Starting a business?

Initial Steps and Things to Consider As You Begin

TIRED OF THE CORPORATE LIFE?

There are so many reasons to start your own business, and there’s no better time than now. The world was turned on its head in 2020 with the onset of the COVID-19 pandemic. Businesses all over the world were required to adapt to the new and unavoidable restrictions. Whether it meant operating with a smaller staff, cutting costs, or turning to remote alternatives like Zoom to conduct business to limit possible exposures to the virus.

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As a direct consequence of the pandemic, people have become far more likely to request or seek positions that allow them to work from the comfort of their own homes. Gone are the days when the employee was required to slog through rush hour traffic in their uncomfortable work attire, just to sit in an office for eight hours to do the same work that could be done from their home computer. That hasn’t stopped employers from requiring an employee’s presence, however. Likely in an effort to offset the costs of having office space, there are still some employers who are demanding the presence of their staff. After all, if you’re paying for a lease and no one is on-site, you’re simply flushing money down the drain. This has led to an enormous increase in the number of small businesses that are being started. It turns out people would rather venture into the unknown than return to office space for forty hours per week. Let that be a lesson to employers everywhere. Including you, if you’re intending on hiring personnel down the road.

So now what? You no longer want to work the same stale job day after day, hoping someone will take notice of you and your efforts. Sitting in the same uncomfortable rolling chair next to Gary the guy who clears his throat every nine seconds, then wipes under his nose with his whole forearm. You want more. You want vertical movement based on your efforts. You want to be rewarded for the work that you do, rather than watching the credit go to the department you work in, or god forbid, Gary. If this sounds like you, then you’re in the right place. And don’t worry, I’ll never tell Gary about this conversation.

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TAKING YOUR FIRST STEP?

Starting a business is a pain in the neck, there’s no way around it. You’re going to have to run around town, starting bank accounts, talking to people like me (please don’t throw up, it makes me feel sad), and putting any number of things into place before you open your doors to business. If you have the fortitude to continue, I’ll help you get through the basics, as well as point you in the right direction as you move forward.

The first step in any venture is to determine what it is that you have to offer the world. What service can you provide? What product can you manufacture and sell? This is a fairly straightforward concept, but you wouldn’t believe how many people can’t articulate what it is that they actually do. Obviously, this rarely applies to those who are selling a product, but rather to those who intend to offer services. You’re not alone if you’re struggling to explain what you do. I for instance struggled for quite some time to drill down what it is that I really offer.

When I started out almost twenty years ago, I wanted to create beautiful designs for a company’s marketing materials. I began by designing flyers for nightclubs and event venues. I’ll let you guess how much that paid. I’ll put it this way, ramen wasn’t in my budget for a while. Through many iterations of my brand, I slowly began to understand where it was that I needed to be within the industry. However, in 2020, I closed my previous business, and now I’m restarting, and every question that you have is one that I have to answer for myself as well. “If I’m not offering marketing campaigns, am I really in marketing?” “Do small businesses care about analytics the same way that I do?” The list goes on and on. Ultimately, it’s all about refining exactly what you do and setting a name to it.

Continuing to use myself as an example, I can tell you that I’ve refined the “what I do” question down to the following: I offer Business Development Tooling and Services. If someone requires additional information on that, I’m happy to elaborate. So what are you going to offer? What services or products do you want to bring into the world? Answer this question and you’ll have completed step one.

The obvious followup to determining what it is you do is, naming your business. In this article, I’m going to assume that you’ve already landed on a business name. However, don’t fret if you haven’t yet chosen a name, I will be walking you through my tried and true process in the next article I post.

STEP 2: THE ADMINISTRATIVE TASKS

Once you feel that you’ve refined the “what you do” part of your business down to its simplest form, it’s time to sink your teeth into the wonderful world of bureaucracy. There’s no real way around this step, but together we’ll get through it.

The first question that you need to ask yourself is, how much liability do you want to take on? This seemingly confusing question isn’t so bad in reality. Without an MBA, you might not be aware of how much is at risk depending on how you form your company with the state. So let me just make a simple recommendation. If you don’t suspect that your company is going to be appointing a board of directors, if you don’t intend to be traded publicly in the next few years, form your company as an LLC (Limited Liability Company).

There are lots of articles on the different types of corporations you can form, but the most popular —and for good reason— is the LLC. Simply put, if you ever find yourself in a legal bind where your company has potential legal exposure (fancy term for your company potentially being legally responsible for some wrongdoing), you’re going to want to make sure that only the company is at risk. “What do you mean that only the company is at risk?” Simple, do you want your home and other assets to be on the table if the court ruling doesn’t go in your favor? If your company isn’t formed as an LLC, your assets could become a target for whoever is trying to get a ruling against you. If, on the other hand, your company is an LLC, the worst-case scenario is that you lose the business and its assets. Note: For any legal scholars reading this, I know there are additional variables, and that not everything is black and white.

The process of filing for an LLC may vary depending on where you’re located. However, it should be as simple as visiting your local Secretary of State’s website and filing a form to create a new record. For Colorado residents, follow this link to create a new business record. Once you’ve filled out the appropriate information, you’ll be charged roughly $20-$50 depending on your location. The form that you’re provided with at the end of this process is known as your Articles of Organization.

Two last quick notes: First, an LLC can also be abbreviated as LTD or simply as “Limited.” There is no difference between these classifications. Secondly, if you need to form your company as anything other than an LLC, such as an e-corp, s-corp c-corp, etc. there are many other things you should be aware of as you begin your venture into business ownership. I won’t be getting into those things in this article, but suffice to say, you will be taking on considerable liability as you move forward. With that in mind, make sure you hire a lawyer who can help you navigate any issues that you may encounter in the future. Don’t skimp on this.

EMPLOYEE IDENTIFICATION NUMBER (EIN)

The next major step that you’re going to need to take is to get yourself an EIN number. This step sounds scary and difficult, especially when you realize that it requires dealing with the IRS. However, it’s really simple. With that said, I will be telling you of some really easy ways to completely screw yourself out of money, so listen up.

This link will bring you directly to the online application form for filing for a new EIN number. You need to be sure of one very important thing before you begin this process. Make absolutely certain that the URL ends in “.gov”. As you can see in the image below, there are advertisement sites, as well as non-.gov websites that will try and charge you a boatload of money to file for your EIN number. Not only will you be shelling out more money than is necessary to get a simple form filed, but you’ll also likely not even get your EIN number. These are scams. These sites belong to unethical companies or individuals who take advantage of the fact that people aren’t familiar with this process.

Keeping these things in mind, either use the link that I’ve provided above or make sure you get to the right place so you don’t waste hard-earned money on a scam. Please also feel free to check my work. You’ll notice that the form that I’ve sent you in the link above is part of the official irs.gov website.

Filling out the form is fairly straightforward. However, if you have any issues, please feel free to contact us, and we’ll be happy to assist. The application will cost you somewhere between $10-$30 to file. After it’s complete, you will receive your EIN number within minutes (if you file electronically) via your email.

Notice how the two URLs in the above image end in .com? Don’t be fooled by the scammers and opportunistic animals out there. Please be vigilant when attempting to acquire your EIN number.

WHERE SHOULD I PUT MY MONEY?

If you’re not the type to store your money in the walls or bury it in the ground, it’s time to move on to the third step in the basic startup process. Even though you may very well be running a company where you’re not shelling out money to staff, or for overhead (expenses), you’re still going to want to make sure that you have your funds accounted for.

So it’s now time for you to lace up your shoes and head to the bank of your choice. Make sure that you bring along your newly acquired Articles of Organization paperwork, as well as your EIN number. You’re going to need to open up likely two accounts. The first account will be a checking account, and the second will be a savings account. You can also opt into a credit account, but the limit for that card will be determined by the bank. The reason that you want at least a checking and a savings account is so that you can easily keep track of the funds that you are both getting for your services, and that you’re paying for expenses.

The way that you allocate funds is entirely up to you, but if you’d like us to help you determine some practices that we employ, please don’t hesitate to get in touch. Please keep in mind that all banks work differently and have different policies. So if you feel as though the offer you’re getting from bank number one isn’t up to snuff, there’s nothing wrong with considering other options. Lastly, you should know that most banks will require you to maintain a small amount of money in your savings account; usually between $300-$500. It’s my recommendation that you add the money to the account, and use that number as your new zero. In other words, if you are required to put three hundred dollars in, and you end up setting aside another one hundred dollars, you should consider looking at this as though you only have one hundred dollars in the bank.

The main reason that I recommend funding the business savings account is, usually it will eliminate any monthly fees that you may incur on the checking account. The last thing you need to be spending money on when you’re starting a new business is bank fees.

NOW THE REAL WORK STARTS

Congratulations on making it this far. You should know that for the most part, the steps outlined above are the steps that I’ve found to confuse people the most. While the list above doesn’t give you a rundown on all of the tooling necessary to running a business, you can rest assured that these are the starting measures that every entrepreneur has to undertake when starting their new business.

I intend to flesh out additional measures that can benefit every company, both enterprise level and startup alike, in a future post. When that article is completed, I will link to it here. For reference’s sake, the next article will cover the following:

  • Choosing a company name
  • URL research
  • Website and email hosting
  • Setting up online profiles

I genuinely hope that you’ve found the information in this post helpful. Our aim is to make starting a business, growing a business, and making the tooling necessary to do both, as accessible as possible. Please feel free to contact us anytime for a free thirty-minute consultation by visiting our contact page and setting up a time on our calendar.