You have cleaned out your desk. You have gone to your last employee happy hour and said your goodbyes. You have discovered a way to make money doing what you do best. You are starting your own business! Before you dive in head first pursuing your passion, take some boring steps to eliminate future headaches.
Find a Competent Accountant
Talk to your accountant about structuring your business. Are you okay as a Sole Proprietor or should you form a business entity, such as an LLC or corporation? If you decide to form a business entity, you will need a separate Employer Identification Number (EIN).
It is better to establish your entity sooner rather than later so that you start a banking history under your business entity and EIN for future borrowing needs. Choosing a business entity may give you tax advantages and reduce personal liability, so make sure to talk to that accountant!
Payroll/ Human Resources
Do you expect to hire employees right away? Will you process payroll and handle HR internally or will you outsource it to your accountant or a payroll company? Will you offer direct deposit? What kind of benefits will your business offer? A happy employee is a productive employee!
Determine How Your Business Gets Paid
How will you get paid? Will you receive frequent, smaller payments or will you require a lower volume but higher dollar amount? Cash, checks, debit, and credit cards are appropriate payment devices for the former. You may need to consider other payment vehicles, like wires, if you are expecting to receive low volume and high dollar amounts.
If you accept credit and debit cards, how high of a volume do you expect to process? Will your business be fine utilizing lower-volume processing services, such as Square or PayPal, or will you require a higher volume service?
Choose a Bank
Business accounts charge different types of fees compared to personal checking accounts. Some may not have a monthly service fee, but there may be a low transaction and cash deposit limit. Other accounts charge a monthly fee, but allow for a higher transaction volume.
Estimate your balance, how many checks you plan to write, the amount of debit card purchases, and cash spent. Determine how many checks and the amount of cash that you will be depositing each month.
After completing your estimates, look at the bank’s pricing to make sure it is acceptable. Remember banks charge different fees, so do not just look at one. Find a bank that is going to work with you to help your business grow. Make sure their fees are reasonable and that they truly understand your business. Just because your bank offers quality personal checking accounts does not mean that they provide adequate business accounts.
By the way, we know of a great business bank. Give us a call!
By taking these few simple steps when you first start your business, you will be in a better position to capitalize on opportunities to grow your business and maximize earnings in the future. You may also reduce liability and tax expenses by making sure that you understand the accounting and HR side of running your business. Make sure that you know your anticipated banking activity ahead of time.