FINANCE 10 ESSENTIAL STEPS WHEN STARTING YOUR OWN BUSINESS

10 ESSENTIAL STEPS WHEN STARTING YOUR BUSINESS

by Lynn Gagne

One of my favorite things about teaching business to university students is hearing about their ideas. It’s why my business – my passion – is about helping small, local business owners succeed, from building the foundation to growing success years into their business.

As a certified professional bookkeeper, I built a successful bookkeeping firm from just myself to over 15 employees. I know exactly what it’s like to start from nothing and maintain a profitable business.

I’ll admit, in the beginning there was a lot I was too embarrassed to ask other business owners. When I finally found out the answers, I was then a little mad. My accountant didn’t tell me what valuable write-offs I was missing. The registries office didn’t educate me what would happen when I incorporated incorrectly. My lawyer made no apologies for charging me money to fix the contracts that I did wrong when I tried to do my own to save money.

It was frustrating. And expensive.

At this stage of my career, I spend most of my energy coaching other business owners and helping them see the flags that they should be aware of. This is my top 10 things that you should consider when you start your business.

1. Decide on your business type. Will you be a sole proprietor, or incorporated? There are different tax rules, write off methods and implications, deciding on the route you take.

There may potentially be a cost to switch types later. Taking the time to understand the correct business type for your needs is extremely important! Some people assume that going into business means a trip down to registries to incorporate. I literally cringe when I hear someone say “I went and incorporated my business!” knowing that they are better being a sole proprietor than incorporated.

The minute you incorporate, you set yourself up for accounting and tax fees that are $2000+ per year. It’s an expensive jump from a sole proprietor, who would typically pay between $250 and $500.

2. Register your company properly (if you are

incorporated). “Properly” depends on your industry.

In some cases, you may need a lawyer to help with the registration process. Some people confuse registering a trade name with registering a business, when in fact, that’s a different step altogether.

When you incorporate, your company will declare shares, ownership, and directors. Sometimes this can be a very important step, so make sure you understand it before you incorporate.

3. If you have a partner, do a USA. USA stands for

Unanimous Partnership Agreement. Think of it as the business equivalent of a prenuptial agreement.

You and your partner lay out what will happen in the event of this, that, or the other, how you will get paid, what each is responsible for, who is liable if this happens, what are the no-nos, and the like. Regardless of who your partner is, or partners, a USA is a must-do. Don’t even think twice about it.

The only downside is in not having one – and we’re talking a possibly nightmarish legal downside.

4. Register a trade name. When you do a trade name, your company just has a “public name”

that people will know you. For example, my company is incorporated, but my trade name is Learn Bookkeeping Canada. You can have as many different trade names as you wish.

5. Open a business bank account. Keeping business and personal expenses separate seems like a nobrainer, but it’s often easier said than done. I dealt with mixed receipts from my bookkeeping clients all the time. It is more expensive for bookkeeping, it causes more chaos when it comes to tax time. And the worst, in my opinion, is if CRA audits you. It’s a nightmare when you have your business and personal income and expenses in one bank account.

6. Designate a personal credit card for business

use only and keep it that way. Typically, a bank is unlikely to approve you for a business credit card for two years. If you have very good personal credit, your bank may issue a business credit card sooner, securing your personal credit against it.

Most business owners, whether incorporated or a sole proprietor, use a separate credit card in their name as their dedicated business card.

Just like your bank account, keeping it separate is important!

7. Decide on invoicing software. Some that I lovelove-love: Freshbooks, Invoices to go, and 17Hats.

I personally use 17Hats for my consulting. It also does contracts and quotes.

In many cases, customers feel that their bookkeeping software is the same as their invoicing software. This is not the case! You don’t have to use your bookkeeping software the same as your invoicing software. In fact, in some cases, your bookkeeper may prefer that you don’t do that. Have a chat with your bookkeeper and make some good decisions about the software you use.

8. Don’t be an ostrich

Many think that the bookkeeping and taxes are an “end of the year” task. Not so! There is so much to learn and doing it during tax season is the worst time to do it. There are three basic rules to saving money throughout the year.

a) Save your receipts b) Do your bookkeeping every month c) Review your money.

Putting your head in the sand doesn’t make it go away, but it will almost always make it worse. 9. Doing the books yourself. I am the first person to say that a very small business (solopreneur) can do their own books. However, if you don’t take the time to get some education, then this one is a hard pass. I have dozens of case studies where a customer did their own books and missed out on very important pieces of information, making it so that they either paid more taxes or they didn’t get as large a refund. If you do the books yourself and you don’t get education on the “how”, I guarantee you are doing it wrong.

Make sure you get some good advice or education on how to do your own books. A word of caution: don’t wait for tax time to talk to a bookkeeper.

10. Stay organized, especially with receipts.

There is nothing costlier, from the bookkeeper’s perspective, than a client who comes in disorganized. It will cost you more to have that mess of receipts sorted.

If it’s tax season, you’re one of hundreds of clients and therefore, probably just another number. Your tax person will do their best to get you in order but expect more taxes and a higher bookkeeping bill. The more organized you are.....the smaller your tax bill will likely be.

Lynn of BWize Consulting & Training is a certified professional bookkeeper who spent more than 30 years running different businesses, including owning a professional bookkeeping firm with more than 300 clients over a period of ten years. She built her company around providing tools to small business owners so they can keep more money in their pocket.