Starting Your Own Company: A How-to Guide
When I expressed interest in writing, my seventh-grade language arts teacher told me that I should consider a career in technical writing, especially writing instruction guides. “There’s a lot of money in that,” she said. At 13, I wasn’t thinking about careers, let alone making money. I wanted to be a novelist, not a technical writer . . . whatever that was.
My teacher’s words came back to me recently when I realize that I'd unintentionally followed my teacher's advice at my previous jobs, where in various capacities, I wrote instructional documents, “how-to” guides, and checklists. Some friends and former coworkers recently asked me how I started my company, how I formed an LLC, and what was involved. So I’m turning to instruction guide writing yet again. Introducing: “Starting Your Own Company: A How-to Guide.” (Note: This post is specifically about starting a small consulting or professional services company and does not include content about raising capital.)
This is a lengthy post, because starting your own company is, of course, not a quick process. If you prefer, you can skim the post and find a full list of resources at the end of the post and download an abbreviated checklist.
Before starting a company, you have to know what you’re doing and why you’re doing it. I had countless conversations with various friends, colleagues, and mentors—all of these conversations helped me crystallize what I wanted to do.
I also thought a lot about answering three questions:
What am I good at?
What do I enjoy doing?
What does my community need?
Some of the best advice I received during my self-reflection time was to be narrow in focus: don’t try to do too many things and be willing to say “no.” A narrow focus is really important for building a great company and a strong brand. Focusing on this advice and these questions made me realize that I wanted to start an operational strategy consulting firm.
From here, I spent a good bit of time articulating my brand. I have a document with my brand positioning, my brand mission, vision, and values, brand personality, etc. This is more than enough fodder for another, future blog, but I will share that my brand’s personality is the “Heroic Magician”. I review my brand document on a monthly basis to ensure I’m staying authentic to my brand.
Pro Tip: A great resource about brand personalities is available at: The Brand Solopreneur
Nuts & Bolts
Each state and county has different rules and regulations associated with starting a business (really, this just amounts to a lot of paperwork and fees). The following steps describe my journey to start a Limited Liability Company (LLC) in Wake County, North Carolina. I share what is required and what I decided to do. You’ll see that a common theme is that I like things to be easy and to provide me peace of mind.
This is a resource only. Be sure to research information for your own state and county.
1. Choose Your Business Structure and Name
You can choose from three basic types of business structures:
Sole Proprietorship: This is best for freelancers. You can start working as a sole proprietor under your own name and file taxes as an individual. I know lots of freelance designers, editors, writers, etc., who have been sole proprietors for years.
Limited Liability Company (LLC): The primary benefit of an LLC is that it protects you from liability. You still need to file taxes as an individual, but your personal assets are considered completely separate from your company. This provides financial protection for you if you are sued. An LLC is also a smart choice if you think at any point you will scale beyond yourself—you can fairly easily add a partner or employees with an LLC already in place (not surprisingly, there’s more paperwork to fill out).
Corporation: This is one step beyond a partnership or LLC. A lot more paperwork and financial considerations go along with becoming a corporation. If you’re looking to start a bigger business or sell physical goods, a corporation is a good idea.
If you go the LLC or Corporation route, you’ll need to choose a name for your company. I struggled for weeks to come up with the right name for my company. You can learn why I chose my company name on the homepage of my website. For me, it came in an epiphany, but I found that talking with friends and doing lots of Googling was helpful. When you’re researching names, check to ensure that this name is not taken (for North Carolina, you can check here). You may want to see what website URLs are available for the name, too (you can check that here). You can also select a fictitious or “Doing Business As” name in addition to your LLC, or you can do this if you’re going the sole proprietorship route (see below).
2. File Your Business Structure & Obtain All Operating Documents
Once you’ve decided on your business structure and name, you need to file your articles of organization with the state in which you’re operating. This legally creates your business. For an LLC, you’ll also need to obtain the following:
EIN: An EIN is an Employer Identification Number, which is a unique nine-digit number assigned by the IRS to business entities (Note: You need this to open a business bank account).
Statement of the Organizer: Document that identifies the member(s) of the LLC.
Operating Agreement: Document that outlines ownership and responsibilities of the LLC members.
Banking Resolution: Document that authorizes who can open a bank account for the LLC (Note: Along with your EIN, you’ll need this document to open a business bank account).
A few online services can handle obtaining all of the above items for you (Incfile.com and LegalZoom are two common services). I used Incfile and was very pleased. I went with their “Gold Package,” which included all the above documents, and they took care of filing all necessary information with the state of North Carolina. I also received a registered agent for one year (see more about registered agents below). They also sent me all information in a handy binder with a very official looking seal for my company. I’ll admit that when it arrived in the mail, I welled up with pride and started crying.
My total IncFile cost was $276 ($127 for the NC state filing fee and $149 for the gold package). Considering they took care of everything, this seemed like a fair cost to me. Except for the registered agent, there are no renewal fees.
2a. Optional: Create a DBA
After your LLC is established, you can always add a “Doing Business As” (or DBA). I did this, as I wanted to get my business established right away, but I wanted to take my time forming my brand and name. So my business is technically “Ousterouting LLC DBA Stabilimenta.” I also did this to provide flexibility with the name of my company. Should I ever expand or change in the future, I can keep my LLC and change my DBA.
If you decide to go with a DBA, you MUST register your DBA with the county in which you live (Note: In North Carolina, registering in one county allows you to operate in all counties throughout the state). I registered my DBA with the Wake County Register of Deeds by filling out the form (you can view the form here) and bringing it and my LLC documentation to the Wake County Justice Center in downtown Raleigh. A few minutes (and $26) later, I had a DBA certificate for Stabilimenta. When filing a DBA, remember these three things:
1. You must establish your LLC before filing a DBA.
2. You only need to register a DBA one time (it does not expire).
3. If you plan to use a DBA, you must have your DBA certificate before you open your company bank account.
Pro Tip: If you are a sole proprietor and establish a DBA, ensure that your bank account is also in your DBA name, so that you can cash checks OR ensure that you provide clients with instructions about whom checks should be addressed to. This will help you avoid any issues with cashing your checks.
3. Obtain a Registered Agent
An LLC is required to have a registered agent: a person who has a physical address in the state where you registered your company and can receive legal documents on your behalf. Incfile includes a registered agent for a year with their packages. As an LLC member, you can be your own registered agent, but having a separate agency handle this has advantages:
1. Flexibility: Your LLC must have a registered agent working Monday–Friday 9 AM–5 PM).
2. Privacy: Your personal information/address is not released and any legal action is sent through the registered agent (i.e., if you were to be sued, all paperwork is sent through the registered agent rather than showing up at your home).
3. Peace of Mind: Registered agents ensure you file any legal paperwork with the state to remain in compliance. They also keep backups of all legal documents in case anything happens to them. During Hurricane Florence, I was sure to put my LLC paperwork in a very safe place that would avoid flooding, but it was nice to know that I could easily replace this paperwork.
I renewed my registered agent through Incfile in June 2019 just for peace of mind.
4. Open a Business Bank Account
For all types of business structures, especially an LLC, you will need to keep your company profits and losses separate from your personal bank account. I strongly encourage you to open a business bank account. In addition, I highly recommend opening a savings account and business credit card (and to do so all at the same time). To do this, bring your LLC paperwork (and DBA certificate, if you have one) to a bank branch. A banking associate will walk you through all of the paperwork and details.
Most banks and credit unions have pretty good options for business accounts. I went with Bank of America, because it was easy and convenient for me. I also had used Bank of America in the past, and as far as banking apps go, the Bank of America one isn’t bad. I will say that I am a little frustrated with how they setup their business credit cards but not frustrated enough to switch.
5. Obtain Permits & Licenses
In North Carolina, standard licenses are not required to operate a business. However, you may need a city or county business permit. To find out, I called the Raleigh City Zoning Department: 919-996-2626. They informed me that I needed a home occupation permit, because I primarily work out of my home. I had to fill out and send in an application with $149 to the City of Raleigh (you can view the permit information here).
Unfortunately, the cost on the website says $143, but it’s actually $149. I pointed this out to the City of Raleigh, but the information is still incorrect online as of January 2019. The lesson learned here is that doing things in person is better and faster than through the mail.
6. Obtaining Insurance
I reached out to my insurance agent who handles my home and auto insurance to extend my home liability and cover business property. There was a small increase in my annual fee. It’s always a good idea to check with your insurance agent to see what coverage your business needs.
7. Set up Business Accounting Processes
I signed up for QuickBooks Online (their Simple Start subscription is $20/month) to help me create invoices and track payments and expenses. Although it’s mostly intuitive, QuickBooks Online has a bit of a learning curve. My biggest learning moment has been to make sure that transferring money from one business account to another (e.g., from checking to savings or from checking to pay your credit card bill) appears as a transfer instead of an expense (it will get double counted otherwise).
In addition to QuickBooks, I also keep a spreadsheet for my expenses/expected expenses as well as one for my invoices/forecasted invoices, because:
It keeps my finances in line while I am getting the hang of QuickBooks.
QuickBooks doesn’t do a great job of predicting future expenses/forecasted income.
I am an operational strategy consultant, so I love spreadsheets.
Please email me if you want to use my spreadsheet templates.
Pro Tip: Because you need to keep your company and personal finances separate, to pay yourself (i.e., give yourself a salary), you need to transfer money from your business bank account to your personal account. Categorize this transfer as “owner’s pay” or “owner’s draw.”
Opening a business bank account was exciting, and depositing my first check from a client was even more exciting. Knowing that taxes are going to come out of those checks is not as exciting. As a standard, I transfer between 30% and 40% of each check into my savings account to cover my estimated taxes. Opening a high interest savings account is a great idea—those cents can add up over time!
You will need to file quarterly estimated income taxes (state and Federal) and also file annual taxes. You can pay quarterly estimated taxes and annual taxes yourself (the NC Department of Revenue provides good details on quarterly taxes). I personally like working with an accountant, as they can help with my annual filing and expense deductions, too (check out this handy article on what can be deducted and what can’t, because the topic can be a bit confusing). I work with Chad Collins & Associates, Inc, which operates out of Greensboro, North Carolina. Of course, there’s a fee for working with an accountant, but it gives me peace of mind.
Pro Tip: The other tax consideration to keep in mind is to ensure that you fill out a W-9 for your clients (with your business EIN) before you send an invoice for payment.
9. Annual Report
LLCs and Corporations are required to file an annual report. The annual report allows the state to update information about the business so it can be made available to the public.
In North Carolina, the annual report is due each year on April 15 (along with a $200 fee for LLCs), and you can file the report online (it’s an extra $2 to file online). I completed my first annual report in April 2019, and it was a really simple process that took only a few minutes. Check out the NC Secretary of State website for more details.
10. The Fun Stuff: Sharing Your Company & Brand
There’s a lot that goes into branding and marketing your company—more than can be covered in this blog. That being said, when you are starting your company, it is really important to secure a domain and set up a company email address and basic website. You will need to obtain a domain first and then setup a website and email address. I personally decided to go with Squarespace. From this one-stop shop, I was able to very quickly and easily . . .
Secure my domain: $20/year
Setup an email address: $50/year (Squarespace uses Gmail so you get access to all Google Suite services)
Create a website: $144/year (usually they offer an upfront discount when you setup your domain)
Squarespace has also recently added really nice email templates so you can announce your company or send out emails to clients without having to worry about a separate email marketing tool (like MailChimp or Constant Contact).
Once you are setup with these basics, you can look into things like creating a logo and brand identity, social channels, presentation templates, business cards, and more. I was extremely lucky that my friend and freelance art director, Rock Schafermeyer, created my logo and brand identity, and another friend and independent graphic designer, Beth Fassler, beautifully incorporated my brand into a presentation template. There are some online services like fiverr and 99designs that can create a logo and help with templates. And I used Moo to create business cards (they have an easy-to-use template and great paper options).
11. Other Considerations & Optional Steps
You may want to consider a few additional steps when starting your business.
Consider trademarking your company name; however, this is not required. An article from The Wall Street Journal provides good insights on why you may want to trademark your company and how to do it. As is typical, you have to file some paperwork (you can do so online with the United States Patent and Trademark office) and, of course, pay a fee (the fee is usually around $275). Services like Incfile can also handle the trademark paperwork. I haven’t yet trademarked my company.
Look into a separate space to conduct business outside of your home. Most days, I work from home (I have a home office setup for this purpose, complete with a standing desk). Other times, I’m at a client’s site or meeting with people at coffee shops. However, I decided to look into a coworking space to give me the option to work around people, network with like-minded individuals, have a space where I can host meetings, and have a physical address that’s not my home address. While legal paperwork goes through a registered agent, I didn’t necessarily like the idea of having any correspondence from clients coming to my home, and I didn’t want to promote my home address on my company website.
I looked into a few coworking spaces (it seems like new ones pop up in the Raleigh area every day!), and I decided to go with the Loading Dock. It’s a cool space with some nice free amenities like local coffee and beer as well as networking events. I also personally liked that they were committed to diversity and being environmentally friendly—plus they were very welcoming and responsive. Their various membership options were also attractive.
Working in Other States:
As noted above, you should file your LLC or company in the state where you primarily do business. Your business may expand into other states though. If it does and you are doing business in person in that state (as opposed to communicating with a client over email/phone), then you should file your LLC as a “foreign LLC” in that state. As always, some paperwork and a fee is associated with this. Look at each individual Secretary of State website for information.
There are lots of things to think about that I won’t get into with this post, but I wanted to list a few more for consideration:
Health insurance: Check out this article for details on self-employment health coverage.
Retirement planning: Review this IRS page about retirement and 401K options.
File storage: I personally use Google Drive and Box.com. And, of course, having a clear organization structure for your files is important so you can easily find what you need.
Tracking time: I track my time in a basic Excel spreadsheet because I have a personal aversion to time tracking programs. But there are some good ones out there—if you have QuickBooks, you can even upgrade to their Essentials subscription to enable time tracking within your accounting software.
List of Online Resources
“Choose Your Business Structure” from Entrepreneur
Estimated Quarterly Tax Information (Federal)
Domain, website & email provider: Squarespace
Business card creators: Moo
Disclaimer: This article is for informational purposes only. The reader assumes full responsibility for ensuring that he/she is following all state and federal regulations for starting a business.