How I set up my business to get ready to do business

In the post, I am going to tell you how I did the few necessary steps to set up my business.  I had an mentioned in an earlier post, I had used the free resources of a Small Business Development Center to help me come up with a business plan and get started on a side hustle.  I didn’t ever start that original business but I learned how to set up a business in my state (California). FYI- Small Business Development Centers (SBDCs) are funded by the government and offer free business consulting to anyone who wants to open a small business.  It’s the best kept business secret out there.

When I was thinking about starting the propane delivery business (that I never started), I had 2 meetings with my SBDC consultant, Clyde, and he really helped me think through details such as what I needed to do to form a company (each state is different), set up a bank account, what taxes I’d need to pay etc.  I laugh in hindsight because my first meeting with him, I took my parents who were in town and the second meeting, I took my 11 year old son because I thought he might help me open a business and I wanted to have him see what a real business meeting is like.

As a working parent, I dress up and go to customer meetings all the time so I thought it would be good to let him see what working life is like.  I pulled my son out of school early and he wore khaki pants, a jacket and a tie and he was very mature and focused at the meeting. I didn’t feel like I needed to go again to the SBCD when I started my websites/blogging but I knew the free help was there if I needed it. It’s an amazing resource that not many people take advantage of. Find one near you at: https://americassbdc.org/small-business-consulting-and-training/find-your-sbdc/  

At this point in October 2018, I didn’t have a real business in mind but I had started my The Ordinary Parent Facebook Group and I knew I wanted to do several side hustles under the name of The Ordinary Mom.  I had already bought the www.theordinarymom.com URL.   See how I did that in this post:

I realized that I needed to stop putting things on my personal credit card and get a business name, business account, business credit card.  

Here are the 4 things I did to get up and running:

  1. Got an EIN from the IRS (you need to this to open a business account).  It’s free- got to:
  1. Went to www.nolo.com and paid to have them set up an LLC.  It cost $174 to do for California.
  2. I added the upsell of having Nolo’s 3rd party partner, V Corp, by my Registered Agent for my LLC.  That was a bit of an extravagance for an additional $149 but they would be the ones to keep on top of when I needed to make payments to whom etc.  I despise keeping track of making tax payments etc so I paid it for my piece of mind. I got the papers via email ~1 month later (I may have delayed the process because they have an online portal to pay taxes, their bills etc. and I didn’t figure out for a few weeks that I had to log in and pay for their annual service)
  3. When I got emails with my EIN number (was pretty much instantaneous) I went to my current bank and opened a business checking account and a business credit card.  I have said this in prior posts but I had a good business year in 2018 with my regular job so I put $2,000 aside to start my side hustle(s).

This allowed me to start tracking everything as business expenses.  In a perfect world, I would have done this first but this is a journey and I hadn’t been ready until this point.  One thing to note is that I set up my business, checking account etc. as The Ordinary Parent Community LLC because my Facebook group with that name was the only thing I had happening at the time I set everything up.  

Hindsight is 20/20 and now I am going back and changing everything to The Ordinary Mom and paying some fees but I’m cleaning things up to make my brand, company etc. all The Ordinary Mom.

I am going to include some of my notes from my SBDC meetings to review but please remember that I am not certified to give legal or business advice, I am just passing on my learnings.  Also, I can’t remember what Clyde’s qualifications at the SBDC were so, again, just use these as guidelines and not legally binding advice.

Notes from my 2 SBDC meetings (I took out the personal details and am leaving in the general notes/advice):

The 4 big things you need to think about to start a business:

  • Name
    • Either surname or
    • Fictitious
  • Legal structure
    • Who will be the owners
      • Single
      • Multiple
  • Licensing
  • Insurance
    • Important
      • Not a question of it you will get sued but when.  California is a “sue you” state.

Name:

  • Pick either something descriptive to the business, meaningful to you, or something simple if it’s not customer facing (i.e You Name LLC)

Legal structure:

  • LLC
    • Single or multiple partnership
    • It is fairly new in the US.  Wyoming was the first state to do it in 1978.
    • You need to register in California, not another state.  If you are not registered in California, you are operating illegally.
    • Provides asset protection
    • Corporation have to file bi-laws; you don’t have to with an LLC but it’s a good idea to do that and keep minutes of meetings
  • Sole proprietorship
  • Multiple Partnership
    • Any partnership is equally responsible unless limited partnership.  Limited partnership invests and is a silent partner- only responsible for what they put in.  
  • Limited Liability Company (LLP)
    • Only for professionals (i.e. doctors, nurses lawyers etc.)
    • If a professional, you cannot be a LLC in California, you must be a LLP.

If personal asset protection is important, do an LLC or a Corporation

  •     Corporations
    • Have to form it legally and need:
      • Bylaws
      • Board of Directors
      • Officers
      • Meetings
      • Minutes
      • Stock

If someone says you don’t get asset protection in an LLC, that’s not true.  

  • LLC bad news
    • More expensive
      • Minimum annual corporate tax (fee)- $800
      • Articles of Organization- $70
      • Within 90 days of Articles of Organization, you need a Statement of Organization- $20
      • Can do all this within ~3 weeks of starting the business

Timing:

  • LLC first
  • Business bank account
  • Everything is tied to the date we receive when we get the Articles of Organization

If you ever hear the term disregarded entity, it means a Sole Proprietorship.  

There are 2 certainties in life:

  • Death
  • Taxes

Revenue= sales

Cost= expenses

Net is what you pay in taxes.

Gross= revenue of sales

Net= revenie of sales minus cost of expenses

LLC has 4 tax elections

  • Sole proprietorships
  • Partnership
  • Sub Chapter C
  • Sub Chapter S
    • We should wait until we have ~$20k+ in net to consider either the Sub Chapter C or Sub Chapter S
    • With in the first 10 weeks of formation, we’ll have to say if we want to be a Sub Chapter.  Say no the first year but we can change it in future years.
    • We will want to do a LLC-1
  • No more than 90 days after the Articles of Organization date, we have to file an LLC-12.  If not, there will be penalties.
  • Then we file it bi-annually i.e. if we formed it 5/17, we’ll have to file another one on 5/19.

Bi-annually= every other year

Semi-annually= twice a year

New:

12NC

  • No change form.  Used to be a box to check on the LLC-12 but now have to file it separately.
  • This is if there has not been a change since the LLC-12
  • For a multiple member LLC (like we’ll have), the LLC-12 only has room for 1 member, so you have to file a LLC-12A too to add other members (owners)

Need EIN number.  We have to have one for an LLC.  It is free but they don’t transfer it if you change your business type so you would have to apply for a new one.   You can get EIN online.

LLC-1

  • You need to appoint an Agent for Service.  Sometimes this is an attorney or a CPA. This is what people pay Legal Zoom $1,100 for.  You don’t need to do that. Just be your own and don’t pay anyone to do this. They basically want a place to serve papers during business hours. Make it your home address.
  • You’’ll need to say how it is going to be run.  The options are:
    • Manager
    • More than one manager
    • Member(s)

We need to check the 3rd box (member).

In California you need to pay the State Francise Tax board $800/year form 3522

Taxes:

Due 15th day of the 4th month of the file date on the Articles of Organization.  i.e. if we got the Articles back and they had 5/25/17 on it, our $800 would be due on 9/15.  After the initial year, it would be due at tax time. Don’t send them in November or December or you’ll have to immediately pay taxes (i.e. if your Articles of Organization date is 12/5, you would owe the first $800 by 4/15 and then again on 4/15 because of taxes).

Keep track of everything!

  • Business mileage ($.53/mile)
  • Receipts

Name:

  • Business name
    • No one can have the same name in the county.
  • LLC or Corporation
    • No one can have the same name in the state.
  • Domain name
    • There is one data base that companies have to buy it from.
    • He said GoDaddy is probably the most popular.  FYI- GoDaddy has always struck me as a weird and sexist name so I ended up going with WordPress at  https://wordpress.com/alp/?aff=13401&cid=2093430 (fyi- this is an affiliate link so I might get paid if you sign up)

Hope you got at least one nugget of information from this post to use to help you on your journey.  

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