5 Things To Not Screw Up When Starting a Business

Blog

Jul 14

Jumping from the employee’s seat to the employer’s, or being self-employed, can be both exhilarating and daunting. What do we need to do first? Do I get a website, sign up for taxes, what taxes apply, and what do I do about books?

Over the last few decades, I’ve had the opportunity to be by our clients’ side through this initial leap on several occasions, and while some things are pretty simple to accomplish, other items can require a little more prep work, even though they may seem easy.

Today I want to talk about the top 5 things you do not want to mess up when becoming self-employed, or starting a business.

Choosing the wrong tax structure. Different structures offer different benefits, and once you lock in changing structure can be difficult. Taking the time to meet with a tax planner and discuss the intricacies of your business can be worth its weight in gold, or shall we say, tax?
While I can’t go through all of the nuance of each structure, things like owning property through the business can create basis issues if you are an S-Corporation, whereas partnerships or sole proprietorships may be treated differently, but incur self-employment tax. The best thing to do is to bring your business plan and forecasts to your accountant, and ask them to help you choose the best method for your business at the start, along with your attorney.
Along this vein, make sure you understand the change from withholding on your W2 to possible self-employment tax, or else income and payroll tax as part of being the shareholder of an S Corporation. Keeping on top of estimated taxes, submission deadlines, and ensuring sufficient savings for tax time is a critical piece of the puzzle starting out.
Not setting up books when you launch. Books are not just for taxes! They are critical for obtaining funding, communicating with partners or shareholders, and measuring your business performance over time. Keeping receipts and trying to organize records at the end of the year or even years later can have disastrous consequences, not just for tax purposes, but for measurement as well. Watching the bank balance is not how we measure performance and growth.
Not having HR policies when you hire your first employee. As far as risk goes, employees can be incredibly rewarding, but require dependable and compliant treatment. Paying under the table, trying to match out paychecks on napkins, or not setting out basic HR policies has the potential to derail communication and land you in the hot seat with state wage and hour boards, the Department of Labor, and more.
Not meeting with an attorney. While the idea of having an accountant in order to be ready for taxes is pretty normal, a lot of new business owners don’t realize the value of having at least an initial consultation with a business attorney. Many times a good attorney and an accountant work hand in hand to make sure your business is a success. While accountants may know tax law and GAAP, attorneys stay abreast of business law changes and can help guide your business to success, and highlight possible potholes along the way.
Not having a marketing plan. Hanging your shingle and calling yourself a plumber is great, but if you don’t have a website or Google listing, things can go stagnant quickly. Word of mouth is fantastic, but you are building a reputation from day one, and good reviews, online presence and a plan to gain leads, which eventually become customers, is a part of the game that is inherently necessary from the beginning.

While building a business can be very rewarding, taking the time to not jump ahead, and instead to plan ahead, can mean the difference between a stressful first year and a smooth one, or at least smooth in the parts you can control.

Starting a business doesn’t have to feel overwhelming. Whether you need help choosing a tax structure, setting up your books, or business advisory that actually drives growth, our team of experts is here to help.

📅 Book a free discovery call today and let’s map out your next steps with confidence.

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