For my clients who’d like to start their own business, they often site intimidation as the reason why they haven’t done so yet. Specifically, the thing they say intimidates them the most is the logistics involved. Their fear is real. But the things they fear aren’t really that scary, especially once they start taking steps toward those things.
This was true for me when starting my own business. I didn’t know much about how to begin. Let’s face it, I didn’t even know the difference between an LLC and LL Bean! It all seemed very overwhelming.
But the important thing is, I started. I did a simple Google search on obtaining a business license. Then I checked out the County Clerk’s web site for instructions. Filling out the form took all of five minutes, and the fee was nominal. Done!
Next, I consulted a business coach on how to set up my business as an LLC. He showed me the steps, which weren’t too difficult. And now days, getting an employer ID number for your business is easier than ever through the IRS web site. Done!
With each step completed, my confidence grew!
It’s easy to let things like the alphabet soup of starting a business cause you to panic. LLC, P&L, and IRS can all sound very scary (especially that last one). But taking just a few minutes to research their meaning, or asking someone who knows about it to explain it to you like you’re a four-year-old, can greatly reduce your anxiety.
Tips for starting your own business
If your goal is to start your own business, you’ll also gain confidence by taking one step at a time. You’ll quickly learn you can figure things out as you keep putting one foot in front of the other.
But in addition to giving you a pep talk, I want to share some practical tips to help make the logistics smoother for you. If you already possess the necessary basic skills for starting a business, then the following advice will help you do so with less intimidation, and less headache.
1. Choose a good business name
Determine the best name for your business. Use one that doesn’t limit you from possibly expanding your products, service offerings, or location. Then check for the following:
- Business name availability.
- Domain availability. (Always get a dot com over a dot net or a dot info. And never use a hyphen in your domain.)
- Platform handle availability. Make sure your business name’s handle is available on every social media platform you plan to use.
2. Select your business structure
If you already know what kind of business structure you want, get registered as such. While registering as an LLC is more expensive than registering as a sole proprietor, it’s much easier to do it upfront than to start as a sole proprietor, and then change to an LLC later.
Consult your accountant or a business coach on which structure would best suit your business.
3. Set up a bank account
Get a separate bank account for your business. You never want to mix your business income and expenses with your personal account.
4. Make it easy for customers to pay you
Set up business accounts through payment method platforms like PayPal and Venmo. This way you can receive customer payments quickly, and make it easier for them to pay you. Setting these up as business accounts under your business name, instead of as personal accounts, will make the IRS less suspicious of your transactions.
5. Keep a P&L
In the beginning you may not have the money to hire a bookkeeper, so you’ll need to keep track of your own income and expenses with a profit and loss ledger. It can be as simple as pen and paper, or an Excel sheet, with an itemized list of all your expense and income categories.
Then, you’ll want to keep a copy of every invoice and receipt to account for all the numbers you plug into your ledger. You’re required to hold onto these receipts for up to seven years in the event of an audit. (I know, the word audit sounds really frightening. But as long as you’re using your income strictly for business expenses, and you account for every penny, you shouldn’t have anything to worry about.)
Even if you don’t have the money in the beginning to hire a bookkeeper, you will want to dish out the money for an accountant to assist you with your taxes. He or she will tell you what business expenses you can write off, and which ones you can’t.
What I’ve found easiest for me is to keep an Excel P&L myself throughout the year, which gives me a first-hand picture of how my business is doing. I update my P&L monthly. Then every year, I give it to my accountant at tax time for her to have when filing my taxes on my behalf.
6. Pay your estimated taxes
As soon as financially feasible, get into the habit of setting aside 15 to 20 percent of every receivable and every revenue stream. This is the estimated amount you will owe on the income your business generates.
Use this amount to pay your taxes every quarter. Paying taxes online through the IRS web site is quick and easy.
I suggest linking a business savings account to your business checking account, so you can move your estimated taxes to it. This will help you keep it separate from your revenue. You can quickly and easily pay out of this account via ACH, through the IRS web site.
Getting into the habit of taking the taxes off the top of each receivable makes it less painful than getting hit with a large tax bill at once. Doing so can even result in a tax refund!
Take it one step at a time
While the advice above may still leave you feeling unsettled or intimidated, I promise it will reduce your chances of facing something even scarier down the road. These tips really are much easier than they sound, and they will save you a lot of headaches in the long run.
Remember, the logistics of starting a business are not obstacles. They’re simply steps. Just take one step at a time and keep moving to the next step. When in doubt, ask your accountant, your lawyer, a business coach, or someone who’s been down this road before. But don’t ever be so intimidated you become paralyzed with fear and give up on your goal.