Every city and state (and country) has different requirements in terms of business ownership. Most banks require you to have a business license and an EIN (employee identification number) to have a business bank account. It is best to find out the rules in your area before proceeding. It’s not usually very expensive to get a business license, usually between 20 and 150 dollars to start out. You’ll need to get a new one each year to be legal and legitimate.
Apply for a Business License
Most times there are no issues regarding being approved for a business license regardless if you own your home or rent an apartment. If you do not keep inventory in your home, and people do not come to your home to do business, the zoning for home business is a lot more lenient than typical bricks and mortar businesses — so don’t be concerned if you have to fill out forms regarding zoning.
Do read your home owners’ association bylaws to be sure that there won’t be an issue, as well as ask your apartment manager before proceeding so that you won’t be disappointed if they say no.
Get an Employer Identification Number (EIN)
An EIN is very simple to get, and it’s free. Don’t be confused by the title of the EIN. The Employment Identification Number doesn’t really mean you hire other people, but it does identify you as a legitimate business to the IRS and to others who do business with you such as banks, your state, city and county licensing authority, and other businesses. You’ll have to provide that number to your payment processor, bank, and in some cases your clients for tax purposes. This is much better than handing out your social security number. It takes less than a minute to get your EIN online. You can do that now by clicking here which will take you to the IRS website. If you live in a different country please check with your taxing authority regarding your needs.
Setting up Proper Record Keeping
The next thing that you need to do is to set up proper record keeping. Most record keeping has to do with the tax authority, but it’s also good to keep records for other reasons. With good record keeping you’ll soon understand how much money you are earning, and whether your business is profitable or not. You’ll also be able to easily identify what works, and what does not work in terms of generating revenue for your business.
Every business is different but in general you’ll need to decide on the following items:
Will you use paper at all or will you have a paperless filing system? If you use paper, and you deal with private information ensure that you have a file cabinet that locks and complies with all relevant laws. If you use digital files only, you will still need to be sure your system is safe and compliant with regulations in your industry. Always ask about security when it comes to your data that is stored online.
Another consideration is to decide what type of person you are when it comes to keeping records. There is no use trying to go outside of your own comfort zone. If you are a paper person assume you’ll print records and have paper files. Do what works best for you so that the information you need is always at your fingertips.
Do you know how you’re going to keep track of your financial inflow and outflow? Will you use bookkeeping software, a paper ledger or a combination of the two? What type of system will work best for you? Today, there are all kinds of systems online that enable most of your bookkeeping needs to be automated.
With a combination of software like Outright or QuickBooks and a payment processing service like PayPal, you will hardly need to do any data entry at all. Plus, as of the writing of this report, if you only accept payments via third party payment system like PayPal, outside of some professionals such as accountant and lawyer, no one needs to send you a 1099, and everything will be kept in one location.
Most services businesses run on a cash basis. This means that money is realized and booked the moment it is received, and money is realized or booked the moment it is spent. This is the simplest method and as a sole proprietor or an LLC, with no inventory, this is the method that will work best for your needs. Don’t complicate things that don’t need to be complicated.