Accepting Payment

master-card-visa-credit-card-gold-164501Most of your payments will probably come in the form of checks, so if you want to avoid running to the bank to deposit them, consider investing in a check scanner, especially if you have a lot.

Regardless of which scanner you buy, remember that you’ll download the drivers and software for it via your bank’s website. More specifically: you download them after you login, from somewhere in your banking portal. Some banks use a desktop app to control the scanner and some do so from within the web browser. Before you start cashing oodles of checks, though, it’s a good time to check your transaction limits, listed in your business banking account documents.

If you only have a few checks, your your mobile banking app’s check scanning feature will probably suffice, but there might be a daily, weekly, or monthly limit (in terms of dollars or quantity of transactions) on mobile deposits.

You may also want to consider accepting electronic check payments, often more precisely called ACH (Automated Clearing House) payments, which allow the client to directly deposit money into your account or you to debit the client’s checking account.  These abilities are usually available as additional services, for an additional fee, from your bank for your business checking account.

Some businesses, though, are run mostly on credit cards. It’s simply the way the owners choose to pay bills, make purchases, and manage their transactions, so that’s how they’ll want to pay you too. You can accommodate them if you have a payment service like Square or QuickBooks’ Payments add-on, but there’s usually a fee of 1-3%, so you’ll have to decide whether you’ll absorb that fee as a general business expense or collect it directly from the customer paying you via credit card. The fee is higher for contactless payments, which you’ll likely be using, since those transactions lack the authentication of the card’s chip.

Overall, you want to be paid, you want to be flexible so that you get paid, but you don’t want to end up accepting all sorts of different types of payments via different services, with varying fees, with funds available at varying times. It’s up to you how accommodating you’re going to be, and for how big of a client.


cash-dollars-hands-money-271168Don’t get caught up in hating them, just pay them when they’re  due. Consider them the cost of doing business.

There’s a lot to know about tax liability and filing for the various business structures so, and especially if you’re only accustomed to a simple, annual, personal tax return, it’s probably wise to use an accountant who is up to date on the current tax laws.

Regardless of who is advising, you, the responsibility for keeping current and accurate records and filing in time is yours. Likewise, it’s your responsibility to exercise good judgment in filing: some people try to shoehorn everything possible into exemptions, clearly beyond the intent of the law. Other people can’t be bothered and just pay more so they don’t have the IRS come barking around. Good judgment means understanding the law and applying it as intended to precisely meet your tax obligations under it.

Regarding those tax obligations, they’ll vary in type, percent, due date, and the form needed to report them, all depending on your business structure (and the changing laws.) The IRS has a page detailing the filing requirements for the various business structures.

Once you understand your tax liability, every month set aside that money in your main business account. You might consider opening a separate account for the money that will go toward tax payments so you run no risk of spending money set aside for the taxman. It’s no joke: you don’t want to miss payments and you don’t want to to be hit by a multi-thousand dollar tax bill claiming money you’ve already spent.

Finally, don’t forget also to collect Sales and Use Tax as appropriate for your services, record and set aside that collected tax, and then report and pay it on time according to your state’s tax laws.

Liability Insurance

umbrellas-art-flying-17679It’s not a pleasant though, but you might make a mistake on the job—or at least appear to make one—and moreover it might be a mistake of the magnitude that one of your clients might take legal action against you.

Now it’s not fun to think that you might make such a mistake, that said mistake might be a big and costly one for your client, that they might get very angry with you, that they might wrongly think that you have done something wrong, or that ultimately they will sue you, but you have to be prepared for that possibility.

You simply can’t expose yourself to that liability and that’s why limited liability companies and liability insurance exist. To be blunt: don’t do any work without liability insurance. Some businesses won’t even employ you if you don’t have it.

So get liability insurance. Policies will usually cover legal defense costs (aka attorney fees) if you are sued for mistakes, negligence, and copyright infringement. If you have an office and employees you’ll likely need more coverage to accommodate those liabilities. In general, you’ll probably want two or more policies (e.g. general liability and professional liability) to protect yourself. The Small Business Administration has a quick rundown of the basic types of policies.

As with auto insurance, for each policy you’ll have a limit of liability and deductible for each claim, a total limit of liability for your policy, and of course a quarterly premium.

Get policies for at least $1,000,000. (But note: while that amount is the total for your whole policy, your coverage for a particular type of claim might be less.) That sounds crazy, but remember that lawyers charge a lot of money. (Don’t go by the fact that your lawyer-friend doesn’t make a lot: his boss still charges clients a lot for your friend’s work.) An angry client, especially if he is himself a lawyer who would only have his time to lose, could very well try to bury you in legal chicanery and paperwork that he knows you simply can’t afford to fight, all in the hopes of bankrupting you out of spite. 

So get liability insurance. When filing out the application, bear in mind three things. First, you will have to estimate your profits if you are just starting up. Second, the insurance company will ask if you use a contract and if you do, you’ll get a better rate because a contract protects you and as such you’re less of a risk. Third, be accurate in describing your business because they’ll tailor your policy for you.

Finally, know what you’re policy does and doesn’t cover. Perhaps review it with a lawyer to see if it has or needs any special provisions unique to your state, but know your coverage: you don’t want to sign off on a project thinking you’re covered when you’re not.

Business License

sign-pen-business-document-48148Of all the registrations and filings, filing your business license is one of the easier tasks. For the most part you just need to find the right form on  your city/county’s website and fill out the basic information about your business. If you’ve already completed your other business preparations, this should not be too difficult.

Just remember to keep the license posted in your office, if you have one, and set a reminder for its renewal date.

Tax Account Registration

bank-banking-black-and-white-budget-259209Doing business in your state, you’ll need to pay Sales and Use tax on your work, and as such you will need to register for a tax account with your state’s Department of Revenue. During that registration you will be asked many many questions about your business.

Some of the information is obvious, like your EIN and business location, but some is not, so don’t rush to complete it. This is not the form to hurry through and worry about later. You may need to consult your accountant or lawyer regarding some of these questions. For example: you’ll need to decide how you’ll pay the taxes, i.e. on accrual or cash basis. A description directly from the IRS:

Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay the expenses. Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received. You deduct expenses in the tax year you incur them, regardless of when payment is made.

Similarly, many questions regard the sale of tangible property, which is often a complex legal matter. Speaking in layman’s terms for the purposes of our discussion, tangible property is physical property as opposed to intangible property like intellectual property and patents. In order to answer these tangible property-related questions accurately, you’ll need either to read up on the law or consult your accountant and lawyer and tell him what your exact business activities are so they can advise you.

Finally, don’t just tick off answers because you’re in a hurry, forget what your response was, and then find a costly mess come tax time. Review the registration and make a list of questions, then consult  your lawyer and/or accountant (or go on your own and do your research), and finally with that information complete the registration.

Most of the information will simply be kept on file, but others, like your fiscal year and filing frequency, will affect you regularly, so: fill out this form carefully, print it out, and make some reminders regarding filing dates and what information you need to record regarding your work. And as with your EIN, keep your State Tax Account Number on file and handy.


downloadAn EIN, or Employer ID Number, is a nine-digit identification number assigned by the Federal Internal Revenue Service to a variety of entities (corporations, llcs, trusts, etc) for a variety of purposes (opening a bank account, hiring employees, etc). Legal Nature gives a good rundown of who needs them and for what reasons, but consider consulting your lawyer and accountant to determine whether you need one for your business.

An often overlooked reason you may want an EIN is that, if you are an independent contractor (i.e. not an employee of your client), then your client may need to fill out a W-9 Tax Form to account for your work for them as their expense. If you don’t have an EIN, then they’ll need your social security number, which is definitely not a number you want floating around. For that reason, when you start work for a client, either have your EIN easy to find or, better yet, memorized: doing so signals that your business is established and that your work for them isn’t your first rodeo.

If you determine you need an EIN, you can apply for one at the IRS website.

Oddly, even though it’s an online form, you need to complete the IRS EIN application during its business hours.

Finally, on the document that IRS sends you containing your EIN number, it reminds you that, “This notice is issued only one time and the IRS will not be able to  generate a duplicate copy for you,” so print it, file it, and back it up.

LLC Registration

sign-pen-business-document-48148If you decide to incorporate your business as a limited liability entity, you will be required to register it with the office of your state’s Secretary of State.

In registering you’ll fill out one of the most important documents related to your business, its Articles of Organization, which lists the business’ name, address, members, organizer, and registered agent.

This document is provided, usually for free though there may be a fee for its submission, by the office of your Secretary of State, where, once it is completed, it is kept on file. After  your business is registered with the office of the Secretary of State, you will likely be required to update your status annually (with an update form and another fee.)

The Articles of Organization is not usually a very long or complex document, although that may vary according to the size and organization of your business, so fill it out and keep it current.

Incorporation Documents

person-holding-silver-pen-signing-photographers-signature-175045If you’re incorporating your business, besides your Articles of Organization, you’re going to need a variety of documents that describe your business and provide details about its operation. You may be required to show these documents at various times, such as when you apply for a loan, open a bank account, and so on, so it’s a good idea to acquire them, read and familiarize yourself with their purpose, and fill them out correctly—with legal assistance/advice if you need it.

Before you stress out: realize that most documents can be bought as an “LLC Kit” and they can even be customized for you, for a small fee, all via the web. Then you just need to fill them out and keep them safe and current. Remember, though, that your business may need more or fewer documents than are part of any given kit, so do you homework and consult with an attorney if needed.

Some documents and items to consider when you’re preparing to incorporate:

  1. Data Sheet: with the basic information about the business, date and state of organization, manager, secretary, treasurer, bank accounts, members, etc
  2. Operating Agreement: outlines your business’ decision-making procedures
  3. Banking Resolution: proves you are legally able to bank on behalf of the business
  4. Shares & Business Seal: for selling shares

You may be thinking, “I’m just a business of one so I don’t need all of that” but remember that:

  1. You may in your state be legally required to have, say, an operating agreement.
  2. You may grow unexpectedly, and you want to have a structure that will scale.
  3. You may need one or more of these documents—or others—for some unforeseen purpose and you want to have them on file.

Also, in case of any business, tax, or legal irregularities, you don’t want it to look like there is no business and that it’s just you, effectively doing business as yourself. If it looks like that, if you are ever sued, a judge may “pierce the corporate veil” and you’ll be personally liable.

So go through all the procedures, fill out all the forms, and let the business be the formed, functioning, funded, entity it’s supposed to be so that it protects you.


Legal Organization

sign-pen-business-document-48148The legal organization of your business has a big impact on your legal and tax responsibilities. Information on the basic structures of businesses is all over the internet—namely at the website of the Small Business Administration—so I won’t repeat it here, but I would recommend paying for professional legal and tax advice, at least to get set up and establish procedures consistent with the responsibilities of your business’ organization. Just to get you started, I’ll mention some basic choices.

First, you need to decide whether you’re going to operate as:

  1. a Sole Proprietor, i.e. just you yourself doing business as yourself, e.g. “I’m Horace Flak and I fix computers,” or
  2. a Sole Proprietor doing business under a business name, “I’m Horace Flak and I fix computers as ‘Roman Systems'” or
  3. incorporate.

If you incorporate, you then have to choose a corporation (INC),  a limited liability corporation (LLC), or limited liability partnership (LLP.) Then you’ll have to choose how you’ll be taxed: as a sole proprietor, a partnership, a C-corp, or S-corp.

Again, the Small Business Administration’s site is a good place to start investigating your options. Online legal services can advise you on what’s best for your business, but you may want to seek more precise advice so that you not only organize your business well, but you choose a business structure that works for you alongside your other business, personal, legal, and accounting arrangements.

Once you’ve decided on your legal organization, you’ll be able to proceed with the necessary document preparation, filing, and registrations that will ask you about your business structure.

Picking a Name

alphabet-close-up-communication-conceptual-278887There are two parts of picking a name: the creative part of choosing the perfect name to represent your business, and legally claiming it.

For creative types, the first part is the fun part. For everybody else, it’s stressful, confusing, and tedious. You can easily sit there floundering over picking a name while your whole business enterprise waits. What to do?

First, it really helps to get some outside help on this. Not professional, necessarily, just outside input, since you inevitably start thinking within very narrow parameters. You never know who will come up with a winning name, or something close.

Second, think whether you want to seem local. Every town and state has local mottoes, birds, plants, sayings, and associations that have come to represent it, so those names may be positive associations to include in your business’ name.

Third, you’ll need to settle on some  word to convey the technological aspect of your business: systems, computers, and solutions are the big three.

Fourth, beware portmanteau, the combining of words. They tend to sound casual and faddish (think: bromance or chillax) although sometimes they enter the common usage and stay (e.g. cyborg, motel.)  In my observation they usually sound ridiculous for computer businesses, like you just slapped a positive-sounding adjective to a computer-ish sounding word, like Systanamics.  These names also have subjective impressions. You might think it sounds great, but to everyone else it sounds as ridiculous as jackalope or turducken.

Fifth, most business names are lousy. Microsoft has two of the worst associations you would want for anything except for muffins: being small and soft. Try to avoid anything that sounds ludicrous, has negative associations in your area, or is too much like another business, and then pick the name and move on.

Finally, you’ll claim your business name when you register your incorporated business with your state’s Secretary of State or, if you are not incorporating, when you fill out the DBA Name on your Business License.

You usually can’t pick a name that’s already taken. So you’ll need to search your Secretary of State’s database of business names. If you’re applying for a trademark or service mark for your name, logo, or saying associated with your business, you will also need to check your state’s trademark/service mark database, and the U.S .Patent and Trademark Office’s one as well.