When you’re first starting out, the new business checklist of tasks to accomplish feels like it never ends. And it’s even harder to figure out how to prioritize those items. No matter what line of work your entering, here five to-dos that absolutely should be on your new business checklist…
Understand Your Tax Situation
There are a number of factors that impact your business’ tax situation, but ultimately, you’ll want to make a decision that you’re going to stick to. Your tax situation is most prominently determined by how you form your business. Being a sole proprietorship has different implications than, say, being an LLC or a nonprofit. It’s not the most helpful suggestion, but you need to pick what is right for you and your business. (Learn more about common business formations.)
Get a Bank Account
In almost all cases, business and personal finances should be kept separate. That means you’ll need a business bank account. A simple business checking account is a good starter option—not too fancy, simple and straightforward to use. A business bank account will give you a place to put your money and give you the ability to pay your expenses and vendors. Plus, if you ever want to take out a business loan, a business bank account is going to come in handy. (Side note: You’ll likely need a business identification number—called an EIN in the U.S.—in order to set up a business bank account. Another reason to properly form your business!)
Set Up Accounting Software
Whether you go with the good ol’ pen and paper (not recommended), the Excel spreadsheet (also not recommended) or a cloud-based solution (recommended!), setting up an accounting system for your business is critically important. If you’re serious about your business, an organized accounting system is going to be your lifeblood. Without it, you’re guessing. You’re guessing about costs over time, income, how your business is actually doing… the list goes on and on. Moreover, keeping accurate, current financials is your key to growing your business much in the same way that having a business bank account is. Your accounting numbers will be your proof and evidence for things you want to do in the future. Said differently, no one’s going to want to partner with, invest in, or do a deal with a business that can’t produce something as basic as a profit and loss statement. (Read more about understanding a profit and loss statement.)
Figure our Licenses and Permits
Depending on your type of business and where your business is located, there will likely be certain licenses and permits you have to obtain in order to do business. For example, if you’re opening a restaurant, you will need health department, food prep and perhaps liquor permits. Similarly, your tax jurisdiction may require specific proofs. As an example, if you want to start a business in Philadelphia, Pennsylvania, know that there is something called a Business Privilege License. Basically you need one of those in order to do business in Philadelphia. (Crazy but true!) Bottom line: figuring our what licenses and permits you need from the get-go will save you a big headache (and money) in the future.
Tip for U.S. businesses: Check out the SBA’s licenses and permits section.
When you’re just starting out, it can be hard to forecast how your business will perform in the future. But what you can do is gauge what you personally need to do from a financial perspective. Ask yourself some tough questions. How long can I go without a salary? What is my monthly budget and how long will my savings support that? If I invest personal money into the business, how does that impact me and my family? What personal expenses can I reduce or eliminate? The point is, you have to go into starting a new business knowing that it might be a while until you personally start seeing the financial rewards.
As with any new business checklist, consider this one partial. There are lots of other tasks to tackle! As a reminder, check out the SBA resource center and the Canadian government’s business info section.