Andrea Travillian of Take a Smart Step is back to bring more great advice for those want to be entrepreneurs getting ready to take that huge leap of faith. Today we're talking the Top 5 Tips to set up your business financially. Make sure you're protecting yourself, and making the
1. Select a Legal Structure - When you pick a legal structure, every single structure has a different way of how you're going to track your business financially. An LLC will record your finances very differently than an S-Corp.
This is going to be something you definitely want to discuss with your accountant and attorney to really determine what's going to be the best for you.
2. Figure Out Which Software You're Going to Use to Track Your Finances - The one most commonly known is Quickbooks. You can do an online version or you can download it to your computer. The data then is all yours, and on your desktop. Quickbooks is really easy to use, and you don't have to necessarily be an accountant to be able to use it. There are also other options. Google 'Online Business Software' and pick one that's the best for you.
As you get bigger, having a legitimate software system for your business. The earlier you do this the better because transitioning between systems is really difficult. You're also running a business, so make sure you're treating it like a business.
How long should it take to set up your accounting software? It should really only take an hour to set-up. Usually when you start it up, the question box pops up, and it will step you through the set-up. With that being said, there are people out there who will set it up for you. Find a bookkeeper who uses it, and a lot of them will have a start-up package.
3. Open a Separate Checking Account - This is all about setting your business up seriously. Also, when you co-mingle funds, the IRS gets very upset. If the IRS finds you run everything up through one, you'll be open to a business and a personal audit. With that, if you don't have a separate account, and you're running things through your personal account, it's hard to tell if you're profitable or not.
The legal structure of your business will determine what you're going to need to set-up the business account. You will need an EIN depending on what your structure is.
As for banks, the best thing to do is to stick with your small local banks. If you need a lot more services, you might be able to find a regional bank, you just need to do your homework. Find banks near you and go to their websites, to see what they are still offering.
4. Create a Cash Flow Plan - You're going to create a column of all of your expenses and income. You want to be able to quickly visualize where there's a cash flow issue. This is the part that will make you go under before you will become successful. The cash flow will help you manage the ins and outs. Figure out projected expenses and projected money in, and looking to see at what point you may fall behind.
5. Make Sure Your Business is Properly Insured - You can get anything from a general policy to others. First, just look for a regular insurance agents. Some will do both, however, some will just do business and then just personal for others. Most of the agents you'll want to work with are independent. Andrea highly recommends you have insurance for even an online business.
You can also find more information here: http://www.takeasmartstep.com/business-basics-answers/
More About Andrea: Andrea Travillian is a financial coach with a focus on helping you achieve financial independence that is in line with your life and goals.
She has a degree in finance from the University of Iowa and a MBA from Creighton University.
She has worked in banking, corporate finance, taxes, and retirement investing both in the United States and abroad in Australia. Since 2007 she has been working with individuals and micro businesses to help them understand and manage their money.
She is an author of four books, writes at about.com and speaks on topics ranging from basic money management to understanding your start-up business money.
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