Wow, here it is week 4 after starting my business and I finally have a bit of time to sit down and write! And that’s after a 60+ hour week…so that’s something to be ready for too: long hours at first!
Setting Up Your Business – All That Paperwork
I have my business set up as an LLC, filing taxes as an S-corp. I went this route because it’s pretty easy to set up, has some significant tax benefits and protection, and doesn’t take much work to maintain. I’m mentioning the tax benefits here but I’m not going to go into huge detail with it – I had an hour consultation with a tax accountant and believe me, it took the full hour to figure out my business tax strategy. It was $100 well spent!
It’s All In The Name
Before you get too far, make sure you have a good name for your business. The easiest approach is to use your name since chances are, no one else has taken it and even then, it’s still your name and you have the right to use it. But if you want to be more original, you’ll probably want something more creative. In that case, you’ll need to be a little more diligent. Personally, I went with ABD Web Design since a) that’s my initials, b) that’s what I do and c) I am my brand (since it’s just me right now).
Here’s the approach that I use:
- Brainstorm business names.
- Search for available domain names – if no domain name is available for your business name, you’ll have a harder time establishing a web presence.
- Check for trademark issues. If someone else is already using your name, especially in the same industry, you can’t use it. Check at TESS.
- Hopefully by this point you have it narrowed down to a couple of options. Talk to your friends and family, and think about it. Once you’ve made a decision, you’ll want to stick with it. Changing the business name can really be a pain in the ass, so you want to get it right the first time!
Set Up Your LLC
I’ve talked to 2 different friends this week that are also starting businesses and they were under the impression that they’d have to go through a lawyer to set up an LLC. Not so! Creating an LLC in Idaho is easy and only costs $100.
I’ve created 3 different LLCs and have always just done it myself.
- You can find the form on the Secretary of State website. Go to the Business Entities page.
- The first available document on the page is the Certificate of Organization Limited Liability Company – print or open this document.
- Fill it out, making sure to put “LLC” after your name. Sign it.
- Send it to the address indicated along with $100.
- Within a week, your LLC will be set up. It’ll actually show up on the website before you get it in the mail so if you’re impatient like I am, visit the SOS Business Entity Search page & search for your business.
File for S-Corp Tax Designation
By default, the tax designation for a single-owner LLC is as a sole proprietor. Boo! So to file your taxes as an S-corp, you have to fill out a form and send it into the IRS. Download Form 8832 from the IRS website.
Get an EIN
While you’re on the IRS site, apply for your Employer Identification Number (EIN). As a business, you need to have this and it’s easy to get.
You can get more information and apply for your EIN at the EIN Online website. Scroll down to the APPLY ONLINE NOW link.
Register Your Business With Idaho
To pay your unemployment and payroll withholding taxes, you must first register with Idaho. You can do that through the Idaho Business Registration System. While the site obviously needs a major redesign, it’s still loaded with plenty of good information and instructions. It’s a rather lengthy process – took 30 minutes for me. After you get it done, they’ll process your application within a week.
Idaho & Federal Tax Withholding
Although it depends on how much money you’re going to make, if you’re working at your own company full-time, you’ll make enough where you’ll need to pay into your Payroll Withholding. With an LLC running as an S-corp, you are the owner and the employee. As the employee, you get payroll checks. As the employer, you have to write those checks and put aside the taxes that are withheld from your payroll check. You can’t just hold onto that money and spend it on PF Changs though. You have to pay the IRS that money, either quarterly, semi-annually, or annually.
Let me give you a word of advice with this. For each pay period that you pay yourself, take that payroll withholding and put it in completely different bank account. Since this money is being withheld as taxes from your paycheck, you need to consider this 100% off limits. Although you still have possession of it, it’s pretty much the property of the IRS. But at least if you put it in a savings account, you can make a little interest off it! If you come up short on your payroll withholding tax though, the IRS will be calling you and/or sending someone over to talk with you!
After you have registered with Idaho, you can create an account with the Idaho State Tax Commission to pay your Idaho tax withholding.
After you have your EIN, you can create an EFTPS account to pay your federal tax withholding.
Unemployment Insurance & Workers Compensation Insurance
Since as an owner-employee I don’t have to pay into these, I’m not going to cover these topics. However, if you will have employees you will need to make sure you’re covered on these fronts.