The lightbulb finally went off and you’ve GOT IT- you're ready to finally start your digital agency! Before you take a cannonball into the deep waters of owning and operating a business, dip your toes in first to ensure that the best foundation is laid for your business venture, then create a splash!
As creatives, digital media gurus and motivated individuals, the small yet, essential steps to set up a business can be easily overlooked in the mounting excitement to hit the ground running. Grab your coffee, take a sip and get ready to learn how to formally set up your United States based business in three simple steps.
What we're going to cover:
- Select the proper structure to operate the business under
- Financially support your big idea
- Formulate your A.B.I.L.I.T.Y. team.
STEP 1. Choosing a Business Structure
To kick it off, let’s determine how to select the proper structure to operate the business under. When deciding how to set up your business, it’s as simple as this- where do you want your liability to lie? It’s important to ensure your business is set up as a legal entity. Let’s break the main structure types down now:
- LLC- The most common business structure offers limited liability through establishing a legal entity. This structure protects and separates your personal assets from business dealings.
- C Corp/S Corp- These structure types are most commonly used in large, corporate settings and involve shares and partnerships in which many people are involved.
- Sole Proprietorship- If you start a business and don't take steps to file for a specific business structure, you are considered a sole proprietor. Although it would appear to be the simplest business structure, this doesn’t deem your business as a legal entity.What that means is that you are personally liable for actions taken against your company. Think of it like walking outside without shoes; even if you think the path is clear there is a chance your feet could get hurt or damaged during the walk.
How to Obtain an LLC
Since formulating an LLC is the most common way to set up a business, it’s also fairly user and budget friendly. You can file an LLC yourself simply by:
- Completing state specific paperwork through the Secretary of State office for selected structure (US specific)
- Effectively registering everything business related under your new Federal Tax ID # (also known as EIN)
- Obtain necessary licensing per your business objectives. (Think tobacco, liquor, etc.)
Now before we go onto the next step, it’s important to note that although we know we’re super business savvy, we are not lawyers offering you legal advice. Because the ins and outs of each business model vary, we recommend you consult with an actual lawyer (see part 3 regarding your A.B.I.L.I.T.Y. team) to be fully confident in your council and structure set up. Sound good? Okay, great! Now let’s move onto the fun stuff, and that’s money, money, moneyyy.
STEP 2. Setting Up Your Finances Properly
Money makes the world go round! With that simple fact in mind, financing your big idea comes in at the top of the to do list. It's never a good idea to mix your personal and business finances. It's important to ensure that your banking, budget and books are all in order to avoid expensive headaches down the road! Here’s how to do just that:
- Choose a Bank – Use your EIN to set up a business checking account. Make sure to do this BEFORE you spend any money earned from your business. Once you have this account in place, all business income and expenses need to go through this account solely. (If you plan to use PayPal to accept funds in your business, make sure to setup a business PayPal account. Since it functions similarly to a bank account, make sure that income is reported to your accountant.)
- Set a Budget – Online budgeting tools such as You Need a Budget help implement a business budget with a step by step guide focused on controlling cash flow, while planning for the future. In looking to the future, it’s also imperative to track the present, especially when it comes to operating your business. This is an extremely important part of the foundation for a successful business for years to come.
- Setup a Bookkeeping System – Receipts, bills and anything that falls under the “cost of doing business” needs to be accounted for on an ongoing process, especially come tax time. In our experience, the most effective tools for keeping up with all things money includes; Quickbooks for accounting, Expensify for receipts and Benefitmall for payroll. (*Note: Benefitmall is for those agencies that already have employees on staff and is not needed to get started.)
With business banking, budgeting and bookkeeping in your back pocket, you’re ready to grow. Next, let's talk about the best team you can put in place, to get started off on the right foot.
STEP 3. Choosing Your A.B.I.L.I.T.Y.
As the saying goes, “it takes a village.” Successful agency owners build an amazing squad around their business and what we refer to as an A.B.I.L.I.T.Y. team. This special team consists of an accountant, banker, insurance agent and lawyer. We’ve already referenced this team more than once throughout this post which further highlights their importance and the integral role they’ll play to guide and protect your business.
So who can help with what and when? Let’s break it down:
- Accountant- Contacting an accountant when setting up your business structure as this will determine your tax set up, tax benefits and recognition of specific tax laws (such as doing business across state lines). They will also be your saving grace during tax season, trust us on this.
- Banker- Having a relationship with your banker is an asset that many people overlook early on. Reach out to your banker first and foremost to discuss your individualized needs. Powered by this knowledge, your banker will lead in assisting you with which accounts to set up, help secure financing options if need be, and recognize as your banking needs change with growth.
- Insurance Agent- There are countless types of insurance one can acquire. Maneuver those waters with a strategic insurance agent that knows what you’re trying to accomplish through your business. Simple factors like operating only online or through a brick and mortar will determine necessary coverage. Your insurance agent will protect your business not only during set up, but also as you acquire new assets, and hire full-time staff members (to name a few).
How to Find Your A.B.I.L.I.T.Y. Team
Now that you’re equipped with the checklist of who can help with what, where to find this dream team is the next hurdle. Here's a few tips for acquiring the best possible team for your agency:
- Word of Mouth (or Keystroke): Referrals and recommendations from other business owners in your area are a good place to start. Also, we love the digital world and suggest searching online based on your specific business plan to select those that may suit you best.
- Chat and Choose: Once you’ve conducted this research, rally collaborative candidates and meet in person. Your A.B.I.L.I.T.Y. team will need to communicate with one another or a fairly consistent basis so feel them out and select those that you are confident will work well together. If you are hiring remote workers or virtual assistants (which is super common in the digital world we live in), still take the time to meet virtually via Skype, Zoom or another video platform of your choice.
- Build Relationships: It’s no surprise that business relationships are indispensable so therefore it’s vital to form and foster those relationships as your business grows. Thank your A.B.I.L.I.T.Y. team when they help you, wish them a happy birthday and rest assured your business is in good hands from the start. What a breath of fresh air that is!
As Benjamin Franklin said, “failing to plan is planning to fail.” Although these steps possess the vanilla side of business implementation: proper structure set up, financial management and a great team are integral components for business success. Now, climb that ladder to the high dive and make waves in your new venture!
If you’re looking to connect with a similar community of digital-savvy go getters (as we suspect you are if you’re reading this post), you’ve got to join Closer’s Cafe! It’s chock full of eager, community-minded collaborators gathering to share business questions, insights and success stories! We’ll see you over there.