A step-by-step report of how I formed my business. I began my journey with no knowledge of how to start a business, but I went for it anyway. My success story is proof that you should never let anything, especially paperwork, get in the way of your dreams.
If terms like sole proprietorship, LLC and S corp are scary and confusing, my advice is to find a Certified Public Accountant, or CPA. Don’t do what I did and spend weeks digging through information on outdated, badly designed government sites only to develop a terrible case of anxiety. I’m all for DIY, but in this case it’s not worth the stress or time.
Start by asking friends, family or even social media for CPA recommendations. Someone usually knows someone. If that approach strikes out, there’s always Google.
When I met with my CPA for the first time I brought a list of questions and a big-picture plan of what I wanted to do with my business (I knew it would be both product- and service-based). We decided that a Single Member LLC was right for me. It made sense for the products I planned on developing, and I liked the fact that I could organize my business to be separate from my personal accounts.
Once I settled on my business structure, I had my lawyer (also a family friend) collect the paperwork I needed to officially become an LLC. Then we mailed it, along with a fee, to my state’s Department of Licensing and Regulatory Affairs.
A few weeks later I received my “Articles of Organization” which included my official LLC business number.
Next, I emailed my official LLC paperwork to my CPA and she helped me apply for an Employer Identification Number (EIN). This number identifies my business entity when I do my taxes instead of using my social security number.
Once my EIN number arrived in the mail, I met with my CPA in person to fill out more paperwork to register my business for Michigan taxes. We also applied for a sales tax license since I’d be selling physical products.
During this time-consuming chain of events, I was busy designing my first product – a travel journal for girls. My local printer discovered that I qualified for tax exemption for my purchases with him. I hadn’t yet received my sales tax license number so printing was on hold until snail mail coughed it up.
The theme for this entire process was hurry up and wait (for the mail).
My path to owning a small business:
• Formed a Single Member LLC
• Registered for an EIN number
• Registered for Michigan taxes
• Registered for a sales tax license
I hope that by sharing my story I didn’t scare you away from starting your own business. I promise, you can do it too. Some structures, like sole proprietorship, are much easier to start. It all depends on your business goals.
Biz-savvy people, any advice, tips or online resources for future small business owners?
Update: I forgot to mention that I also started a business checking and savings account at my local credit union. A few months in I also applied for a credit card (story here) and used that to buy a laptop. I signed up for a business Pay Pal account and linked that to my business email. I use Thunderbird to manage email. Phew!