name, a business card, a domain name, or anything else other than you and your determination to succeed.
That’s all you need.
Before I continue, I’d like to remind you that:
(1) I’m not an attorney or CPA,
(2) the information provided is for informational purposes only, and
(3) if you need professional advice, you should seek the counsel of a licensed professional.
That being said… if you want to stay in business and grow it, then there are somethings you should consider.
1. Register your Business Name and Structure
If you’re working as a freelancer, your own name is fine. Just don’t forget to track all business income and expenses for your Schedule C come tax time.
If you’re going to use a name that isn’t your legal name, you probably want to register a fictitious name, LLC or corporation. It’s important to choose a business structure as well as a name, because you register the name with the business structure (i.e. LLC).
Your business name should be something that’s either unique or descriptive.
When picking a unique name, it should be
When choosing a descriptive name, you want to make sure it says what your business is. For example, Aaron’s Air could be an HVAC company, a small airline or any thing, like a skydiving service. But Aaron’s Heating & Air is most likely a HVAC service provider.
Keep in mind that if your name is unique but nondescript, you’ll need to put extra effort into marketing. This is especially true if your business exists offline only. (I recommend all companies have an online presence.)
For example, my now-defunct partnership (yay!) was named Gapti Services, LLC. What does the name tell you? Nothing. Except that it’s a service. What service? Who knows!
We chose that name because it had an interesting story and we provided diverse services. Also, we wanted to operate only by word of mouth. Despite our name, our business was successful because we delivered beyond expectations.
I recommend making a list of at least 3 names to check for availability.
Find out if the Name you Want is Available
Do a search for your name(s) of choice. I recommend typing in the name as is, and also in quotes. Example: search for Aaron’s Heating and Air and “Aaron’s Heating and Air.” You can also search at US PTO.
This isn’t an exhaustive search. Legitimate registered businesses may have no online presence. But many business registrations can be found online through government websites. Or through business information listing sites which gather and publish said information.
Your goal is to establish whether someone else is using, or has a right to use, the name you want. This is especially important if you want to go Nation or International. Of course, you can always change your name later, but it’s a hassle you can avoid.
Make sure the domain for your name is available. You can simply do a Google Search for it. Any Top Level Domain (ex. .net, .org, .us) will work, but keep in mind that if people remember your business name, they will type in .com first.
I recommend Google Domains for this. Domains there are $12 a year. They include private registration, email forwarding, and other features that usually cost extra. It’s easy to set up to use on a free Gmail account as an outgoing address, too. [I don’t receive any compensation from Google for promoting this service. I just like it a lot.]
Pick a Business Structure
In the State of Florida, businesses register with the Department of Corporations. Whether it’s a For Profit or Non-Profit, Corporation, LLC or fictitious name (DBA), etc. In some places, businesses register with a State Agency, Clerk of the Court, city or town, or other agency. Find out what the business registrar is in your area and check that the name you want is available locally.
To help you decide on the best business structure for you, the State of Florida Department of Corporations has provided some basic definitions. Again, you may want to contact a licensed professional if you’re unsure of what is the best option for you.
The most common structures are fictitious names (also known as DBAs) and Limited Liability Companies (LLC). LLCs are state-created and not equal in all States. Also, they aren’t an IRS designation.
I’d like to note that some businesses can choose tax treatment as a different business entity. Examples:
When it’s time to register, be sure to find out whether you have to register with more than one entity in your locality. You may need to register with the State, the city/town, the county, and any other local agencies. You may also have to register to collect and/or pay sales taxes, employment taxes, etc.
2. Register with the IRS
After registering, you can get your Employer Identification Number (EIN) from the IRS. The EIN is your business’ tax identification number. It’s like a Social Security Number for your business.
You can register for an EIN online anytime, Monday through Friday from 7 a.m. to 10 p.m. ET. There are other ways to register. You can find all the information about registering your EIN on the IRS website.
Be sure you find out whether you need an EIN. If you have registered a Corporation or LLC, you definitely need an EIN. Even if you don’t /need/ an EIN, you can still register for one.
You may also have to register with your State. In Florida, the Department of Revenue (FLDOR) manages collection of sales tax, use tax, etc. Businesses required to collect sales tax or pay use tax have to register within 10 days. The Florida Department of Revenue administers the collection of taxes and other regulations.
Be sure to research all tax liabilities and registration requirements for your area. Don’t forget Reemployment (Unemployment) taxes and Worker’s Compensation, if you’re hiring.
3. Set Up Your Books
Remember when I said that you can *start right now!*
Well, this is the one step that you shouldn’t skip at all.
Whether you’re a freelancer, a business owner, a registered entity like an LLC, you definitely need to track income and expenses.
Uncle Sam doesn’t like it when you don’t pay your taxes. And you don’t want to mess with the IRS. You want to have your books straight in case any question arises.
Mostly importantly, if you don’t know what’s coming in or going out, how do you know if your business is profitable? Set for growth? Actually a business and not a money pit?
Decide on whether you want to use Cash or Accrual accounting. Most common and easiest is Cash Accounting, which means you count revenue and expenses as money comes in or goes out.
Accrual accounting is different.
With Accrual Accounting, you record revenue and expenses as they become due. For example, you record revenue when you complete a job whether the client has paid or not. You record an expense as of the due date whether you’ve paid it or not. There are benefits and drawbacks to both methods. You may want to consult an accountant to decide which type is most beneficial for your business.
Once you’ve decided on the accounting method, you should set up your books. I recommend using software to do this. I also recommend using Quickbooks Online. You can access your accounting at any time, anywhere. It also lets you grant access to up to 2 accountants or bookkeepers.
Don’t forget to track any and all expenses related to setting up your business. Even if you paid for them out of your own pocket or bank account before you had a business account. Don’t forget to include all the fees related to these steps.
BONUS: Insurance Coverage
An often overlooked step is to secure insurance for your business.
Ladies! This is super important!
Depending on your business, you’ll need different types of coverage. The good news: qualified insurance agents have predetermined coverages for different businesses. You can always add more coverage.
You don’t want to lose your business because there was a natural event, or fire, or theft. You don’t want to lose your business because of a lawsuit.
These are things to consider when you’re in business, and in everyday life as well. Ensure your business has insurance for the basics, at least. Then make sure you have specific contingencies covered as they could be disastrous.
At this point in the process, you should still be very excited about your new business. Or about turning your side hustle into a full-time business. Don’t let the red tape get your down. Take care of the requirements and the details. Many tasks you do only once. And you can outsource the repetitive functions once you can afford that.
Keep your head up and Keep on Growing!