Financially Fit in Five for Business – Steps to Take When Opening Your Own Business

As a daily money manager I often work with single entrepreneurs (aka solopreneurs), especially those just starting out, to help them with the financial matters of their new business. Over the past few weeks, I had a number of new entrepreneurs ask me to go over the process, most specifically how they would go about handing the money.

Certainly there are any number of things which need to be done – a mission statement, a business plan, etc, but from a financial start up point, here’s a list of some of the items to start you on your entrepreneurial path.

There are three things which should be done in synchrony. First, once you decide on a business name, you should check to see if that name is available for use in your State. In New Jersey, you would check with New Jersey Division of Revenue ( where you can reserve a name for 30 days. At that same time, you should be looking to see the availability of the .com address and purchase it in advance. There are any number of sites where you can reserve the website address including GoDaddy and Yahoo. Once you know the business name and the type of business you will be opening (LLC, Corporation, Non-profit, etc.), you need to set up a legal entity. You can use an on-line site such as Legal Zoom or Bizfilings. I suggest you get an EIN number; otherwise, the business will be tied to your Social Security number.

(A Note about using your SSN for your business – Think about the forms you may be completing for the business such as 1099’s, sales tax, and the like. Your SSN would be visible on all these forms, and the number could potentially be floating around without regard to potential identity theft.)

If your physical location will be from home, you might want to consider a PO Box. Quite honestly, when I first started out, I used my home address. It took just one networking event, where my business cards were freely distributed to strangers, to make me feel uncomfortable using my home address.

Once you have the business formed legally, you would use your EIN to secure a business checking account. At the time you open the business checking account, you would want to determine what type of accounting software you would use. For a small business which doesn’t require a payroll or doesn’t need to purchase any inventory, you can use a product such as Quicken Home and Business. This type of single entry accounting software is similar to a check register and is fairly simple to use. Many of the appropriate business categories are built into the software. It would be prudent to look at IRS Schedule C to get a better understanding of tax categories. Larger entities would be more suited to using QuickBooks or Sage accounting.

One additional item to note is, if you are going to form a partnership, the first step must be a partnership agreement. A partnership agreement spells out the terms of the partnership. A partnership agreement covers items such as how Capital accounts are to be maintained, what happens upon the death of a partner, and how disputes between partners would be handled. Often people confuse it with an operating agreement, but the two items are different. Many partnerships run into trouble when there’s no formal partnership agreement.