So many people dream of starting their own business, but it can be confusing to know what to do and where to start. I completely understand, I worked for a large publicly traded company for 20 years and finally decided it was time for me to pursue my dream of owning a business. But I didn’t know what to do.
The question is, should you start your own business? Sure, why not? Don’t wait because you’ll run out of time and then look back and regret you didn’t do it. I’ve heard of those rocking chair moments with people in their golden years when they look back and wish they did things differently. Don’t let that be you.
You work for your current company and you think, gosh, I can do this on my own and even improve on it. It’s true, just think of all the ways you can improve and make it better and make the client experience that much more impactful for years to come. Another question is, do you go at it alone or do you have partners? That decision is up to you. But going through this process brought back vivid memories of a great book I read by Michael Gerber called The E-Myth Theory. Michael says there are 3 people inside you, when you own your own business, that fight for your attention…the Entrepreneur, the Manager, and the Technician. The Entrepreneur side should win out most of the time and being a solo owner, I need to make sure I am managing all three of these appropriately.
So, what are the steps to starting your own business? Here they are and have fun along the way. The journey will be fun, scary, exhilarating, and energizing.
- Decide on your company name. This is going to be your baby, right? So, what’s the first thing you do when you have a baby? You name it! It’s important to pick the right one. How does it sound when you introduce yourself? Does it make you feel excited? I went through a ton of names and I finally landed on the one I loved.
- Get it Trademarked. I decided when its time to grow, I wanted to have exclusivity rights to that name as we expand to other areas, cities, and states. Hopefully, you will be able to get it approved because not all trademarks are accepted.
- Have an attorney write up your partnership agreement (if it’s just you, move on to step 4). It’s important to have everything in writing when partnership opinions differ. Address this stuff on the front end. It will take some time to hash out the details but it will save you tons of time, frustration, and even money down the road.
- Decide what type of entity you want to be – there are a number of options for you – C-Corp, S-Corp, LLC, LLP, Sole Prop, Non-profit 501(C)(3). Get with your CPA on this and run through the different tax scenarios to decide.
- Get Your Business Federal Identification Number - Guess what? You will have to pay business taxes and this tax number will help the government identify your business. Think of this as a social security number for your business. You get this by filling out and filing a document called the SS-4, Application for Employer Identification Number.
- File Your Business with the state – In California, because I am an LLC, I needed to file an LLC-1 Secretary of State Articles of Organization. Find out what forms are required for the state you’re in and the entity you decide on. Yes, you’ll need to give the state some tax dollars too.
- Get your business license – The county, town or city you reside in is also going to want to some tax dollars. Because I am located in the town of Folsom, I had to get a business license. Make sure you set this up where ever you are operating your business. Just go on line to the county, town or city website your business resides in and they can help you set this up.
- Get your business insurance – You will need to have professional liability insurance, general liability insurance, perhaps Errors & Omissions insurance, etc. Get with your insurance broker to figure out what is the best level of insurance coverage for your business. It’s really important you cover all the bases here.
- Set up your business bank account – You’ll want to keep your business account and personal accounts separate. This process will be different than going to the bank and setting up your personal checking account. They will need articles of incorporation, or the LLC-1, fictitious business name statement, the partnership agreement (if applicable), your Fed ID document proof from the IRS, driver’s license and a small deposit to start.
- Set up your company website – You need a website in the 21st century. When is the last time you opened a phone book? People need to find you online. Go and get a professional to do this for you and put something together you can be proud of.
- Get your client agreement completed – You’ll want to make sure you have an agreement in place, so you and your client know what the clear expectations are when services are engaged with your company.
- Set up QuickBooks or similar accounting software – You need to have a clear understanding of your finances. They allow you to know exactly where you stand with all the monetary requirements of running your business. Plus, you can set up invoicing and clients can pay you directly through this software.
- Set up Workers Compensation Insurance – If it’s just you as owners you don’t need it. Let me clarify, if you are an owner and have at least 10% ownership you don’t need it. However, if you are in the construction industry, different laws apply and even as an owner you may need it. But once you get that one employee, just one, you will need to secure workers compensation insurance. Don’t skip this step, penalties and fines are massive for trying to circumvent this requirement.
- Apply for your State ID Number – this is only if you become a subject employer when you employ one or more employees and pay wages in excess of $100 during any calendar quarter. You’ll need to complete and file California form DE-1. This ID will be used to apply your California payroll tax payments for unemployment, state disability, employee training tax (ETT), and the employee state personal tax.
- Get set up with a payroll company – I think it’s very important to have a company do payroll for you. They make the payments on your behalf, do all your filing requirements, pay your payroll tax liabilities and complete the W-2’s at the end of the year. If you like you can even hire a bookkeeper to handle this for you too.
- Get set up with an HR company – Phew, it took a lot of work in the wee hours of the morning writing this document to get to the part I am really passionate about. My company along with many others can help you manage everything from pillar to post as it relates to being a fully labor law compliant company in California or any other state. Because the burden of proof is on you the employer, you need to make sure you have the proper HR infrastructure in place for your business. From employee handbook creation and management to recruiting, hiring, performance reviews, training, proper separation, these items are essential. Once you get that one W-2 employee, how you go about managing these items will become really important.
I know its lots of stuff but good stuff. I can’t stress enough how important it is to align yourself with good business partners to help you along the way. Get a great attorney, great CPA, great bookkeeper, great financial advisor, great broker, and great mentors. Don’t be so rigid and stubborn to not be open to changing the business and more importantly open to changing you. That’s the hardest part isn’t it? It’s tough to look in the mirror and self-reflect on how we can change to be a better version of ourselves. In Earl Nightingales, Lead the Field, and I am paraphrasing here… “the world is a mirror, often a merciless mirror of who we are as a person, and the world will give back to you exactly what you put out.”
Written by Glen Drouin, founder and owner of Harbor HR, LLC. Glen has 13 years experience working with his Father’s business and 20 years experience as an HR and business consultant. You can reach Glen at 916-293-2116 or e-mail at firstname.lastname@example.org .