Are you ready to take that leap of faith and start your own business? Congratulations! You are in good company. Small businesses create a vibrant and strong economy. In Pennsylvania, 2.5 million people are employed by small businesses. The hard work, innovation and creativity of small businesses helps our region and state thrive.
For entrepreneurs, visionaries and go-getters, taking the plunge into small business ownership can be exciting and daunting all at once. There are a number of important things to do before you officially – and sensibly – open for business.
Gift CPAs has prepared this five-step checklist to help you set your business up for success:
1. Choose the Right Business Structure
A business structure is the legal structure of a company. It protects your personal assets as well as enables your business to build credit and apply for loans.
Common business structures include:
- Sole Proprietorship – Ideal for abusiness with a single owner who is personally liable for all debt. It provides limited protection for personal assets.
- Limited Liability Company (LLC) – An option for a small business with one or more owners.It reduces the potential liability you might face from your business.
- S-Corp – Ataxstructure for a company in which the owners are taxed on the income of the entity. It provides strong protection against liability, while still allowing you to avoid the double taxation required at the business and personal level.
- C-Corp – A tax structure for a company in which the owners are taxed separately from the entity. It provides the strongest protection against liability but is subject to double taxation on amounts disbursed to owners.
2. Get An Employer ID Number
The Internal Revenue Services (IRS) assigns and identifies businesses by an employer identification number (EIN) or business tax ID number. Small business owners use this number to file business taxes and apply for business bank accounts, credit and loans. There is no cost to obtain an EIN and you can easily apply online at IRS. In addition, you must also secure a state (EIN) which can be acquired from the Pennsylvania Department of Revenue.
3. Hire an Accountant
Whether you are opening an automotive repair shop or hair salon, you bring a specific and valuable skill set to the table. Now is the time to maximize your talents so your new business can take off. By hiring an accountant, you can save your time and energy to do what you do best for your business. Leave the rest to a trusted accounting partner like Gift CPAs who can offer advice as well as provide services like bookkeeping and tax preparation and planning.
4. Separate Your Business and Personal Finances
Create separate bank accounts for all business expenses and income. Separating your business and personal finances is critically important to ensure your personal assets are protected should you ever face legal business trouble. Separate accounts also enable you to accurately track your business expenses and income for tax purposes as well as easily analyzing accurate financials to help drive your business decisions. Keeping your business records organized is a healthy habit for small business owners to adopt from day one.
5. Establish a Bookkeeping System
Tracking every incoming and outgoing dollar is essential to effectively manage a business. QuickBooks is the most popular small business bookkeeping and accounting software in the United States used by thousands of small businesses. QuickBooks is user-friendly and offers a tiered platform based on desired features and the number of users. Through QuickBooks, you can generate and track invoices, manage your inventory, pay salaries and prepare for tax season. Rather than managing dozens of different record-keeping software tools for your business, QuickBooks combines it all into a single user-friendly platform. The initial setup and installation must be done correctly in order for future information to be accurate. A Gift CPAs expert can help you through all your questions and provide professional QuickBooks training to help you get the most from the platform.
At every step in your small business venture, Gift CPAs can help support your needs. We are here to help small business owners thrive in central Pennsylvania.
Get Connected Today!
Contact Gift CPAs for more information on our full scope of accounting and business services. We have years of experience working with small businesses to help with bookkeeping, taxes and other business needs. Make an appointment to meet virtually or at one of our five locations in Harrisburg, Mechanicsburg, Myerstown, Ephrata or Lancaster!