Four More Steps #6 The legal stuff An experienced attorney does more than just provide legalese, and will help you envision where your company is going in a practical and realistic way.
It is going to cost you money to incorporate. Even if you do it yourself, it is going to cost hundreds of dollars. The costs include:
Incorporation fees payable to each state you are doing business inCity licensing fees, typically under $50 if you only have a couple of peopleFiling fees for getting a federal employee identification number (EIN)Certificate of Good Standing, which is necessary to incorporate your business in states outside of the one your formed in
One easy piece of advice I can give you is about what type of company you want to be. Unless you plan to go public at some point—that is, sell common shares of your company on a recognized open market, like Google did last year—you should incorporate as a limited liability company (LLC). It is cheaper and easier for both the company and its principals to do so. Unless you think you might go public, or if you just can’t imagine your company without the magical “Inc.” on the end, make it an LLC. You’ll thank me later.
You’ll also need to appoint a registered agent, an entity that any legal requests or correspondence will be sent to. This can be a member of your management team or an attorney. If your team has someone who is comfortable with reviewing legal documents, or if you have a friend or family member who is also qualified, it is by far cheapest to just do this yourself. If not, don’t skimp on the legal protection of your company—retain an attorney. For example, even though I spent over a year while in college working as a legal assistant and have a lot of business experience dealing with the legal side, we still have an attorney. We don’t use him much, but we have him as an extra layer of security, and a quick resource for assistance.
Getting an attorney to help you will cost more, but it will also give you access to someone who is knowledgeable about all of the different paperwork and requirements necessary to be compliant. Perhaps most importantly, an attorney can help you create Articles of Incorporation, which formalize the legal structure for your business today and set a framework for it to grow and change over time. An experienced attorney does more than just provide legalese, and will help you envision where your company is going in a practical and realistic way. They can also quickly provide you with templates and short forms for essential business documents such as:
Client contractsConsultant contractsNon-disclosure agreementsNon-compete agreementsPatent forms and filings
#7 The financial stuff Most design professionals have not cultivated financial administration and management skills, since they don’t engender much interest and excitement. But managing the cash going in and out, keeping good books, and planning ahead are the foundation of all successful businesses. You need to take it seriously and pay close attention to these issues right from the start.
The first thing is handling the money that comes in from clients and goes out for the various costs that your company incurs. The same day your incorporation is complete and you have the necessary identification, open a checking account at the bank. The requirements are different based on your state and type of company, so call the bank you intend to use for specifics. I recommend using a national bank if possible, so that if you move to another state or region, your bank moves with you. For the sake of organization, every dollar that comes into or goes out of the company should run through this checking account. This will give you an easy-to-follow money trail, even if you neglect or make mistakes with your financial management.
The survival of your business depends on getting paid, and the reputation of your business, to some degree, will be built on timely payments. In order to get paid, you need to create and provide invoices that detail:
The dateYour contact/payment informationHow much you are owed/were paidWhat products or services you providedDifferent methods of payment people can chooseWhen the payment is dueThe penalty for late paymentAny additional notes, comments, or annotation related to the products/services or payment
Paying for contractors and supplies is pretty simple—it’s just a matter of sending them a check (many bank Web sites now allow you to do this online, and will even mail the check for you) and then keeping careful track of the date, who was paid, the amount, and the reason for payment. You can either do this tracking in a spreadsheet or in accounting software.