In today’s post, we’ll cover the 5 essential actions in order to do business as C2C within less than 2 weeks.
We’ll walk you through the basics of how to get started and each of the expected outcomes with each step.
Requirements for Doing Businessas an S-Corp
Requirements for each client you work with will differ. I will go into detail about each item throughout the post. If there’s one thing to remember, typically you’ll need to provide the following items prior to starting work:
Business Bank Account
Employee Identifier Number (EIN)
Articles of Organization
Comprehensive Insurance
If you are propositioned for an opportunity, I suggest you ask what their requirements are ahead of time so you may prepare yourself accordingly. See an example of requirements I’ve received from previous clients.
C2C requirements Example
This might seem like a lot but the documentation can be obtained within 2 weeks. Trust me, I’ve had to set up things on a time crunch before with a lot of reading and youtube videos.
However, I suggest anyone seriously considering going into business for themselves start the process before the opportunity presents itself.
Sometimes with clients, they want to get you started very soon and you don’t want to miss out on thousands of dollars in cost-savings because of a few documents that cost you $50 a month.
Steps
1. Register your company with the Federal and State Government
Obtain an EIN
In order to do business, you typically need what’s called an Employer Identification Number (EIN). EINs are social security numbers for businesses essentially.
You can receive an EIN within 5 minutes of filling with the IRS for free! You may want to consult with a tax accountant to determine which setup is best for you. Typically you’ll want to register as an S-Corp or LLC.
Once you complete the online form, you will receive an electronic and physical notice with your EIN. Store a copy and save a version online for safekeeping. You’ll need your EIN # soon.
EIN Letter
Register with the State
Once you have your EIN in hand, you’re now ready to register with the state government. Again, you’ll likely want to consult with an accountant on which state is best for your business. Typically you’ll want to register initially in the state in which you reside.
If you’re unsure of where to begin, I would search for something like “[State Name] register business.”
Many states in hopes of encouraging business have developed business express pages.
These pages are geared towards helping small businesses know what is required by the state to register an S-corp through a series of questions. The cost for registering a business with a state varies from free – $350 generally.
Maryland Business Express
Once you have successfully registered your business, you will receive a series of documents for your record. One of the most important items will be the Article of Incorporation (aka Article of Organization). This document outlines ownership and role within your S-Corp.
Key Documents to Remember
EIN Notice
Articles of Organization
2. Sign up for a business bank account
Now your business is “legitimate’ and no longer living underground. Time to get a business bank account. The business bank account allows you to separate your business income from personal income.
We don’t like to get audited in these virtual streets. Separate bank accounts make for a happy life.
When getting started, I know there’s an inclination to go with your household banks. However starting out particularly if you don’t have a client lined up, I suggest going with a low minimum or free business bank account. This way you have something available but don’t need to overfund this bank account.
You’ll want to choose a somewhat tech-forward bank that can integrate with other tools. The bank at the minimum should be able to connect to integration services like Plaid.
For those not familiar with Plaid, they are essentially the Sign-in With Google feature for banking. By the way, we receive no money from Plaid for mentioning them but they are currently the status quo for connecting bank accounts.
Nado's tip - Go to this Plaid's website and search if your bank is supported
Generally, you’ll need a few items such as your identification, EIN, and the articles of organization to open a business bank account. Here’s a sample of what Novo requires LLC to have to open a business bank account.
Novo’s Requirement
Here’s a list of business banks that you can sign up with today with no monthly fees.
Now that you have a bank, you have to figure out how to track your expenses. A large reason people get audited is due to insufficient receipts and tracking of their expenses.
I know your favorite guru influencer told you that you could deduct your baby G-Wagon but do you have the receipts to prove you used it for business?
What is a bookkeeping service? Let’s start by defining what is a book. When businesses refer to books, we’re speaking of your receipts. These help you track your sales and expenses in one place.
I recommend starting with one of the many free/low-cost options to connect your business’s transactions such as WaveApps or FreshBooks.
Once signed up, you’ll want to connect your new business bank account so that transactions are automatically imported. Now, we’re talking! You have a business that tracks a majority of expenses in one place.
4. Payroll (optional)
Taxes, taxes, taxes.
If there’s one thing people fear, it’s doing taxes. The laws are constantly changing and there’s a lot of paperwork to complete.
Thankfully companies exist to help us out here like payroll companies and accounting firms.
If you have an S-corporation, you are legally obligated to treat yourself as an employee and run payroll at least once within a year.
Investopedia defines payroll as “the compensation a business must pay to its employees for a set period and on a given date.”
When you are an employee on payroll, the payroll company handles the taxes taken from your paycheck such as federal and state taxes.
I recommend for simplicity to use the same service for bookkeeping and payroll. Keeping it all in the family reduces the need to remember another password.
5. General Liability Insurance
I have never been sued and hope never to be. General Liability insurance is needed to cover your ass (CYA) from certain hiccups. Typically insurance for IT contractors is $20-$50 a month. This insurance is important for businesses to ensure that they can legally protect themselves if they happen to be liable for something due to the services they provide.
Popular companies other consultants use for insurance are:
Typically your client will tell you how much insurance you need and if there are any specific add-ons you need to include such as medical expenses.
Certificate of Insurance
Once you are all ready to go, you’ll receive a Certificate of Liability Insurance (COI). A COI like other insurance documents outlines who is insured, how much, and other interested parties in case something is to occur. Typically the client will ask to be added as an additional insured for legal purposes.
If you’ve completed all the steps, you have made it to the finish line and are ready to make some hard-earned cash. Best of luck, you have done what 99% of people won’t do in the name of too much paperwork.
