Business Start-upC H E C K L I S T

IT TAKES A LOT OF PASSION TO START A BUSINESS.We trust you have that part covered.What about the rest? Before you ramp up manufacturing your unique product or start

satisfying your customers, you need to think about the businessey stuff:

• What’s the best legal structure?

• What kind of bank account do you need?

• What bookkeeping system will you use?

• How will you hire and pay employees?

• Do you have all the necessary licenses, permits, and insurance coverages required by your

city, county, and state?

• Will you be prepared when it comes time to borrow money or launch a funding round?

Don’t panic.We’ve got you covered with a checklist of all the big and small decisions you need to make as

you launch your business.

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Many people think of a business plan as something they need to put together to borrow money

or raise investment funds. However, it’s much more than that. According to Entrepreneur:

"It's a tool for understanding how your business is put together. You can use it to monitor progress, hold yourself accountable and control the business's fate. And of course, it's a sales and recruiting tool for courting key employees or future investors."

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Writing your business plan helps you to think through all the large and small decisions you

need to make, as well as how those decisions impact each other. A business plan consists of

the following components:

• Executive summary: give a brief and

enticing snapshot of your business

• Company description: describe what

you do and who you are

• Market analysis: compile research on

your industry, market, and competitors

• Organization and management:

explain your business and management

structure

• Service or product: detail the products

or services you’re offering

• Marketing and sales: show how you’ll

market your business and plan your

sales strategy

• Funding request: map out the amount

of money your business will need for

the next 3 to 5 years

• Financial projections: supply informa-

tion like balance sheets and forecast

future revenues and expenses

• Appendix: optionally, include

additional background information, such

as résumés of key players and required

permits

The marketing plan section of the business plan explains how you're going to get your

customers to buy your products and/or services. The marketing plan, then, will include

sections detailing your:

• Products and/or services

• Unique selling proposition

• Pricing strategy

• Sales/distribution plan

• Advertising and promotions plan

WRITE A BUSINESS PLAN AND CREATE A MARKETING STRATEGY.

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You put a lot of effort into coming up with a company name that’s creative,

descriptive, compelling, and not in use by any other company. But what

about those three little letters that come after your name?

Many founders make the mistake of rushing through the legal structure just

to get it done, and then later realize they chose the wrong entity type or

provided incorrect information. Here’s a quick rundown on what you should

think through before checking any boxes or signing off on a decision.

2IDENTIFY THE APPROPRIATE LEGAL STRUCTURE.

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Sole proprietorships, partnerships, LLCs, and S-corps are

all considered flow-through entities for tax purposes. That

simply means that the company’s income is reported on

the owner’s individual tax return, or shareholders’ returns

in the case of an S-corp. Corporations are separate taxable

entities that pay taxes based on their net income each year.

Which one is right for you? Choosing your legal structure

isn’t something you should take lightly. Talk with your CPA

and/or attorney about your long-term business plans to

make sure you choose the right formation.

When it comes to legal structure, you have five basic options:

Business legal structure definitions taken from entrepreneur.com/encyclopedia

Sole ProprietorshipNot actually a formal legal

entity, a sole proprietorship is

a simple business form with

one owner who is person-

ally responsible for all debts

associated with the business.

Income and losses are

reported on the individual’s

personal income tax return.

PartnershipA legal term referring to a

business operation in which

two or more individuals

share management respon-

sibilities, profits, and debts.

There are a number of

different types of partner-

ships you may hear about,

but the most common are

general and limited.

Limited Liability Company (LLC)Business owners operate like

a traditional partnership in

that they share management

responsibilities and profits,

but their personal assets are

protected from liability for

business debts.

CorporationThe corporation is a

separate entity from the

founders or owners and

generally has most of the

legal rights enjoyed by an

individual. Upon formation, a

corporation must distribute

common stock and elect a

board of directors.

S-corporationSimilar to a corporation,

an S-corp offers some tax

benefits advantageous to

smaller businesses and

also protects owners from

liability.

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If you’ve chosen anything other than a sole proprietorship for your

legal structure, you need to obtain an Employer Identification Number

(EIN) from the IRS. You’ll use this number for tax filing and reporting

purposes. Sole proprietors simply use their social security numbers

instead of an EIN.

You can apply for your EIN quickly and easily on irs.gov. The very first

question the application will ask is for your legal structure, so make

sure you’ve selected the appropriate structure before getting started

on your EIN. The good news is that the process is quick and painless,

and you’ll receive your EIN almost instantly if you apply online.

OBTAIN YOUR FEDERAL EMPLOYER IDENTIFICATION NUMBER.

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Many business owners get started using a personal account for

business purposes. This is one of the biggest, most time-consuming

mistakes we see new business owners making every day.

A separate business bank account ensures that income and expenses

have clear classifications. Your business should have its own checking

account and credit card. While it’s fine to use the same bank you use

for personal business, don’t be tempted to commingle your funds.

Doing so voids the liability protection offered by setting up a separate

legal entity and subjects your personal assets to any business litiga-

tion. It indicates to the courts that you did not intend to separate your

business life from your personal life.

At a minimum, a new business owner should consider using a separate

card (even if it’s in your personal name) for business transactions only.

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OPEN A BUSINESS BANK ACCOUNT.

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You may be tempted to use Excel spread-

sheets or even paper books when you’re

starting out. Sure, it’s a way to keep track

of your numbers, but there is a whole lot

of room for error when you’re doing every-

thing manually. You will also lack real-time

business insights when you’re simply

looking at raw data in a spreadsheet.

Starting off with the right accounting

software will save you lots of hard work

and potential headaches in the long run.

There are two basic options today when it

comes to selecting bookkeeping software:

desktop or cloud? Most business owners

today need to be able to access their

bookkeeping information from anywhere

and collaborate with their accountant

online, which is why cloud accounting is

quickly becoming the most popular option.

We recommend Xero’s cloud accounting

software to all new business owners.

You, your team, and your accountant

can collaborate on real-time information

from anywhere. The easy-to-use mobile

app means you don’t even need to have

your computer with you. Time-consuming

accounting tasks can be automated, and

modular add-ons allow you to build in new

features as your business grows. Most

importantly, Xero’s encryption protects

your data with multiple layers of security.

No one can access your data without you

inviting them into the system.

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5 ESTABLISH A BOOKKEEPING SYSTEM.

Depending on the type of business you’re starting, you’re going

to need certain legal stamps of approval. Some of these will be

obvious for your trade—if you’re a massage therapist, you already

know you need a massage therapy license. But some are less

obvious. Be sure to fully research your line of business and have

all of this in place. Same goes for insurance. It’s a good idea to

have at least a minimal amount of liability insurance; many lines

of business have much stricter requirements. Look into what you

need and get it in place before anyone asks to see proof.

If you’re selling any sort of product, you will be responsible for

collecting sales tax and remitting it to the government. Be sure

you have a plan in place for sales tax at the outset, and don’t

be tempted to hang on to it and pay a lump sum at the end of

the year. This is another way that newer business owners find

themselves in hot water.

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6 RESEARCH AND OBTAIN THE LICENSES AND/OR PERMITS REQUIRED BY YOUR CITY, COUNTY, AND STATE, AS WELL AS BUSINESS INSURANCE.

So many businesses start off with

a very small revenue stream, but

at some point as the business

grows, the owner gets a nasty

surprise at tax time. Did you know

that, as a business owner, you’re

required to make quarterly tax

payments based on the amount

of net revenue you generate?

Don’t wait for the end of the

year to figure this out. Almost

any accounting software can

help you keep track of revenue

and expenses—information that

will be necessary to calculate

what you owe the IRS and your

state government. You can also

find the forms for quarterly tax

payments on irs.gov.

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7 PLAN FOR QUARTERLY TAX PAYMENTS.

If you’re going to hire people, even one person, you need some basic systems

in place to pay them and remain in compliance with government regulations.

• Most states require you to apply for state-regulated unemployment

before you onboard anybody.

• Will you hire employees (paid on a W2) or contractors (paid on a

1099)? It’s critical to know the difference and make the right decision

about how you classify your workers. In general, if you control when

and where people work, they are considered employees. Contractors

dictate when and where they work, pay their own business expenses,

and are generally free to work for multiple clients. If you’re not sure

how to classify your workers, there is a lot of information at irs.gov.

Your CPA or attorney can also help you select the right designation.

• Look at the federal and state minimum wage laws and labor laws to

ensure you’ll be in compliance by paying your employees appropriately.

• Choose a payroll system (we recommend Gusto payroll) that integrates

directly into Xero and has the features your business will need. Even

if you, the owner, are the only person on the payroll, you still need

to account for employment taxes and make sure you’ve selected the

appropriate type of business entity.

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8 DETERMINE WHETHER (AND WHEN) YOU’LL NEED TO HIRE EMPLOYEES.

What goals will you set for your business?

How will you know if you’re successful?

How will you know if you’re on track to hit

your goals? Answering these questions

at the beginning helps you to plan and

make better decisions. Get granular. Your

goals should be specific and measurable.

How many new customers do you need to

acquire each month? What profit margins

are you looking for? What’s the minimum

amount of revenue you need to bring in to

cover expenses? How much do you need

to invest in growth?

These are all areas your accounting system

should help you to track. You should be

able to see, at a glance, how your business

is doing and drill into any areas that merit

further analysis. Keeping your books clean

and up to date positions you for long-term

business success. You’ll also be ready to

produce financial statements in the event

that you need to take out a business loan

or raise funds from investors.

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9 DETERMINE YOUR MEASURES OF BUSINESS SUCCESS.

Starting your own business can be a lot of fun, and putting in the right

accounting processes at the beginning will help you devote more time

to the things that made you want to start a business in the first place.

We can help! We offer custom cloud accounting solutions that simplify

your accounting processes, and our cloud advisors give you real-life

support when you need it. We can advise on everything from setting

up your systems, automating processes, keeping your books up to

date, and helping your business grow. Let us focus on your accounting

so you can focus on the things you love.

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Give us a call today to get started:

904-680-7083

info@GCTAccounting.com

GCTAccounting.com

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