Congratulations on deciding to start a new business! It is empowering to become your own boss and to pursue your dream of starting a business. However, there is a lot to learn about setting up a business, and there is a lot that needs to be done in the beginning. Here are three tips from a bookkeeping services professional on how to give your business a financial head start:
1. Establish a Business Entity
One of your first actions as an entrepreneur should be to establish a business entity–whether it is a Sole Proprietorship, an LLC (Limited Liability Company), or a Corporation. Do your homework and consider consulting a lawyer to find out which type of entity will best serve your business. A Sole Proprietorship is fairly easy to set up, but has more liability than an LLC (which offers protections for the proprietors). Or, it may be preferable to form a corporation, which will better position your company for outside investment.
Separating your personal finances from your business finances is a great way to get organized, make tax time easier, and even save money. Set up a bank account that you use exclusively for your business, and also get a credit card that you use only for business expenses. It is helpful to consult with a CPA to learn about business expenses, tax guidelines, and best practices regarding managing your business bank account.
3. Determine How You Will Organize and Track Your Business Income and Expenses
Even before you earn any money with your new business, you should establish how you will be keeping track of your business’ finances. Think not only about your finances now, but about what your finances will look like after a year in business. It will help you in the long run if you take the time to set up a system that is both easy to use and scalable. There are several software programs that help you organize your finances and make it easier for you to stay on top of tracking your income and expenses.
An option that works for many businesses is to hire a bookkeeping services professional or firm. An experienced accounting services firm will be able to advise you on software tools for bookkeeping and time tracking, and when your business grows will be able to respond to your new needs, such as HR, payroll, and healthcare administration. An accounting services firm will help your business where it is, and help get you where you're going.
For more tips on how to set up your business, please read the blogs by my colleagues Dawn Hershik, “Three ways to optimize how you run your business’ books” and Amy Lyons, “My top five favorite business bookkeeping apps.”