So in case you missed last week’s episode, just go to our website, because it’s archived there. But today I want to talk about the steps from a legal and accounting point of view to starting your business.
So, you’re an attorney now, also …?
It’s funny you should say that since as an accountant, I cannot give specific legal advice, so that’s why you should have a good attorney like we talked about last week as part of your team.
Right, so we’re talking about more general legal advice …
Exactly. So I think the first step that needs to be done is going to be done by the attorneys, and that’s things like registering your business with the state. And what an attorney can also do is they can just make sure that you’re filing the appropriate paperwork to start your business, make sure that your name is unique, do things like your articles of organization, [articles of] incorporation, maybe a buy-sell agreement, sales contracts … you know, all those things that businesses don’t really think about but they really need in order to get that legal binding contract with their clients.
So then what does an accountant do during the startup process of a new business?
We’ll work on a lot of the initial things, like:
What kind of business should they be? Is a sole proprietor or a single-member LLC—is that right for this business? Or maybe should they look at being a partnership or some kind of corporate structure? Those are the things that we look at at the very first part, because it’s different for every business.
Identification Numbers (Federal and State)
So, federal numbers are not necessarily required, but they are strongly recommended, because if you don’t have a business identification number, a lot of times you have to use your Social Security number, and as all of us know, we really don’t want our Social Security number really floating around out in the public, so it’s better that you get the identification number for federal. A lot of banks are requiring it. So, at that time we’ll help you get set up with federal and state identification numbers, which can be done on the websites of those particular entities really at no charge.
So, what about bankers, now? Where does banking fit into all this?
A lot of businesses need some kind of financing or some kind of bank account set up (a business bank account). So from the loan point of view, banks are really going to help you out with getting something, whether it’s a loan internal to the bank, a Small Business Association (SBA) loan, what we’ve talked about forever: The Paycheck Protection Program (PPP) loan … your bank is really going to be the one that helps you out with those kinds of things.
But like I said, you also want to set up a business bank account and make sure you run all your activities through that account. It’s just good business practice, because your business expenses and your business income should really run through that business account, and your personal expenses and personal income should run through your personal account. We see a lot of small businesses that kind of intermix that together, and it’s really important—from probably both a liability point of view, but also from an accounting point of view—to make sure that those are separated.
So let’s ask the question: Let’s say there already is a small business out there that has been in operation for a couple years now and it has just all been mixed together. How do you start to unravel that and separate this if they have been doing the [personal and business] banking altogether?
That is the hardest part, because I think that puts the most stress on a client, because they’re the ones that generally have to go through every transaction and say, “Ok, this is a business transaction,” “This is not a business transaction” … where if they would have just set up a business account or they start a business account now, then all those transactions are just in one place and it’s a lot easier for everybody to figure out what the business transactions are.
Finding the right people … that’s key in all of this.
It really is. So like I said, you could have the best business idea in the world, but if you don’t have that team of different experts to help you implement that, I think you’re just doing your business a disservice. So that’s why I recommend: Get yourself a good team.