Steps to building a business

In January WYZGYZ started out as a new business. For someone who’s never been on his own in the business world, this is a big and exciting step. Realistically, though, it was a piece of cake. I spent weeks doing research, but only a few days actually putting everything together. I’ve learned some lessons, and I have a lot more to learn as my business grows, but the gist is that starting a business isn’t that hard.

The basic steps:

Secure your name first. Without an easy to find name, you’re in trouble, and your business could easily be mistaken for other businesses. This means registering the following:

Get your domain name in .com at least, and preferably .org as well, and possibly .net. These are the big three. The others don’t matter so much. (wyzgyz.com, wyzgyz.org)
Get your twitter name. (twitter.com/#!/wygyz)
Get a facebook page and register your username (facebook.com/wyzgyz)
Register your trademark. This is probably the most expensive part, but it’s important if you’re doing business in multiple states that you have official protection that having a registered trademark affords. You can have a lawyer do it, but I was lucky enough to get mine through without a lawyer. The documentation on the USPTO web site is pretty thorough. The process takes a long time, like 6 months, so be patient.

Secretary of State for your state. Here you are creating your business. You decide whether it’s a LLC, Sole Proprietorship, Corporation, etc. Many people go with sole proprietorship because it’s really easy; there’s no additional paperwork beyond your regular 1040 taxes. An LLC is only slightly more work, but not really. I chose the LLC.
Department of Licensing for your state. You usually also need a business license for any city or county in which you do business. In some states you check off which counties when you apply with the state DoL, so this isn’t a big deal. If you do business in other states, technically this requirement still exists, but for small businesses doing 1-offs or small infrequent jobs, this is rarely enforced.
Federal EIN. This is a federal tax number that you get from the IRS and use in place of a SSN on paperwork related to your business. This isn’t necessary for sole proprietorships, but it’s a good thing to have for any business.

Then you need to find a way to take in and spend money. It’s best to have this separate from your personal accounts to make it easier to keep track of how your business is doing.

Many banks offer business banking accounts. Get a regular checking account and optionally a savings account. A lot of these charge monthly fees that are waived if a certain amount is kept in the account, so I deposited that amount when I opened the account and took it back out when I had earned that money through the business. I haven’t paid a cent for my bank account yet.
You can get a business credit card, but think long and hard about it before you do. This is not cheap money; you pay a lot in interest. It’s better to get a loan if you need startup cash. Or consider starting smaller and scale as your business grows. I don’t have a card, so I can only spend money if I make it.
Get a paypal account. This allows you to accept payments online or from other people very easily and is a good alternative to requiring a check or doing direct deposit.

There are three more important parts to mention, especially relevant to small businesses:

Being taxed on all your income sucks. You pay a lot more in taxes than if you are employed (Look up FICA tax. For social security and unemployment taxes, your income is taxed at 14.something percent, and when employed you pay half and the employer pays half. When self employed, you pay all of it. That’s a lot. When starting an LLC, you can choose to be taxed as a corporation, and you become your own employee. As your employee, you can make a salary that’s acceptable, then at the end of the year you can get a nice fat bonus check for the rest. You get taxed at a much lower rate on the bonus check, so you end up saving a lot of money. It’s a little more paperwork, but hiring an accountant for a couple hundred dollars to save you a couple thousand dollars makes sense.
When you operate a business doing freelancing or being hired to do work for other people, you have to be careful to show that you are a contractor and not an employee. If the IRS determines that you only worked for one client full time, then they will force the employer to pay employment taxes, which is a bad deal for them, since you also have to pay the employment taxes anyway. This is why a clear contract and multiple clients is a good thing.
One of the advantages of LLCs is personal protection of your company. However, if the court determines that your LLC is really just a front for your personal life, they can go after your personal assets. For this reason, you need to keep your business separate as much as possible from your personal life and prove that it’s a business and not just a hobby. Look up the term “piercing the corporate veil.” You should have a business email, business cards, a business bank account, a business web site, written contracts; and use them and only them when doing business. Pay for business expenses with your business account or re-imburse yourself with receipts for purchases made out of pocket. Deposit payment into the business bank account. Keep it separate. An accountant will thank you, too.

These are the things I’ve learned so far. It’s only a couple days of work to get it all set up, and a few hundred dollars. In the grand scheme of your business, it’s ridiculously easy.