1. Start-up costs
This video explains how to track and record business start-up costs. Start-up costs are those costs you incur prior to your business official start date. They are handled a little differently than the costs you incur after your business is operational.Start-up cost free spreadsheet
2. Choose form of business
There are many options for your business entity. The right option is the one that is best for you, the business owner. It is important to get legal and tax advice, but first know the options, how they work and that will help you determine what questions to ask.
Read this blog post to understand the options >>>
3. Get an EIN
An Employer Identification Number (EIN) is a type of Taxpayer Identification Number (TIN). A social security number is another type of TIN.
Business owners get an EIN to avoid using the owners social security number, and it is usually required by the IRS or banks. A sole proprietor or individual EIN is linked to the owner themselves. An LLC, S-Corp or C-Corp EIN is tied to the business itself, not the owner.Official IRS.gov EIN online application (free)
Don't get scammed
Scam sites have "IRS" or "IRS.gov" in the web address and they will charge a fee for applying for the EIN for you. However, the EIN on the IRS site is free and easy to get. You will spend as much time filling out the form on a scam site as you would getting the EIN itself. Ensure you get a free EIN directly from the official IRS site.
4. Open a business bank account
Keeping business transactions separate from personal transactions is critical to having good books and records for your business. If you have an LLC, entity taxed as an S-Corp or a C-Corp you want your business to own the accounts.
Your bank will expect business to be conducted through a business account. You may also want to consider opening a business savings and a business credit card.
If you are considering the Profit First you will need more than 3 accounts. There are resources for using Profit First and other cash management methods in the Simple Profit membership. Managing your cash flow is an important part of managing your business.
6. Choose an accounting method
There are three methods of accounting: accrual, cash and modified/other. Most small businesses use cash method accounting. Cash method is the simplest, and ensures you won't pay tax until you have actually collected the revenue.
If you are unsure which to choose, it is likely best to choose the cash method because it is the easiest to understand.
Accrual vs. cash method
What did I choose?
2020 or 2021 revenue?
7. Choose an accounting system
An accounting system is a process of tracking and categorizing financial transactions. If you use an electronic health or medical record or client management system, you still need an accounting system. An accounting system links or summarizes information that passed through your business accounts
If you use an accountant or tax preparer, speak with them before choosing an accounting system. They may have a recommendation, offer a discount or want to have remote access so it is best to at get their input.
For help with bookkeeping, consider joining the Simple Profit membership.
Which Quickbooks version?
Can I use a spreadsheet?
What are other choices?
What about payroll?
8. Determine owner pay
How you pay yourself as a business owner depends on your form of business. Watch the videos below to understand your options. Owners Pay video is a general overview, and Owner Payroll is about establishing a reasonable salary for an S-Corp or C-Corp owner.
9. Pay estimated taxes
The IRS and states who collect income tax expect self employed individuals to pay estimated tax periodically during the year.Get the Estimated Tax tutorial in the membership
Who pays estimated taxes?
When are tax estimates due?
Do I pay my first year?
Should I just save 30%?
10. Explore Simple Profit resources!
Simple Profit has tons of resources to help the small business owner!