A Few Baby Steps...

I’m excited today because I’ve had the opportunity recently to talk to a lot of people who have either started a new business or are thinking about starting their own business. The excitement and exuberance in the way they talk about their business is truly special. There is nothing quite as exhilarating as going out on your own, working independently, and doing something you are truly passionate about. I know the feeling. I’ve been there. So, I thought this is a great time to share with you a few of the top tips that I always give people when they are either just about to start a business or they already did and need to catch up a little bit.

Believe it or not it doesn't always start with accounting. It doesn't always start with a QuickBooks file. It starts first with getting an Employer Identification Number (EIN) created for your entity. This is important so that you have some sort of distinction between you, the person who owns things and has a whole life, and you the business. Having a formal entity and EIN that's recognized by the government is the first step in doing that. It's very easy, takes about 15 minutes, and is free so don't believe the people who say that you need to pay them to get you registered. Just go to irs.gov and register on their website. That's it. You're not going to have to pay some third party to organize it all for you and you’ll get your EIN immediately after verification. This is the first step is creating a distinctly separate entity for your business.

The next step I would recommend especially if you are starting or have started a business with another owner or partner would be to create a partnership agreement. A partnership agreement is a legal document that outlines the management structure of a partnership and the rights, duties and operating responsibilities of each party, ownership interests and profit shares of the partners. It's not legally required, but highly advisable, to have a partnership agreement to avoid conflicts among partners. You don’t need an attorney to draft one either. There are very simple templates that you can use online as a starting point for creating your own.

Then the next thing I would recommend that stems from having registered your business with the IRS is take that EIN number to your bank and open a new bank account in just the name of the entity. And every time somebody pays you for that business or work, deposit the money in it. And every time you spend for your work, spend the money out of that operating account, so that you always have one place to look when you're trying to find your records on what you've spent for your business. Those are all deductible expenses, and you really want to make sure it's all in one place. You're no longer looking for a needle in a huge haystack, that is your total financial life, you're really just looking for the pile of needles. And since you've been piling them up in one business bank account as opposed to keeping them in with the rest of your personal transactions, it will be so much easier to find.

The other thing that I do try to share with a lot of business owners is that often we do a lot of driving for our business. When you own your business that mileage is deductible. And I always find that using an app called Mile IQ is the best way for me to track my mileage. It's called Mile IQ and it is an app that runs right here on my phone in the background, by GPS, just tracking everywhere I go. And then I can either swipe right, if it was a business trip, or swipe left if it was a personal one, so that I always have a monthly report of exactly what my business mileage was. And it's easy to calculate my deduction from there or give the figures to a CPA.

So those are just some of the first steps to make sure that you're laying the beginning groundwork to owning your own business. Even before you think about other functions, those are the very first tiny baby steps to get started, and I hope these tips have helped you a little bit. I promise owning a business isn't nearly so daunting as it seems. And these are all things that you can do for yourself before you ever work with a professional like me. But when they're no longer enough for you, I'm right here to help with even more support.