It's the first month of the year, believe it or not! How are your new goals coming along so far?! Just because the excitement of the holiday season is over doesn’t mean that you've forgotten your goals for the year, right? And for you, one of those dreams might be starting a new business.
Whether you want to ditch your 9-5 for good or you’re just beginning your passion-driven side hustle, one thing is sure: many people start their businesses with a lot of hope and excitement, but without the proper financial and legal structure.
Of course, that might be the last thing on your mind. Why should you care if you don't have a legal and financial setup for a business that hasn't made you any money yet?
But if you don't start out with the right foundation, you run the risk of a big-time income-tracking nightmare when you DO start making money. (Not to mention the potential problems if you get any income questions from the government...)
How do you avoid all this? By giving your business a solid start in three crucial ways: a name, a registration, and a bank account. Not only makes your new business feel more “official,” but it also covers your interests as far as the government is concerned. (And we all know you can't put a price on peace of mind!)
Where do you start, though? Does "order of operations" matter here like it did in algebra class?
There are steps that you need to take, and they do follow a logical order. The good news is that they don't have to be mysterious or confusing!
Here’s what I’m going to share with you today:
- We’ll go over the first steps to set your foundation
- What order to take them in
- Why each of them is significant
- I’ll help you demystify the process and boil it down to easy tasks that you can implement one at a time.
- I'd also like to share with you our STARTER Bookkeeping Spreadsheet to get you started on the right track.
Let’s take the fear, confusion, and headaches out of the equation once and for all!
Step 1: What’s In A Name? More Than You Might Think!
Let’s assume that you know what kind of a business you want to run. You know what you want to sell and to whom, and you’re ready to get things rolling.
The next step is to make your business "real" by deciding what to call it. But it's more than just what you want your business cards to say.
Naming your business baby comes down to a three-in-one first step, which goes like this:
- Choosing a name that you love
- Finding a domain name that you love just as much
- Ensuring that the name you love is officially available
It's like this: once you have a name that lights you up, two other tasks come into play. First, finding an available domain name for your website-to-be that matches your business name. And second, making sure that someone else hasn't already registered their business with the name you want.
These three steps work together as one, and here is why:
You need a name that reflects what your business is all about. And of no matter how much people say that Social Media alone is enough, you DO need your own “storefront” in the form of a website. That means getting a domain name that matches your business name. Finally, to cover the legal side, you need to make sure that your name is available as far the law is concerned.
I’ve seen situations where people have chosen a name and spent time and energy on branding only to find out that their beloved business name was registered to someone else. I’ve also seen people get excited about a business name, but realize that every version of their dream domain name has been sold.
So when choosing a name, keep all three of these pieces to the puzzle in mind. Once you’ve got a name that lights you up, you find a suitable and available domain name, and you get the green light from the incorporation office, you're (almost) "in business."
Step 2: Business Isn't Personal: Why You Need Separate Business Account
Now, let me share what is quite possibly the most significant step of all. You MUST have a business bank account that is separate from your personal account. Period.
No matter how much or how little money your business is making, you need to separate your business income from your personal income, at least in terms of how you receive it initially. In other words, it's critical to have a place for your business income to “land” that isn't tied to your personal finances.
In the beginning, most of the income from your new business will probably go out of your business account as fast as it went in, but that's OK. What matters is where the initially lands. Save your butt and keep the initial deposits in their proper places. It'll make keeping track of your income (and satisfying any income questions from the government) that much easier down the road.
Step 3: Getting A Business Account (And Making It Legal)
So how do you get a business account? Can you just walk into a bank and ask for one?
Here’s the thing about business accounts: you MUST have your business name registered before you can open an official business bank account. That means that you’ve already gone through the steps in part one, you’ve registered your new business name, and you’ve received that piece of paper from the government that gives you the official “go” to start making money.
But of course, when it comes to government rules, there is always at least one exception!
If you’re a Sole Proprietor, you can open a business bank account in your own name. Just as long as it’s separate from your personal account. You're likely a Sole Proprietor if you’re a small business who does most of their transactions online. That is, you’re not writing or receiving paper checks, and all of your income is digital.
If you're a Sole Proprietor, your new business account would just be another bank account in your name. If you’re not a Sole Proprietor, you’ll need to register your business and get the proper incorporation documents before you can get an official business account.
But the take-home message is to direct your business income to an account that is JUST for your business. Keep it simple, keep it separate.
Here’s a quick recap of the "order of operations" for our business equation!
- Set your foundation with a business name, then be sure that the name is available for registration and that there’s a domain name that’ll work for your website.
- Register your business name to give your business the legal status that it needs.
- Get your business bank account set up as soon as possible so that all the money you earn from your business initially goes to one place.
There you have it! Follow these simple steps and save yourself a lot of stress, confusion, and hassle in the future. If you need more help, our STARTER Package might be just what you need.
Setting the right foundation for your new business is important for MANY reasons, and I want to help ensure that you start off right.
That’s why I’ve created a FREE checklist that includes not only these three steps but also the next steps to streamline your business structure. No worries, no hassle. Just straight-ahead, easily implementable tasks that'll make your business legally and financially “legit” from the get-go.
Grab your copy by filling in the form below and get your business built right from the ground up!
A great article that gives good advice on how to set up a new business.