Thinking about starting a business? There are many steps to take and keeping track of it all can be overwhelming. This is a rough outline of things you might need to do to get your business up and running as a sole proprietor, which is the simplest form of a business. You can learn about other business classifications at the SBA. As always, don’t rely solely on anything I say-do your homework!
Note: Many of these links are Massachusetts specific, but the principles are the same for your location.
- Choose a business name. Check for availability on this Massachusetts corporations division website. Give this step a lot of thought. If you create a website, your domain name should work with your business name.
- Register your business name with the Commonwealth of Massachusetts here. Creating this account with MassTaxConnect will also set you up for paying your taxes to Massachusetts.
- Obtain a Federal Employee Identification Number (EIN) at this IRS page. It’s free.
- Obtain a local business certificate. Application for the Town of Falmouth can be downloaded here. The name you apply for should match exactly the name applied for with the State. This is also where you list any other names you might use when conducting your business, also known as “Doing Business As” (dba). For example, if your official business name is “Smith Enterprises”, but your business card, website, or flyer says “Cleanout’s by Smith”, you need to list that on the business certificate (and possibly elsewhere).
- Get set up E-File with the IRS here.
- Open two accounts at your favorite banking institution. You need a business checking and a business savings account. Be sure to get a debit/credit card. All your income and expenses go into and out of the checking account. Use the savings account to set aside 30% of all your income for taxes, insurance, etc.
- Get yourself some insurance.
- Use some type of accounting software. I use Quickbooks, but there are many choices out there.
- Keep track of your mileage with MileIQ
- Look official with your own domain name, website, and email address. I use AISO for my hosting.
- You’ve put a lot of effort into this. Protect yourself-backup your computer with Backblaze.
Other things to keep in mind:
- Pay your quarterly estimated taxes. You have been setting aside funds, right?
- If you put any lettering on your work vehicle, or carry equipment such as ladders, you must get commercial plates. Beware, this means higher registration fees and possibly higher insurance.
- Keep all your receipts. I use Evernote to scan receipts plus I file the paper copies.
- If you travel for work, keep a logbook of all your jobs. Even if you don’t travel, make sure your books accurately reflect all of your business activities. The last thing you want to do is have unaccounted for cash flow.
- Give some serious thought to forming an LLC and electing S-Corp status with the IRS.
- Sometimes vendors who pay you want a copy of your W-9. This is an IRS form that helps the vendor properly report payments that they make to vendors. Once you have an EIN, you simply download and fill it out.
- If you have people working for you, don’t make the mistake of misclassifying employees as independent contractors. This is a surefire way of getting in trouble with the IRS.
- Employees are expensive (but nobody makes a fortune without them). If you have employees you must have unemployment insurance and workers comp insurance. Quickbooks has a partner program where you can purchase “pay as you go” workers comp.
- If you pay a vendor at least $600 during the year, you need to complete a form 1099-MISC. One copy goes to the vendor, one to the IRS. Your accounting software might handle this for you, or you can complete one manually.