Business has always come easily for me. Even the tiniest hobby I turned into a money maker, mostly because I just love the creative rush of starting a business. The logos, the websites, the paperwork—these elements all light a fire somewhere inside me. That spark is probably why I specialize in making business after business grow, and quite frankly, exist. For me, business is a passion above an occupation and I approach just about everything in my life AS A BUSINESS.
When I work with new or aspiring entrepreneurs, one of the most common concerns they have is the initial paperwork. Do they even need a business license? Can’t they do that later? Yes you do. And no!
But take heart! It’s not as difficult as you think to start your own business. Here’s how:
#1. Decide if this is a business.
Ok, so I just said I treat all my hobbies like a business no matter what, which is true, but in the eyes of the Federal Government and the (gulp) law, if this is truly a business, you need the paperwork to confirm that.
- Do you get paid to do this hobby?
- Do you want to make this hobby a money-maker for you and/or your family?
- Are you working with other businesses?
If you answered “yes” to any or all of these questions, then chances are, you need to make it official and begin the journey into owning your own business. Do you absolutely need to form a business entity to start your business? No, but doing so can protect your personal assets and definitely unlocks some serious tax benefits. Whoop whoop!
#2. The Fun Part
So, you want to start your business…GREAT! There are lots of “fun” parts, but the first of these is naming yourself.
Don’t think too hard if it doesn’t immediately come to you. You could name your business after your actual name (Jane Doe LLC, Jane Doe Business, etc), or your hobby name (Underwater Basket Weaving, Underwater Basket Weaving LLC), or something completely random (Night Stalker Inc). But pick a name.
#3. Apply for a Federal Tax Employer Identification Number
Some people will put this step later, but I always start here. You’ll need this number to apply with your state for licenses and permits and to open a business bank account, etc. Your federal tax ID number is what’s known as the Employer Identification Number or EIN and it works much the same way your Social Security Number does. Except different.
Do you NEED it? No, technically not, but to quote the movie “Ghostbusters,” I don’t “cross the streams.” An FEIN is required if you have employees, are operating as a corporation, or are planning to use a tax-deferred pension plan (did I lose you yet?), but one of the biggest benefits is that it separates “you” from your “business.” The FEIN is kind of like a Social Security number for your business. If I need to supply W-9 information to a venue, I will use my business’ information and NOT my personal social security number.
Plus, it’s free and can be done online. So just go ahead and get one now. Apply for an Employer Identification Number (EIN) Online
If you get to the end of the application and it asks for a bunch of money, you probably clicked the wrong button, so go back and double check. It should be free. Also, even though it’s an online registration, it only works during business hours. Sigh. Get it together, Government!
#4. LLC, Corporation, or a Sole Proprietorship?
What the what? I’m not going to get into all the nuances of your options in this post, but if you’re just starting out, I generally recommend a limited liability company to my clients. Why? Well, because I’ve been sued before—so far I’ve always won, *knock on wood*—and an LLC protects owners from being personally responsible for business debts. A sole proprietorship does not.
Now, the chances of getting sued are pretty low, but for me, it’s worth the few extra bucks and paperwork for the peace of mind. Totally up to you. I would venture a guess that many performers are Sole Proprietors. If you’re still not sure, the U. S. Small Business Administration (SBA) has this super helpful guide on the different structures, including the pros and cons.
#5. Create Your Company, Legally
Whatever happened to, -‘Hey, I have some apples, would you like to buy them?’-‘Yes, thank you!’ That’s as complicated as it should be to open a business in this country. -Ron Swanson
This is usually where I really lose people. The IRS, GE taxes, and who the heck is the Comptroller? Why does it seem sooooo complicated? Don’t get me started!
Each state has a website dedicated to helping you start a business right from your computer. Google it! And companies like the Small Business Development Centers (SBDC) can also help you navigate. If you look at the exhausting list of forms to fill out and want to cry, you can also try companies like Legal Zoom or Inc File. These websites are the equivalent of using tax software—you answer a few questions and they do the rest. Yes, it costs money, but if you are struggling with the minefield that is our Government’s paperwork requirements, just stop and pay “the man” to do it!
#6. Register Your Business Name
You’ve decided on which business structure you’ll use, great! Now you need to officially register your business name. Don’t worry! All this paperwork can be part of your company paperwork and Articles of Organization, in fact, I recommend it. If you filed with a company like IncFile, they will do this for you, but there are a few different ways to make this happen:
- A DBA (Doing Business As): I always get this. It doesn’t do anything for you, legally, but some states and structures require it.
- A trademark: This one legally protects you at a federal level.
- An entity name: legally protects you at a state level.
- A domain name: You need this anyway! Proclaim your excellence on the web!
#7. Determine Your State Requirements
Every state is different, sometimes VERY different and each requires different paperwork. Don’t neglect this step because it can bite you in the rear! And “I didn’t know” won’t work with the government. Some states require separate state tax ID numbers, so you’ll want to visit your state’s website and check the local laws.
#8. Obtain Licenses and Permits
And just when you thought you were done, you’ll need to apply for business licenses and permits for your specific state (and federally), as well as for your specific industry. Depending on how you filled out the paperwork, perhaps you are an educator, or a performing artist, or a dancing troupe…all these different businesses have different rules. Sigh. The SBA can get you started with their list of common federal business licenses.
#9. Open Your Business Bank Accounts
Oh man, it’s coming together!!! Now that you have all this delicious paperwork from the feds and the state, you can head on over to your favorite bank and open a business bank account! Whoo! Look for accounts that offer no fees or minimums if possible. I recommend taking $100 with you to open the account (many institutions require at least this much, but check with yours). It’s also a good idea to check the bank website to make sure you have all the required paperwork in-hand before you show up at the branch.
“But I already have an account!” Well, it’s extremely important that you separate out business and personal, and this is the #1 easiest way to do that. #2? Open a business credit card! It doesn’t have to be specifically “business” on the front of the card, but it should have your business name on it and be used ONLY for business expenses.
#10. Get Insured
Ug, another thing to pay for, I know! If you’re anything like me, you hate paying insurance because you’re literally paying for the “what-if.” Some insurances are required by law, like disability (TDI) or Unemployment (UI) (only applicable if you intend to bring on employees, or make yourself one in an S-Corp). Some venues will require general liability insurance to perform in them (check with your venue). Three types you are most likely to need:
- General Professional liability insurance: This is the one I recommend the most as it’s kind of a catch-all for your business. It includes things like injury, medical issues, financial loss (can anyone say COVID?), and lawsuits.
- Commercial property insurance: If you have a physical location like a storefront, you’ll absolutely need this one! Vandalism, accidents, idiots, or natural disasters can all happen and you’ll want your business location protected.
- Product liability insurance: A little less of an issue unless you sell a lot of products, logowear, etc. It’s hard to imagine getting sued because you sold a defective novel, but…
For more information on what types of insurance you might need and why, check out our blog Insuring Your New Business: What Do You Need?
#11. (BONUS) The REALLY Fun Part
Don’t get discouraged! I know this list seems long and daunting, but in reality, all this can be accomplished in half an hour, assuming you have uninterrupted internet, and minus the trip to the bank. But once you do all that, you are officially a business owner joining the ranks of entrepreneurs everywhere! Now you can write-off all the car rides to the bank, the ink cartridges, your computer, and even cell phone bills! What!?!?
But moreover, taking your place in the business world does something to you, as long as you take it seriously. When you are a business owner, you command attention. You radiate something deep inside—maybe it’s pride, maybe it’s power, maybe it’s just YOU!
I’ve coached many new business owners and I often hear that they just don’t know how to run a business. I won’t lie, being an entrepreneur isn’t for everyone, but I absolutely believe that if you have the passion, you can make it work. If you need help…hey, that’s what I’m here for! Feel free to shoot me a questions or comment!