I’m a checklist person.
For some reason, the thought of a blank notebook page is like a fresh start on life – a new opportunity to get it all down, and get it all done. I get to my desk in the morning, create a list, feel organized and look forward to checking each item off.
Given the big, never-ending goals and tasks for my business, this small, compartmentalized action is just enough to remind me that things are happening and I am making progress, even if it sometimes feels like a tiny drop in a vast sea.
So, when my partner and I started our online business last year, we created a checklist: setting up our LLC, getting tax ID numbers, launching a website, etc.
However, in all of our excitement, there were things we did not do. Like find a comprehensive list of all county and state forms that had to be filed and fees to be paid.
I was so focused on the fact that we worked from anywhere, had no employees and our audience was global, that I never considered myself a local business directly accountable to a city, county or state. Unfortunately, the government did.
Around the end of January I began to focus on taxes because I had a nagging feeling there were business issues I wasn’t aware of. To ensure I got off on the right foot, I found an accountant who focuses on small businesses and sent him everything.
Soon enough, emails came pouring in. Did you submit your Schedule K-1? Did you send out your 1099-Misc forms? What is your state account number?
My façade of organization came crumbling down.
In short order I became familiar with the local IRS office and City Hall where I bounced back and forth between floors filling out forms, getting permits, paying fees. Despite being about a year late with some of these things, my taxes were done in time and I’m happy to report we’re in good standing.
However, never has it become more fully apparent to me the number of hoops one has to jump through to start a business that doesn’t even have real walls. And I know more hoops still loom out there somewhere. No matter how well prepared we try to be, there will be surprises. But my goal is to minimize them as much as possible.
My mantra must be, “I don’t know what I don’t know – but someone else does.”
For example, I know from other startups I’ve worked with that there are many other considerations once you take funding or sell your company. The structure of your company may make sense now, but it might need to change as your company evolves. This is an area where continual learning is critical.
The stakes are too high not to ask questions (of experienced people) at every stage.
If you are considering starting a business, save yourself a lot of stress down the road and ask a lot of questions up front.
Use resources like the Arlington Economic Development site – this is specific to my town, but you’ll find similar sites for your own area. And here’s a very quick checklist of the types of things you’ll need to look into – you may have more or fewer items based on your type of business and location:
- Zoning: even if you work from home, just you and a laptop, you may need a home occupancy permit. It’s easy, but you have to go apply in person. You need this in order to get your business license. There was no fee.
- File articles of incorporation with the state: this is where we set up our LLC and got an EIN. Annual fee.
- Register Your Trade Name: I did this at the city hall in Arlington. It was a small fee.
- Get your Business License: I also did this at the city hall. You’ll pay a tax based on the type of business it is and gross receipts (which you estimate as a new business – some types of businesses just pay a flat fee). Your tax will be adjusted the next year based on actual gross receipts. This must be renewed annually by March 1st.
- Review the list of state and local taxes that you may be required to pay. Some of them have to be paid monthly or quarterly.
- Talk to an accountant: if you think April 15 is the only tax date you need to be aware of, you’re probably wrong. There are various forms and taxes due at different times of the year once you have your own business. It’s worth learning about and getting organized in advance.
I have some close friends who had a business for several years. They were unbelievably talented at what they did, but never bothered to dig into these tasks.
When they finally visited an accountant who really understood their business, they learned they owed over $50K in back taxes.
That is a serious hole to dig your way out of as a small business – one that will keep you up at night. Today they are out of that debt, doing great and are religious about paying their quarterly taxes.
In the big picture of your business, this may seem like a small but sharp nail hiding in the corner that you try to ignore as long as possible. But the more you learn, understand and prepare, the less stress it will be, leaving you more time and energy to focus on your core business.
- 15 small business tax deductions from Grow Smart Business
- Regular contributor Lori Saitz reminisces on how building one business led to launching another
Image © Jen Consalvo, used with permission.
Guest contributor Jen Consalvo is co-founder of Shiny Heart Ventures, a new technology startup focused on building community driven products that remind people of the joys of life. For almost 14 years, Jen has led teams in a range of product areas such as digital imaging, social platforms and personalization. The majority of her career was at AOL, planning and building products used by millions of people globally. Also find Jen at jenconsalvo.com, bodysoulconnect.com and twitter.com/noreaster.