Stinkerpants

Legally Starting Your Own Business

January 28, 2009 in Running A Business • Advice

Because I live in America, land of ridiculous lawsuits, it’s probably best to start off this entry by saying that I’m not a lawyer and you shouldn’t go around making wild decisions based on my advice and then try to sue me if it doesn’t work out.  That’s just rude.  Now, moving on.

When I decided to start my business, I was totally clueless about what I had to do.  After I finally figured it out, I decided to review all the different government agencies and create a list on Yelp.  This was less about actually reviewing the agencies and more about helping people figure out what the heck to do!

Unfortunately the process varies by what city and state you’re in, so this likely will not be exceedingly helpful to the majority of you (unless you happen to live in an unincorporated area of Alameda County, California!).  The point, though, is to start you on the right track.  There’s a certain order to these things.

First, you have to decide what kind of business you want to own.  I decided to go with a Sole Proprietorship for now.  This makes things very simple.  A sole proprietorship means you and your business are one and the same, tax-wise.  Your business’ income = your income.  To start a sole proprietorship, here’s what I had to do:

1. Register my business name with the county by filing my fictitious business name (also known as “doing business as” or “DBA”).  I did this at the County Recorder’s Office, and it cost me $29.
2. In order to have a valid fictitious business name, you have to run your business name in a newspaper for four weeks.  Obviously, this is a pretty common practice, so your newspaper people should be familiar with it and probably have a special rate for running the announcement.  The people at the Oakland Tribune charge $60 to do this and they try to convince people that they are the only valid newspaper to run such an announcement.  LIARS. Ask the people at the Recorder’s office for a local, inexpensive paper to run your announcement.  For me, it was the Inter-City Express.  No one’s ever heard of it, but who cares?  It’s legal, and it only cost me $35 compared to the $60 the Tribune charges.
3. Next, you can get your business license.  I had to visit the Tax Collector’s Office for this.  It was really easy and kind of boring.  You have to wait six weeks to get a copy of the license, and when you get it, double-check it for typos.  When I first got mine, my business name was “Stinker Pants Desgigns” and my emergency contact was someone named Yorken.  Seriously.  How hard is it to type in some information?  Apparently pretty difficult.
4. If you need one, you can get a Seller’s Permit.  I needed one in order to open wholesale accounts with envelope distributors and get my printing done without paying tax to the printer. I went to the State Board of Equalization for this. And it was free.
5. Once you get your business license in the mail, you can set up your business checking account.  If you want to cash checks addressed to your business name, you will need to do this.  Plus, you just should.  You’re supposed to keep your personal accounts and your business accounts separate.

If you’re looking to start your own business, I highly recommend buying (or checking out from your library) books by Nolo.  I bought the Small Business Start-Up Kit for California and highly recommend it.  Obviously you might want to look into a different title if you’re not in California.  :)

The Financial Learning Curve

January 15, 2009 in Running A Business • Running Stinkerpants

Yesterday I had an appointment with my local SCORE counselor.  Why?  Because I had some questions that were actually kind of stupid (as it turned out).

First off, I have to begin by saying that this whole running-my-own-business thing is kind of like wading through muddy water.  I have no idea what the heck I’m doing.  Not a clue.  Everything is learn-as-I-go, even given the fact that I am a World Class Googler.  I can’t find the answers to the majority of my questions, and there’s no real guide book for these things.  This is even more true when it comes to financial stuff.  Let’s just say I’ve never been good with numbers.

For the past year, I’ve been diligently saving all of my receipts and making photo copies of all of the checks I collect.  I have no idea why I’m doing this–I only know that I’m supposed to do it.  A few months ago, I realized that I really needed to ask someone what the hell to do with all my stuff, and I should probably stop using Quicken for my accounting and move over to Quickbooks (in other news, why on Earth is Quickbooks for Mac so much more expensive than Quickbooks for PC?!  Not cool.).

Anyway, so I decided to contact my local Small Business Administration office to see if I could talk to someone about managing a small business.  They recommended calling SCORE.  My main questions for Tom (my SCORE counselor) were:

1. How do I know where to find a good accountant?  No one I know uses an accountant I can afford.  Also, I am cheap (I didn’t tell him that part).
2. Washington Mutual set up two different business checking accounts for me.  One is for “Income” and the other is for “Expenses.”  They claimed that this would make my taxes easier to file, but it is a royal pain in the ass.  See, they told me to make all of my deposits into the “Income” checking account–then transfer money into the Expense account for each withdrawal I make from the Expense account (sorry if this isn’t making any sense).  Basically, each time I make a purchase with my Expense account, I have to immediately transfer money to cover it from my Income account.  The first time I had an overdraft was because a company charged me more for shipping than they said they would.  I thought, “this might not work out so great.”  The second time, the transaction went through so quickly that I didn’t have a CHANCE to transfer the money.  Is this method really going to make managing my taxes that much easier?!  Because it’s a royal pain in my behind right now and it’s cost me $66.
3. How do I know how much money to set aside for taxes?
4. How do I know when it’s okay to pay myself?  That is, how much money is my income?

As it turns out, the answers to these questions were totally common sense and I was making it way harder than it needed to be.  First off, Tom told me to call around to different accountants and talk to them on the phone.  See how much they charge and if they seem cool.  He told me that he could see the benefit of WAMU’s idea, but if it didn’t make sense to me, change it around so it suits my style.  Then he told me to get Quickbooks.  Apparently if I were properly keeping track of my expenses, it would be easier to figure out how much money is my income and how much I need to set aside.

Here’s what I’ve decided to do:

1. Find a good accountant by calling around to various places (I have a list.  Turns out I do know people with accountants!). The accountant will be able to tell me which purchases are tax deductable (and what exactly that means), whether I’m managing my accounts correctly, and how much money I can expect to pay in taxes.  But first, get my accounts in order.
2. Screw WAMU and their weird idea.  I changed my accounts.  I will now have one main business account and one “reserve” business account.  I will put 35% of all my income and all the money I charge to clients in sales tax into this account to prepare for taxes.  As Tom said, this will have a learning curve.  35% might be too little, or it might be too much.  I’ll have to figure that out as time passes.
3. Get Quickbooks.  I’m working on that now, and it’s not easy.  Here’s a tip: start using Quickbooks in the very beginning of your business.  It will save you a lot of hassle down the line!
4. Sign up for a class through SCORE on Starting and Managing a Small Business.  Hey, it couldn’t hurt!

From everything I’ve read, it’s really highly recommended to have a business plan.  I don’t have anything written out.  I’ve written a business plan before, and it was a lot of work.  I have goals written down–long term, monthly and weekly, but I haven’t done the business plan.  Maybe I should just get off my butt and do it.

Who here has their own business or is in the process of starting one?  Come out from the shadows and share how you’re managing your finances and whether or not you have a business plan!