Chapter 7 – Should I incorporate?
Many questions people frequently ask about starting a business are rooted in some aspect of incorporating.
There isn’t a formula or an algorithm for it (yet), so I think it’s wise for everyone to look into it. Incorporating can be expensive, but it can also protect you. Know what it is, and what it does, before making a decision.
For some answers, start at the U.S. Small Business Administration’s List of Top Ten Questions.
Other related questions I often hear include:
How do I choose a name for my business?
The creative process aside, the decision to incorporate becomes a factor when selecting a name for your business. The name you choose must be available. Do your own research by simply Googling it. Then check with one of the online domain registries to see if the .com version of it is available. If not, it may be best to keep looking.
For those of you that have already trademarked a name for a product you’re planning on selling, something such as “Carla’s Cookies”, know that trademark laws vary from state to state, even from federal to state, so this usually means multiple filings to register the business. The trademark is not the business.
Assumptions can be expensive.
One of my overall recommendations is that every business’ first-hire to be a licensed accountant. Please don’t be among the many that seem to think you need to be making a ton of money to need an accountant. You need one as soon as you can pay one. Generally speaking, it may be the best investment you make.
How do I find an accountant?
The best way to find one is through referrals. Ask around on some of your social networks and always double-check all referrals. Don’t have any income yet to pay an accountant? Get creative, consider offering to barter with whatever you’re offering.
Good business is your business.
It doesn’t matter if you’re trying to open a creative design studio or sell chocolate chip cookies, plan on spending 2X more time on your financial books than you now think it’s going to take. If you’re a better accountant than anyone you could hire, than you probably should be opening an accounting firm. Don’t mess with your money; get everything lined up from the start.
For those of you that didn’t get everything lined up know that it’s not too late to get some accounting support.
Don’t be intimidated by the language of it all ? it’s there to be as specific as possible when discussing an action.
What 2-3 things should I know if I’ve never run a business before?
- What the difference is between a “P & L” and a balance sheet
A profit and loss statement, or P&L, is a summary of the revenues, costs and expenses of your venture for a specific amount of time ? let’s say the first quarter of the year, or “Q1.” A balance sheet is a statement of assets, liabilities and capital, or equity, at a specific point in time. Assets must equal liabilities (plus equity) to ‘balance out.’
- How to file your taxes correctly.
Did someone a while back recommend an accountant? That’s right, this one’s screaming at you people. How else can I say it, don’t go it alone. If you have nobody, try SCORE, a non-profit that provides mentoring to entrepreneurs.
- Keep records of everything.
I know, you save all your receipts already. Now you need to take it to a new level. You need to take document filing seriously even if it’s something you’re doing digitally. Save everything until your newly hired accountant says you can toss it.
Overall I recommend proper preparation over speed when it comes to establishing the foundation of your enterprise. If you didn’t read it clearly before, let me say it again, get a professional to help you, and don’t rely on the Internet (ahem).
Next time, let’s speed thing up and discuss “marketing-in-a-hurry.”
Catch up with:
Part 1 – Launching You, Inc.
Part 2 – Get Direction
Part 3 – Is Your Idea Any Good?
Part 4 – Should I Have Them Sign an NDA
Part 5 – Make a Practical Business Plan
Part 6 – How Do You Know If Your Business Idea Stinks?
Jason Veduccio, author of The New American Dreamer: How to Land That Ideal Job in a Nightmare Economy is a hard-working entrepreneur following his dreams, and he wants you to dream, too. Drawing on his experiences working with companies on marketing, technology, hiring, and workplace issues, his regular column will demystify the job search process and identify strategies for moving up the corporate ladder. Founder of In1Concepts, Jason also knows the ins and outs of launching a new business. He welcomes your questions and can be reached at firstname.lastname@example.org.
Top photo: Bigstock