Psst, we’re talking business. Pull up a chair...
I’ve chatted it up with bawse women around the world (shout out to my Dream Catchers), and many want to start or grow their business.
The easy part? Throwing on your "Open for Business" sign to sell a product or service.
What gets tricky is making sure you're going about it the best way (i.e. the most legal, organized, and secure way), so keep reading!
We all come to the entrepreneurship life differently...
For some, it’s finding an innovative solution to a problem. For others, it may be a money-making talent.
For me, it was in 2009, when I lost what I "thought" was one of the most secure jobs in town –– a preschool teacher.
Whew, that 2008 Recession was no joke.
After losing my job, house, savings, and (almost) all my confidence, I finally said… “I need to bet on myself.” Because let’s be honest: No one is going to have Tiff’s back like Tiff.
But, where to start?
I didn't know, so I just hopped in and hoped for the best *do not advise*. My big focus was "who would pay" and the intense work of coming up with a cute logo (sigh, the good ole days)...not business structure and legalese.
Here's a better biz starting path for you to follow instead of the "hope and a prayer" method I used with my first business...
The “Big Idea”
It all starts with an idea. Now, here’s the thing: I can’t tell you what you should sell, but I CAN share some ways to help figure it out.
Think about these questions:
- What problem are you looking to solve?
- What marketable skills do you possess? (Don't say none. We all have something. Maybe it’s painting or storytelling, or designing, or gardening…)
- What businesses do you frequent, and have an idea for how it can be better?
- Can you turn a passion project into a moneymaker?
>>*Taps mic* Need more help finding your side hustle/entrepreneurship "why" and "how"? Grab your spot in my FREE Biz Web Class: www.budgetnistabusinessclass.com.<<
In the simplest “Tiff” terms, a business plan outlines what you’re going to do and how you’re going to do it.
It typically includes a business summary, an analysis of the industry, and items or services offered. If you are hoping for monetary help, banks, lenders and investors want to see a plan before they hand over the funds.
PRO TIP: Don't let the thought of having to write some long, drawn-out business plan stop you in your tracks. These days, a "one-page business plan" is a real thing! Ya welcome!!
Pick a business structure
Yup, this matters. According to the SBA, the business structure you select influences EVERYthing: from day-to-day operations... to taxes... to how much of your personal assets are at risk.
You should choose a business structure that gives you the right balance of legal protections and benefits.
FYI… it’s cheaper to take the time and create your business online vs. using a third-party source to file your documents. My friend Chike Uzoka, the entrepreneur coach, teaches an amazing business course in my online financial school, the Live Richer Academy. He speaks openly about his experience dealing with these registering agents that charge up to $500... for something you can file on your own for $100.
But, back to business…
Here are five common business structure models:
This is an unincorporated business owned by one person, who will report all business profits/losses on his or her own individual tax return. A sole proprietorship is the simplest business structure and is a great option for most folks starting out. Note: This business type also puts full responsibility on YOU for all business debts and obligations.
LIMITED LIABILITY COMPANY (LLC)
Here's another common set-up. An LLC allows you to take advantage of both the business structures of the corporation and of the partnership as a hybrid structure.
In most cases, LLCs protect you from personal responsibility.
For example, if your LLC ever faces bankruptcy or litigation, your personal assets are not at risk.
Business profits and losses will get passed through to your personal income without facing corporate taxes. But, members of an LLC are considered to be self-employed and must pay self-employment tax contributions towards Medicare and Social Security.
Partnerships are the simplest structure for two or more people to own a business together (as opposed to the sole proprietor I mentioned earlier, which is a solo venture). There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).
Limited partnerships have only one general partner with unlimited liability, and a limited liability for all other partners. The limited liability partners also tend to have less control over the firm, which is documented in a partnership agreement. Profits are passed on through personal tax returns, and the party with no defined liability must pay taxes on self-employment.
An LLP protects each partner against the partnership's debts, and they won't be responsible for other partners' actions.
An S corporation has one class of stock and no more than 100 shareholders (within specified provisions). Profits are taxed on shareholders’ tax returns, and shareholders have limited liability.
S corps allow profits, and some losses, to be passed through directly to owners' personal income without ever being subject to corporate tax rates.
Corporations give their shareholders the best immunity from personal responsibility, but the expense of creating a corporation is greater than other structures. Corporations do need more detailed record-keeping, organizational and monitoring systems.
In comparison to sole proprietors, partnerships, and LLCs, corporations pay tax on their income. In some cases , corporate profits are taxed twice — first when the corporation makes a profit, and again when dividends are paid on their personal tax returns to shareholders.
You need to determine your business structure before you can register your company.
Psst… if you get a little confused with the different business types, check out the U.S. Small Business Administration site for more details.
Register with the City/County/State
Once you pick the structure that best fits your company, the number of owners, and your future plans... you must register your company to become an officially recognized business entity. Your location and business structure will determine how (or if) you need to register.
Nearly every business needs some sort of license or operating permit. Your demands differ according to state and industry. The SBA provides a list of regulations for State licensing.
Here’s a simple list of where to check:
- Register with federal agencies: Think trademarks, brand names, product names, etc.
- Register with state agencies: Most states require you to register with the Secretary of State’s office, a Business Bureau, or a Business agency.
- Register with local agencies: This step is not always necessary but varies from city to city. If you find out you need to file for licenses and permits from the county or city, make sure to check out your local government websites.
Open a business bank account
Ahht, ahht! Before you start accepting payments, open a business account.
Trust me; a business bank account helps you stay legally compliant and protected.
Most commercial bank accounts offer benefits that do not come with a standard personal bank account.
Business banking keeps personal responsibility at a minimum by keeping the company funds separate from your personal funds.
And, business banking usually comes with the option of a business credit line. This can be used in emergency situations, or when the company needs new equipment.
Once you decide on the bank you want to do business with, go online or to a local branch to start the easy process.
Here are some of the most common documents that banks ask for when you open a bank account for business. *Note: some banks may require more.
- Employer Identification Number (EIN) (or a Social Security number, if you're a sole proprietorship)
- Your business's formation documents
- Ownership agreements
- Business license
Whew… this may feel like a lot, but trust me: Once you get through the biz setup and other boring (but important) biz things, we can get to the marketing, logos, and websites. You know –– the fun stuff!
Just getting started? Download this basic business checklist to make sure you’re on the right track. (And share with a business buddy because us Dream Catchers aren’t stingy, ha!)
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The Live Richer Academy coursework can be worked on at your own pace and we’ll always have something new to offer you no matter what financial stage you’re in right now.
Membership also includes VIP access to our private community forum and exclusive members-only online events, like our live, weekly "Ask the Expert" series.
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