Katelyn Magnuson:
00:00:16
And this episode, we're going to talk about all things. Business foundations. And we're going to deep dive into what even should your business foundations be? You know, what, what should you be looking for? What type of business should you register as, what do you need to do on the legal side of things? You know, do you have employees, do you have contractors? Do you need to register like payroll, all the things like where do you need to be set up? So. Pause get something to write with. I don't care if it's your phone and you're just using your notes. If you're a pen and paper kind of person, but get whatever you need. Pause this, come back. And then we're going to take a whole bunch of notes because this episode is jam packed with information. Okay. Number one, we were talking about business foundations. The number one foundation is choosing what type of business entity you're going to be. Now, what I mean by that, there are, there are different names for all of these, but in general, you have a sole proprietor. You have an LLC, you have a corporation, and those are kind of your big basis. Entity types right here, but there are multiple ones within those. So sole proprietors and single member LLCs are what are known as disregarded entities. Now, disregarded entity is a really fancy way of saying that basically your tax returns get filed together. Um, the business itself, while it is a business, it doesn't have its own, you know, business return that has to be done. There's just a couple of extra forms to get processed with your personal routine. And with both of those, they're also known as pass through entities, all the entity types. So those pass through entities mean that the business profits or losses pass through. So think of like there's a bucket, right. And below that bucket, Is your personal bucket. So the top one's your business. The bottom bucket is your personal, and there's a hole in your business bucket, and all of the profit trickles through that hole into your personal bucket for when you file taxes. So your business doesn't owe income taxes, you owe income taxes on the profit that you make in your business. Now, the benefits of a disregarded entity, again, generally a sole proprietor single member, LLC. Your tax costs are really low to do your filing your preparation. You know, you can do it yourself through TurboTax or some of the free EFL software's. If you're going to pay a professional, you're normally looking at something that's not a massive investment. Um, there's still a lot of information that goes into all of that. You want to make sure that your records are accurate. Um, but the, the deadline is the exact same as your personal, you know, In a normal year, April 15th. Uh, if you're filing by the regular deadline, October 15th, if you're filing by the extended deadline, because it's part of your personal return. Now I really like LLCs because they're what I call a transitional entity. So LLCs are great because they are really flexible. So you can be a single member, LLC, which is basically a sole proprietor with the protections of an LLC. Still has all the same simplest. You can be a multi-member LLC, which could be a partnership. It could be, uh, an S-corp election. You could have a C Corp election there, all of these different elections that you can do with an LLC. And the same thing with the corporation, you can elect to be a C Corp. You can elect to be a partnership. Um, that's a lot of times when you see like the Inc period, the incorporated. Generally I'd say probably 75% or more of our clients that we work with are single member LLCs and single wall, single member LLCs, or S-corp elections. Um, but LLC for their entity type. When you're choosing, cause that's a whole bunch of information and you're probably like, kind of losing your mind right now. So how do you choose number one, are you planning to continue this business? You know, have you dipped your toe in? Are you going full time? Is this something that you've been doing a little bit on the side and you now really want to make it legit? Um, I get a lot of questions. Like when should I make things legitimate? As soon as you decide, it's something you're going to be pursuing, like actively pursuing. If you're just testing the water for a couple months, that's your call. You can be a sole proprietor and operate that way. But if you are getting something started that you were planning to do for more than the next year, I would absolutely set yourself up. Now in a couple of states, being an LLC can be a little bit cost prohibitive. Those states being Massachusetts and California, And I think Illinois off the top of my head. So first you're going to want to type in the state that you live in LLC registration, the state that you live in sole-proprietor registration. And you're going to want to look at the fees. And the reason that I call out those three states in particular, Massachusetts, for example, is $500 a year to register, to be an LLC. California. Once you register to be an LLC, you have to pay dread $800. That is not actually a business registration. That's a business tax that California itself charges. And once you become an LLC, you pay $800 on. Every year is registrations. When we file your taxes, you pay $800. It is a write-off as is the Massachusetts $500. But I recommend generally in California, you become a sole proprietor. And then when you get to the point that you're making enough profit to be an S-corp, you then register to be an LLC with an S-corp election and kind of do that all in one fell swoop. Whereas with a lot of my clients, I'll recommend that you do a single member, LLC. Meaning that you're just literally the only owner single member because it's simple and it keeps you protected. And I normally recommend that you do that. And then you can do an S-corp election at a later date when you're making profit. That's great because it means you don't have to change bank accounts. You know, everything is set up your business, entity and name, isn't changing the way you get taxed as the only thing that changes. But like I said, California can be pretty cost prohibitive. Um, you might be wondering, well, like when, when should I even be an S-corp? What is an S-corp? Um, that's something that we dive in really heavily into my, into my course, um, Get your shit together, self study course that, you know, we're talking about everything that's coming from that course right now, so that you can really understand how to own your finances, your business, finances confidently. But in that we discuss escorts and S-corp elections. And essentially for most business owners that I work with, if you're a sole proprietor or a single member, LLC, and you expect to be making 40 or $50,000 in a year, And profits now keep in mind when I say profit it's business income minus business expenses, but those business expenses don't include what you pay yours. So, if you expect your profit to be between 40 or $50,000, an S-corp election is most likely something that you should look at. Um, it comes with some additional costs, but it also comes with some really big tax savings. However, those tax savings continue to grow. The more money that you're making. In profit. So definitely something to, you know, go to confident money podcast.com and check out the course because we do delve really, really deeply into that. Um, it's something that I think probably over 60, 60 or 70% of our clients are escorts now. Um, I'm an escort. It has a ton of tax advantages and I found it to be really beneficial. So. Continuing on with what type of entity you should have. So sole proprietor, single member, LLC, or an LLC with an S-corp election. Great. Those are all really good options. What do you need to consider covered? Do you have employees? Now we dive into this, like the difference between employees and contractors really deeply in the course, but I'm going to give you an overview. I have a lot of clients that will come to us and I'll ask, you know, do you have employees? And they'll say, well, yes, I have contractors. And that's an oxymoron. And you want to be really careful with that because if you have contractors, you have contractors. If you have employees, they are different. Contractors at the end of the day, contractors are business owners themselves. They, the biggest difference between employees and contractors is that contractors have the ability to choose when they work to choose how they work and to refuse work employees don't to nearly the same extent. So if you have a contractor, let's say that you're a wedding event, industry, vendor, you know, maybe you're a photographer and you want to bring on a contractor because it's a flat fee. You don't have to set up payroll. It's a little bit easier. All well and good. Generally, you're going to expect to pay a little bit more to the contractor and because you're not paying for all the taxes, you're not paying for benefits, you know, it's just a flat fee and that contractor can refuse work. So what that might look like is, you know, Hey contractor, I have this project coming up, I need X, Y, and Z done by this date. Is that something you can take? Versus if they're an employee, Hey, so-and-so I have this, this and this that I need, and I need it done by this date. Let me know if there's any issue. So the first one, the contractor has the right to refuse that if they don't have time, if they don't have capacity and they can also choose how to invoice you, like there's a lot of other nuances to it. Whereas an employee you are setting when, how, where, you know, and what potentially they are doing. So there's, there's some more control that can come with that. If you need certain things done differently, there's nothing wrong with having contractors or employees or. We have a mix of both in our company and that's great. They serve totally different purposes, but if you do not truly have employees, then you do not need to be registering for payroll tax accounts. Assuming that you are not also an S-corp yourself. So we've chosen our entity. We've decided if we have employees or not at this point, and that can change. If you get employees in the future, you can set up payroll. It's not like you don't have to have everything done right now. You get to piecemeal. Now do you do legal zoom? Where do you register? Do you have to register at the state? Do you were just here locally? Do you register with the IRS? Do you do it yourself? Do you have someone else do it? Googling will not help here. There is so, so much that comes up with this. Our company, the freelance CFO does business registrations all the time. You know, the price varies, but we make sure that you have the right entity type. We ask questions. We make sure you have, you know, any documents that are needed set up and you're good to go. We register you with the state with the IRS, but if you want to do. I absolutely cannot recommend against legal zoom enough. They charge pretty high fees and their recurring fees per year are much higher than you need to be paying in order for your business filings to be maintained. So, no, I absolutely don't recommend legal zoom. I recommend a, if you feel comfortable doing it yourself, we go into how to do that for quite a few states. In my course, I actually have recordings of how to do it and of how to register with the. So that's something that's in there again, competent money podcast.com. It's in there. Now with that being said, if you feel comfortable doing it, you just need to understand there's going to be a ton of repetition. Generally. It's going to be you yourself. Putting your information in again and again, and again, and again. Now there are a few things to consider. Do you want your home address being listed or your apartment address? Because most of us, our business addresses wherever we're living at the time. You know, there's not a lot of, a lot of people that I work with that have physical addresses that are separate. So there are two things to consider. Do you want to set up a virtual mailbox in your state near you? I did that. I love it. All of my mail for the business gets scanned in. I'm able to pick it up locally if I need to pick it up. If someone sends a package to me. Um, but my address is not publicly. And then the other thing that you need to have you need, what's called a registered agent and it's called something different in certain states, like a registered process server or an agent of record. What that basically means is you need someone with an address in the state that you're registering that has a physical location, not appeal box. They can actually, you know, go to the office and that's, if you were to be served legal documents, Someone needs to be available. Now that can be you, you can absolutely act as your own registered agent. I was my own registered agent up until about a year and a half ago. But again, that lists your address publicly. So if you go look at your state and then registered agent, you will normally find for about 25 to $75 a year, registered agent services. So you can have a virtual model. So that you use that virtual mailbox address for your address? Cause you're the owner. Um, it'll have a couple of other questions. You're like the owner, you're the officer. Um, you're the organizer. And then when it comes to registered agent, that's where if you choose to use a registered agent service, you can put the registered agent information in there and you can put their address. And that way, your address does not need to be listed anywhere in the filing requirements. Again, that's something that, you know, we handle if needed, but it's something that was a little bit of legwork you can do as well. And. You need to register with both the IRS and the state. And this is one that I see happen occasionally actually, where people will do one or the other, you know, maybe you'll register in the state, but you won't have registered with the IRS or vice versa. A lot of times you'll need to do. EIN. And again, an EIN registration is just basically a social security number for your business. It's an employer identification number and you need one. If you're an LLC or an S Corp or a C Corp, you can choose to get one. If you're a sole proprietor, I had one when I was a sole proprietor, because then I didn't have to give my social security number out. It can work in place of that. If you register your business and you can register a business as a sole proprietor. So federal registration, state registration, even if you don't have income taxes, like if you're in Florida or Texas, you still need to register your business at the state level. And then you need to check in your county and city to see if you need to register there. Do you need to register for a business license, you know, or any other sort of business registration and that's normal. Just a phone call. Um, it could feel a little bit weird in this day and age, but phone calls really will get you forward. And I would just call your local city, say that you're confirming, you know, Hey, I'm starting a new business in this area and I want to make sure that there's nothing that I'm missing. Then you have everything. You get your EIN and a matter of minutes, it's a, an electronic document. It's so easy. You don't save that PDF and then save it in like seven other secure places and print a couple copies and like give one to a parent or friend. If you lose that document, it can take weeks to get a new copy from the IRS. So just save it because you need it for freaking everything. It's like having your social security guard. You get your state registration. Sometimes that's immediate. Sometimes that can take a week to two weeks depending on the state and how they process it. So you have your federal registration, you have your state registration, you have your local license or anything else that you need you're then going to need to open a bank account because all of these things. Basically they've created a new entity, right? So in order to have a business bank account, you need these documents, your federal EIN, your state registration, any local licensing, and then check with the bank that you choose to work with and see if they need anything else. Occasionally they will request a certificate of good standing and all that means it's normally like five to $15. You get it directly from the state. You can either get it from their website or call them and ask them where to get it. And it just means that your business registration is active and current, and you're not behind. And you don't have any liens or anything else, you know, sort of nefarious or bad going on, associated with your business. Make an appointment at your bank, go in, open a business, checking, preferably a business savings and ideally a business credit card. All at the same time. My favorite bank to do all of this is chase. I would absolutely love in my heart and soul to find a small bank that did all this really well. The problem is if you choose to use an accounting software like QuickBooks, zero wave, countless others, they don't support all of the banks, especially the smaller. So the bigger the bank that you can go with, the more support and the more connectivity you're going to have, I find as well that with chase, chase is one of the few banks that will give you a decent credit card limits. When you apply as a new business, I have all of my business banking or almost all of it. I'm now moving over to. I had most of mine with Wells Fargo. When I first got started, despite having excellent personal credit. When I applied for a business credit card, I got a $600 limit on my business credit card. And it was a secured card, which means I had to put a deposit down that was equal to $600. They basically let me prove that my business was responsible enough because my business had no credit at all. So Wells Fargo was much tighter on their lens. Chase will really frequently give our, you know, the new clients that we work with anywhere from like a 5,000 to a $15,000 credit limit as a brand new baby business owner, which is much more feasible for the business owners that I work with. And it's just. You can have your checking, your savings, your credit card, all there at the same bank. And it makes it easier if you don't want to use chase. I just recommend looking at whatever accounting software you're planning to use, or even planning to use in the future and seeing if they connect with the bank that you're going to be at. The other thing that I really like about chase. Again, this is not sponsored. Um, the other thing I really like about chase is that they give you the option to add users. So I'm able to be added, are know, other team members are able to be added to clients, chase accounts, with truncated permissions, meaning we can see their activity. We can download, we can connect to different apps that we need to connect to, to get the data that we need, but we can't move. Or we can't approve bill pays. And so it keeps it much more secure while still giving us access to be able to do as much of the job that we can without having to bug our clients or get additional information from them, us bank, bank of America and Wells Fargo have something similar, but they are significantly clunkier and much more difficult. So again, I recommend chase just ease of use credit line and the ability to grow with the bank as you get bigger. So. You've opened your bank account. You have your registration. You're good to go. Now let's talk about anything legal again. I am not a lawyer. I'm also not your accountant or finance professional. This is general information not to be taken as financial advice. So please do your own research. You know, reach out to us, go through the course, you name it. However, the biggest things that I think are really important when you're laying the foundation. Getting a contract in place for you for any contractors you work with making sure that you're protected. I have a contract for all of our employees. I have a contractor agreements for any of our subcontractors that we work with, you know, that can be social media managers that can be graphic designers that can be virtual assistants, online business managers, photographers you. The contracts are in place to protect both of you. And to describe how the relationship should go. Especially if things end up not turning out the way that you anticipated, you know, if there's a late payment, if someone refuses service, if you need to cancel those contracts, detail that out, they also will detail out who owns the intellectual property that's created during that time. You know, if you have a graphic designer creating things for you, you want to make sure that you as the business. On those once payment has been rendered because therefore you, so making sure you have those nailed down, making sure you have client agreements, simply being an LLC is not the have all be all to protect everything. You need agreements in place. And. That takes us to our last item of operating agreements. So if you're a single member, LLC, if you're a sole proprietor, operating agreements are not required, um, an operating agreement is just that. How is your business going to operate? I see these required really frequently with partnerships or multi-member LLC. Essentially an operating agreement can be as simple as some information scribbled down. You know, I, Caitlyn Magnuson owned 50% of this business and you know, you, Sarah Smith owned 50% of this business. We've both put XYZ up in capital. Like it can be really, really simple or it can be very detailed. You know, I have one that I use. That's a really great template that I've modified, that covers all the bases. You know, if someone wants out, if someone, if there's a disagreement, if a vote needs to be held, if a new member needs to be added, you know, how taxes are handled and that operating agreement is there for when you need to be able to make business decisions. And a lot of times when you're needing to reference your operating agreement, Things might be a little bit heated or things might be a little bit more difficult. And so having all of this laid out when you've done it in a clearer fair Headspace gives you guidelines for how to operate your business. It also makes it cleaner. Like if one of you wants to sell, if one of you doesn't want to sell, if one of you wants, like how do you buy out? You know, what all goes into this? So those are all things that you need to be considering, and you should absolutely use. You know, go to the legal page. There are tons of other lawyers out there that work with creatives and business owners. You don't have to work with someone in your state unless you have something really particular, but you do need to work with someone that is familiar with your industry. Same thing I really recommend when you work with a finance professional, finding someone that is familiar with your industry, even if they're not located in your state, we work with clients all over the U S so. Let me know what you thought of this episode. If you loved it, please leave a five-star review. Again, anyone that leaves a five star review gets entered into a drawing at the end of each month for a free strategy session with yours. Truly Caitlin Magnuson. Next episode, we're going to talk all about paying yourself, which is something it's probably the most common question that we field in this business is making sure that you're paying yourself the right way and how to do that.
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And this episode, we're going to talk about all things. Business foundations. And we're going to deep dive into what even should your business foundations be? You know, what, what should you be looking for? What type of business should you register as, what do you need to do on the legal side of things? You know, do you have employees, do you have contractors? Do you need to register like payroll, all the things like where do you need to be set up? So. Pause get something to write with. I don't care if it's your phone and you're just using your notes. If you're a pen and paper kind of person, but get whatever you need. Pause this, come back. And then we're going to take a whole bunch of notes because this episode is jam packed with information. Okay. Number one, we were talking about business foundations. The number one foundation is choosing what type of business entity you're going to be. Now, what I mean by that, there are, there are different names for all of these, but in general, you have a sole proprietor. You have an LLC, you have a corporation, and those are kind of your big basis. Entity types right here, but there are multiple ones within those. So sole proprietors and single member LLCs are what are known as disregarded entities. Now, disregarded entity is a really fancy way of saying that basically your tax returns get filed together. Um, the business itself, while it is a business, it doesn't have its own, you know, business return that has to be done. There's just a couple of extra forms to get processed with your personal routine. And with both of those, they're also known as pass through entities, all the entity types. So those pass through entities mean that the business profits or losses pass through. So think of like there's a bucket, right. And below that bucket, Is your personal bucket. So the top one's your business. The bottom bucket is your personal, and there's a hole in your business bucket, and all of the profit trickles through that hole into your personal bucket for when you file taxes. So your business doesn't owe income taxes, you owe income taxes on the profit that you make in your business. Now, the benefits of a disregarded entity, again, generally a sole proprietor single member, LLC. Your tax costs are really low to do your filing your preparation. You know, you can do it yourself through TurboTax or some of the free EFL software's. If you're going to pay a professional, you're normally looking at something that's not a massive investment. Um, there's still a lot of information that goes into all of that. You want to make sure that your records are accurate. Um, but the, the deadline is the exact same as your personal, you know, In a normal year, April 15th. Uh, if you're filing by the regular deadline, October 15th, if you're filing by the extended deadline, because it's part of your personal return. Now I really like LLCs because they're what I call a transitional entity. So LLCs are great because they are really flexible. So you can be a single member, LLC, which is basically a sole proprietor with the protections of an LLC. Still has all the same simplest. You can be a multi-member LLC, which could be a partnership. It could be, uh, an S-corp election. You could have a C Corp election there, all of these different elections that you can do with an LLC. And the same thing with the corporation, you can elect to be a C Corp. You can elect to be a partnership. Um, that's a lot of times when you see like the Inc period, the incorporated. Generally I'd say probably 75% or more of our clients that we work with are single member LLCs and single wall, single member LLCs, or S-corp elections. Um, but LLC for their entity type. When you're choosing, cause that's a whole bunch of information and you're probably like, kind of losing your mind right now. So how do you choose number one, are you planning to continue this business? You know, have you dipped your toe in? Are you going full time? Is this something that you've been doing a little bit on the side and you now really want to make it legit? Um, I get a lot of questions. Like when should I make things legitimate? As soon as you decide, it's something you're going to be pursuing, like actively pursuing. If you're just testing the water for a couple months, that's your call. You can be a sole proprietor and operate that way. But if you are getting something started that you were planning to do for more than the next year, I would absolutely set yourself up. Now in a couple of states, being an LLC can be a little bit cost prohibitive. Those states being Massachusetts and California, And I think Illinois off the top of my head. So first you're going to want to type in the state that you live in LLC registration, the state that you live in sole-proprietor registration. And you're going to want to look at the fees. And the reason that I call out those three states in particular, Massachusetts, for example, is $500 a year to register, to be an LLC. California. Once you register to be an LLC, you have to pay dread $800. That is not actually a business registration. That's a business tax that California itself charges. And once you become an LLC, you pay $800 on. Every year is registrations. When we file your taxes, you pay $800. It is a write-off as is the Massachusetts $500. But I recommend generally in California, you become a sole proprietor. And then when you get to the point that you're making enough profit to be an S-corp, you then register to be an LLC with an S-corp election and kind of do that all in one fell swoop. Whereas with a lot of my clients, I'll recommend that you do a single member, LLC. Meaning that you're just literally the only owner single member because it's simple and it keeps you protected. And I normally recommend that you do that. And then you can do an S-corp election at a later date when you're making profit. That's great because it means you don't have to change bank accounts. You know, everything is set up your business, entity and name, isn't changing the way you get taxed as the only thing that changes. But like I said, California can be pretty cost prohibitive. Um, you might be wondering, well, like when, when should I even be an S-corp? What is an S-corp? Um, that's something that we dive in really heavily into my, into my course, um, Get your shit together, self study course that, you know, we're talking about everything that's coming from that course right now, so that you can really understand how to own your finances, your business, finances confidently. But in that we discuss escorts and S-corp elections. And essentially for most business owners that I work with, if you're a sole proprietor or a single member, LLC, and you expect to be making 40 or $50,000 in a year, And profits now keep in mind when I say profit it's business income minus business expenses, but those business expenses don't include what you pay yours. So, if you expect your profit to be between 40 or $50,000, an S-corp election is most likely something that you should look at. Um, it comes with some additional costs, but it also comes with some really big tax savings. However, those tax savings continue to grow. The more money that you're making. In profit. So definitely something to, you know, go to confident money podcast.com and check out the course because we do delve really, really deeply into that. Um, it's something that I think probably over 60, 60 or 70% of our clients are escorts now. Um, I'm an escort. It has a ton of tax advantages and I found it to be really beneficial. So. Continuing on with what type of entity you should have. So sole proprietor, single member, LLC, or an LLC with an S-corp election. Great. Those are all really good options. What do you need to consider covered? Do you have employees? Now we dive into this, like the difference between employees and contractors really deeply in the course, but I'm going to give you an overview. I have a lot of clients that will come to us and I'll ask, you know, do you have employees? And they'll say, well, yes, I have contractors. And that's an oxymoron. And you want to be really careful with that because if you have contractors, you have contractors. If you have employees, they are different. Contractors at the end of the day, contractors are business owners themselves. They, the biggest difference between employees and contractors is that contractors have the ability to choose when they work to choose how they work and to refuse work employees don't to nearly the same extent. So if you have a contractor, let's say that you're a wedding event, industry, vendor, you know, maybe you're a photographer and you want to bring on a contractor because it's a flat fee. You don't have to set up payroll. It's a little bit easier. All well and good. Generally, you're going to expect to pay a little bit more to the contractor and because you're not paying for all the taxes, you're not paying for benefits, you know, it's just a flat fee and that contractor can refuse work. So what that might look like is, you know, Hey contractor, I have this project coming up, I need X, Y, and Z done by this date. Is that something you can take? Versus if they're an employee, Hey, so-and-so I have this, this and this that I need, and I need it done by this date. Let me know if there's any issue. So the first one, the contractor has the right to refuse that if they don't have time, if they don't have capacity and they can also choose how to invoice you, like there's a lot of other nuances to it. Whereas an employee you are setting when, how, where, you know, and what potentially they are doing. So there's, there's some more control that can come with that. If you need certain things done differently, there's nothing wrong with having contractors or employees or. We have a mix of both in our company and that's great. They serve totally different purposes, but if you do not truly have employees, then you do not need to be registering for payroll tax accounts. Assuming that you are not also an S-corp yourself. So we've chosen our entity. We've decided if we have employees or not at this point, and that can change. If you get employees in the future, you can set up payroll. It's not like you don't have to have everything done right now. You get to piecemeal. Now do you do legal zoom? Where do you register? Do you have to register at the state? Do you were just here locally? Do you register with the IRS? Do you do it yourself? Do you have someone else do it? Googling will not help here. There is so, so much that comes up with this. Our company, the freelance CFO does business registrations all the time. You know, the price varies, but we make sure that you have the right entity type. We ask questions. We make sure you have, you know, any documents that are needed set up and you're good to go. We register you with the state with the IRS, but if you want to do. I absolutely cannot recommend against legal zoom enough. They charge pretty high fees and their recurring fees per year are much higher than you need to be paying in order for your business filings to be maintained. So, no, I absolutely don't recommend legal zoom. I recommend a, if you feel comfortable doing it yourself, we go into how to do that for quite a few states. In my course, I actually have recordings of how to do it and of how to register with the. So that's something that's in there again, competent money podcast.com. It's in there. Now with that being said, if you feel comfortable doing it, you just need to understand there's going to be a ton of repetition. Generally. It's going to be you yourself. Putting your information in again and again, and again, and again. Now there are a few things to consider. Do you want your home address being listed or your apartment address? Because most of us, our business addresses wherever we're living at the time. You know, there's not a lot of, a lot of people that I work with that have physical addresses that are separate. So there are two things to consider. Do you want to set up a virtual mailbox in your state near you? I did that. I love it. All of my mail for the business gets scanned in. I'm able to pick it up locally if I need to pick it up. If someone sends a package to me. Um, but my address is not publicly. And then the other thing that you need to have you need, what's called a registered agent and it's called something different in certain states, like a registered process server or an agent of record. What that basically means is you need someone with an address in the state that you're registering that has a physical location, not appeal box. They can actually, you know, go to the office and that's, if you were to be served legal documents, Someone needs to be available. Now that can be you, you can absolutely act as your own registered agent. I was my own registered agent up until about a year and a half ago. But again, that lists your address publicly. So if you go look at your state and then registered agent, you will normally find for about 25 to $75 a year, registered agent services. So you can have a virtual model. So that you use that virtual mailbox address for your address? Cause you're the owner. Um, it'll have a couple of other questions. You're like the owner, you're the officer. Um, you're the organizer. And then when it comes to registered agent, that's where if you choose to use a registered agent service, you can put the registered agent information in there and you can put their address. And that way, your address does not need to be listed anywhere in the filing requirements. Again, that's something that, you know, we handle if needed, but it's something that was a little bit of legwork you can do as well. And. You need to register with both the IRS and the state. And this is one that I see happen occasionally actually, where people will do one or the other, you know, maybe you'll register in the state, but you won't have registered with the IRS or vice versa. A lot of times you'll need to do. EIN. And again, an EIN registration is just basically a social security number for your business. It's an employer identification number and you need one. If you're an LLC or an S Corp or a C Corp, you can choose to get one. If you're a sole proprietor, I had one when I was a sole proprietor, because then I didn't have to give my social security number out. It can work in place of that. If you register your business and you can register a business as a sole proprietor. So federal registration, state registration, even if you don't have income taxes, like if you're in Florida or Texas, you still need to register your business at the state level. And then you need to check in your county and city to see if you need to register there. Do you need to register for a business license, you know, or any other sort of business registration and that's normal. Just a phone call. Um, it could feel a little bit weird in this day and age, but phone calls really will get you forward. And I would just call your local city, say that you're confirming, you know, Hey, I'm starting a new business in this area and I want to make sure that there's nothing that I'm missing. Then you have everything. You get your EIN and a matter of minutes, it's a, an electronic document. It's so easy. You don't save that PDF and then save it in like seven other secure places and print a couple copies and like give one to a parent or friend. If you lose that document, it can take weeks to get a new copy from the IRS. So just save it because you need it for freaking everything. It's like having your social security guard. You get your state registration. Sometimes that's immediate. Sometimes that can take a week to two weeks depending on the state and how they process it. So you have your federal registration, you have your state registration, you have your local license or anything else that you need you're then going to need to open a bank account because all of these things. Basically they've created a new entity, right? So in order to have a business bank account, you need these documents, your federal EIN, your state registration, any local licensing, and then check with the bank that you choose to work with and see if they need anything else. Occasionally they will request a certificate of good standing and all that means it's normally like five to $15. You get it directly from the state. You can either get it from their website or call them and ask them where to get it. And it just means that your business registration is active and current, and you're not behind. And you don't have any liens or anything else, you know, sort of nefarious or bad going on, associated with your business. Make an appointment at your bank, go in, open a business, checking, preferably a business savings and ideally a business credit card. All at the same time. My favorite bank to do all of this is chase. I would absolutely love in my heart and soul to find a small bank that did all this really well. The problem is if you choose to use an accounting software like QuickBooks, zero wave, countless others, they don't support all of the banks, especially the smaller. So the bigger the bank that you can go with, the more support and the more connectivity you're going to have, I find as well that with chase, chase is one of the few banks that will give you a decent credit card limits. When you apply as a new business, I have all of my business banking or almost all of it. I'm now moving over to. I had most of mine with Wells Fargo. When I first got started, despite having excellent personal credit. When I applied for a business credit card, I got a $600 limit on my business credit card. And it was a secured card, which means I had to put a deposit down that was equal to $600. They basically let me prove that my business was responsible enough because my business had no credit at all. So Wells Fargo was much tighter on their lens. Chase will really frequently give our, you know, the new clients that we work with anywhere from like a 5,000 to a $15,000 credit limit as a brand new baby business owner, which is much more feasible for the business owners that I work with. And it's just. You can have your checking, your savings, your credit card, all there at the same bank. And it makes it easier if you don't want to use chase. I just recommend looking at whatever accounting software you're planning to use, or even planning to use in the future and seeing if they connect with the bank that you're going to be at. The other thing that I really like about chase. Again, this is not sponsored. Um, the other thing I really like about chase is that they give you the option to add users. So I'm able to be added, are know, other team members are able to be added to clients, chase accounts, with truncated permissions, meaning we can see their activity. We can download, we can connect to different apps that we need to connect to, to get the data that we need, but we can't move. Or we can't approve bill pays. And so it keeps it much more secure while still giving us access to be able to do as much of the job that we can without having to bug our clients or get additional information from them, us bank, bank of America and Wells Fargo have something similar, but they are significantly clunkier and much more difficult. So again, I recommend chase just ease of use credit line and the ability to grow with the bank as you get bigger. So. You've opened your bank account. You have your registration. You're good to go. Now let's talk about anything legal again. I am not a lawyer. I'm also not your accountant or finance professional. This is general information not to be taken as financial advice. So please do your own research. You know, reach out to us, go through the course, you name it. However, the biggest things that I think are really important when you're laying the foundation. Getting a contract in place for you for any contractors you work with making sure that you're protected. I have a contract for all of our employees. I have a contractor agreements for any of our subcontractors that we work with, you know, that can be social media managers that can be graphic designers that can be virtual assistants, online business managers, photographers you. The contracts are in place to protect both of you. And to describe how the relationship should go. Especially if things end up not turning out the way that you anticipated, you know, if there's a late payment, if someone refuses service, if you need to cancel those contracts, detail that out, they also will detail out who owns the intellectual property that's created during that time. You know, if you have a graphic designer creating things for you, you want to make sure that you as the business. On those once payment has been rendered because therefore you, so making sure you have those nailed down, making sure you have client agreements, simply being an LLC is not the have all be all to protect everything. You need agreements in place. And. That takes us to our last item of operating agreements. So if you're a single member, LLC, if you're a sole proprietor, operating agreements are not required, um, an operating agreement is just that. How is your business going to operate? I see these required really frequently with partnerships or multi-member LLC. Essentially an operating agreement can be as simple as some information scribbled down. You know, I, Caitlyn Magnuson owned 50% of this business and you know, you, Sarah Smith owned 50% of this business. We've both put XYZ up in capital. Like it can be really, really simple or it can be very detailed. You know, I have one that I use. That's a really great template that I've modified, that covers all the bases. You know, if someone wants out, if someone, if there's a disagreement, if a vote needs to be held, if a new member needs to be added, you know, how taxes are handled and that operating agreement is there for when you need to be able to make business decisions. And a lot of times when you're needing to reference your operating agreement, Things might be a little bit heated or things might be a little bit more difficult. And so having all of this laid out when you've done it in a clearer fair Headspace gives you guidelines for how to operate your business. It also makes it cleaner. Like if one of you wants to sell, if one of you doesn't want to sell, if one of you wants, like how do you buy out? You know, what all goes into this? So those are all things that you need to be considering, and you should absolutely use. You know, go to the legal page. There are tons of other lawyers out there that work with creatives and business owners. You don't have to work with someone in your state unless you have something really particular, but you do need to work with someone that is familiar with your industry. Same thing I really recommend when you work with a finance professional, finding someone that is familiar with your industry, even if they're not located in your state, we work with clients all over the U S so. Let me know what you thought of this episode. If you loved it, please leave a five-star review. Again, anyone that leaves a five star review gets entered into a drawing at the end of each month for a free strategy session with yours. Truly Caitlin Magnuson. Next episode, we're going to talk all about paying yourself, which is something it's probably the most common question that we field in this business is making sure that you're paying yourself the right way and how to do that.
