ACCOUNTING TIPS FOR YOUR BRAND
While my passion is here with Vita, I’m also an accountant, and have been for the past 25 years. I get questions about my accounting background all the time, and I thought it was time to finally bring that part of me here!
Yes it takes more than an idea to create your brand – let’s talk about what that may mean.
Being financially organized and up-to-date is a very important step towards success!
Hopefully my 7 Start-Up Accounting Tips For Entrepreneurs will help you to get started with the right attitude:
1. Have a budget and organize funding
This means you may want to explore budgeting and funding.
Once you have a grasp on all your expenses, start to create a business budget. A budget helps you be aware of the expenses that you have to prepare for. Imagine yourself with zero money and see the options you can explore. I highly recommend to still earn while you build your new brand. Don’t quit your day job just yet.
One of the top items on your checklist for starting your business should be funding. If self-funding isn’t possible, you have several ways to finance your business:
Business credit card
You can finance your business by opening a business credit card account. Though you shouldn’t depend on credit cards due to high interest fees, they can help you make immediate payments.
Small business loan
A small business loan can cover some initial costs of starting a business. Banks offer small business loans, but they can be difficult to get for new business owners (you need to be in business for 6 months or 1 year). Another source for a small business loan is the Small Business Administration’s loan program. These loans offer bank funding that is backed by the SBA. With the SBA’s guarantee, loans are easier to secure.
2. Choose a business structure
Choose your legal business structure wisely. The different types of business structures will affect your tax liabilities, personal protection, and income reporting. You can choose between:
The pros of sole proprietorship include the ease of setup. You are considered the same legal entity as the business. The downside is that if the business can’t cover debts, you are the one who is responsible.
Another easy option is partnerships which are owned by two or more people. When you form a partnership, the owners are the same legal entity as the business. Your personal assets are also at risk here if the business can’t pay. Partnerships use a pass-through tax. Taxes skip the business and are passed onto the owners, so income is only taxed once.
Limited liability companies (LLCs)
An LLC combines aspects of corporations and partnerships. Like a corporation, an LLC has limited liability so the owner’s property is protected. And like a partnership, an LLC uses a pass-through tax, so income is only taxed once. Most of entrepreneurs choose this option due to easy set up, benefits when tax filing, and protection of liability.
A corporation is a separate entity from its owners and it offers limited liability. Incorporating a business is the most complex structure to operate as. Income is double-taxed: once at the business level and again on the owners’ compensation.
3. Register your business name
Your business name is the first impression potential customers will get of your company. You need to choose a name that is unique to your business and register it. If you’re creating a personal brand I would highly recommend you use your name. In case of any additions or changes you don’t have to worry about rebranding.
The state you operate in and your business structure determine how you register the name. For example, corporations usually register names when they file documents to form the business. In some situations, you need to file for a DBA. A DBA is a name that is different than the legal name of your company. For example, the legal name of a sole proprietorship is the name of its owner. To operate under a name that is different than your own, you need to register a DBA name. If you think about trademarking your name, consider to wait unless you have the financial resources. It is a very costly process that can wait and you may change your mind about the direction you are choosing.
4. Set up tax accounts
You need to pay taxes on your business’s income. When starting a business as a corporation, partnership, LLC, or you have employees, you need a federal tax ID number. You will use this ID number to file taxes, open business bank accounts, and secure business permits.
If you are a sole proprietor, use your Social Security number for business taxes. You can apply for an EIN through the IRS.
Usually, states also require you to register for a business tax ID number. The state tax ID number is often used for reseller permits and sales tax registration. Check with your state to see if you need a state tax ID number.
If you hire someone you can choose between having them on your team as your employee or independent contractor. There is no additional cost for independent contractor and you’ll issue them Form 1099 if they make more than $600 annually. For the employee, the company withholds income tax, Social Security, and Medicare from wages paid and will file payroll taxes for them monthly or quarterly. Employee works mainly for you, the company has the right to control what, when, and how the worker does the job; independent contractor works on a project basis and has more freedom when and how the job is done.
If you sell items that have a sales tax, you must get a sales tax license to collect and remit sales tax.
5. Get business licenses and permits
Almost every business needs some kind of license or permit to operate. Most small businesses need to register for a basic business license in their city or state. You may also need zoning and land use permits. Your requirements will vary by industry. The SBA (Small Business Administration) provides a list of state licensing regulations.
6. Open business bank accounts
Open separate bank accounts specifically for your business. That way, you keep your business’s finances separate from personal money. This makes the accounting easier and helps you file income taxes. You can deduct business expenses on your tax return. But, you cannot deduct personal expenses. A business bank account organizes business expenses and helps you report them to the government.
A business bank account also helps you check your books for accuracy. Each month you’ll need to reconcile your bank statement with your books. Check that the end balances of the statement and your books match.
7. Hire an accountant and get accounting software
As your new business starts to make transactions, you must keep records. Your financial books are a place for you to review your business’s income and expenses. By keeping your books organized, you can take control of your finances and make smart decisions.
If you hire an accountant, you will not need to worry about managing your books. The accountant will compile financial statements and calculate totals for you. You can hire an in-house bookkeeper or outsource your record keeping tasks. Either way I highly recommend to use accounting software like QuickBooks.
Fun Fact about young creative individuals : According to research compiled by WorkplaceTrends.com and others, 91% of Millennials wish to become leaders. An additional 43% feel they already possess the motivation to inspire leadership interest in others. However, they lack structure and planning.
Millennials are out-of-the-box thinkers. One thing they might not be as great at, however, is the interpersonal element of communication. They lack some of the confidence required to reach out and make personal connections. With that in mind this blog is especially helpful to you, Millennials.
You don’t have to be someone who is facing the the numbers with fear or avoiding it completely. There is a correlation between success and an entrepreneur who takes finances seriously and faces the numbers with joy. You deserve to be paid well for what you do and if you develop a healthy relationship with money you will look at your accounting with joy and excitement!
Start before you are ready but don’t expect to make a full living right away; plan ahead, be realistic, and know there is no overnight success. Most importantly, don’t be afraid to get help.
Online training includes free visualization and workbook.