We believe that entrepreneurship is the future of the Cape Fear Region and are highly supportive of efforts to promote and expand it. As a result, we often have the opportunity to talk to people that are in the process of getting ready to start a business. We are going to walk through some of the things that a potential business owner should evaluate as they start the process.
Start with Your Legal and Tax Structures
You need to talk with an attorney and work through what the optimal legal structure may be. While there are services like LegalZoom, we really recommend that you talk with and establish a relationship with a business attorney who can provide guidance specific to your situation. Before you finalize your legal entity, you should talk with a CPA to be sure that the legal structure will accommodate optimal tax structures. We often see people structured in a way ahead of time that does not allow for optimal tax structure or results in additional costs for professional fees. LLCs offer a lot of flexibility from a tax perspective, but may not be optimal for those starting with a plan to sell the business or to bring on external investors. With all things in the legal realm, you should always consult with an attorney.
Separate Yourself from Your Business
Once you have a separate legal structure you need to get a tax identification number and open a separate bank, and as appropriate, credit card accounts. If you have a separate legal structure you need to operate that way — it will minimize complication in the case of an IRS or NC audit, makes sure you are accurately tracking all your income and expenses, and generally the cleaner you separate your finances, the better off everything is going to be. You may want to consider what insurance you need to separate yourself from your business and to protect both the business and yourself as you operate it.
Setup Infrastructure for the Future
You should think not only of where your business will be at the start and trying to keep your costs low but also of where it is going to be in the future. We recommend that from the start a business owner setup Quickbooks online and connect it to their business bank account and credit card. Get into the flow of regularly reviewing Key Performance Indications (KPIs) and financials in order to make sure you are tracking the performance of your business.
Realize Entrepreneurship is Not All Glory
Entrepreneurship is glorified a lot in our culture today. While those of us that enjoy it would have it no other way, it does come with a lot of challenges. Be ready for the battles, tough conversations, and decisions. I recently heard George Taylor, Chairman of Untapped, say at a panel discussion that, “running a startup is like going to war.” Not all new businesses are high growth startups, but all businesses come with their challenges. Know what you are signing up for and make sure that you have the support of your friends and family.
While we couldn’t possibly cover everything you need to do as you start a business, we hope that we provided you with some good starting points. If you have follow-up questions on this topic or anything else, feel free to reach out to us.
Caroline Montgomery, CPA (NC License Number 39017), MSA, is tax manager and partner of Adam Shay CPA, PLLC. The most rewarding part of what she does is helping business owners and individuals achieve their goals, all while working with a dynamic team that is growing quickly. The firm focuses on a proactive approach by encouraging clients to minimize taxes via income tax planning and projections, or by focusing on other areas of their business as part of the firm's Virtual CFO services. The firm also offers tax preparation, fraud and forensic accounting and tax issue resolution services. She moved to Wilmington in 2014 and started at the firm in 2015. Caroline graduated with her her undergraduate and graduate degree in 2010 from East Carolina University. She is actively involved with NourishNC as their Treasurer and enjoys volunteering with various organizations throughout New Hanover County. In her free time, Caroline enjoys spending time with her husband, Mike, and dog, Mason, as well as travelling and going to the beach.
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