Starting a business is thrilling. You’re finally taking your business idea and turning it into a reality. And to do that, you have to check some exciting tasks off your list, like thinking of a name and decorating your office space.
Unfortunately, not all tasks are going to be “fun” ones. There are a number of behind-the-scenes responsibilities that you can’t afford to ignore. And yes, some may even consider these tasks—*gasp!*—boring.
5 “boring” startup responsibilities
Everyone’s preferences are different. Some people aren’t bothered by tedious tasks like paperwork. Others? Well, they procrastinate on these types of tasks.
But when it comes to startup responsibilities, you can’t put them off for long. So when you get to the “boring” stuff, hunker down and crank them out to set your business up for success. This includes tasks like:
- Choosing a business structure.
- Signing up for tax accounts.
- Shopping around for insurance.
- Getting the necessary licenses and permits.
- Setting up your accounting books.
Take a Fresh Look at Your Business Finances
1. Business structure
Going solo? Starting your business with a partner? Whatever your situation, there’s a structure for it.
And, you need to choose a business structure before you can dive into your startup. In fact, selecting your business structure is one of the first decisions you need to make. Your business structure influences everything from taxes to control.
You can choose between a:
- Sole proprietorship.
- Partnership.
- Corporation (S or C Corps).
- Limited liability company.
Before choosing a business structure, ask and answer questions like:
- Are you starting your business with someone else?
- Do you want limited liability?
- How much control do you want over your business?
- What’s your vision for your company?
Not sure how to choose? Consider talking with a small business lawyer about the right structure for you and your business. And, a lawyer can help you register your company with your state or locality, depending on the structure you choose.
2. Tax accounts
EINs and tax ID numbers, oh my! When you start a business or hire employees, you may need to sign up for a number of key tax accounts, including:
- Employer Identification Number (EIN).
- State and local tax ID numbers.
You must apply for a federal EIN with the IRS if you have employees, structure as a corporation or partnership, file certain tax returns or meet other specific IRS requirements.
Consult your state and locality to find out whether you need business tax ID numbers and how to apply. Most states (and many localities) require businesses to register for things like state unemployment insurance (SUI) tax account numbers and state income tax withholding tax account numbers.
Additionally, consider enrolling in the IRS’s Electronic Federal Tax Payment System (EFTPS) to make federal tax payments electronically.
3. Insurance
The unexpected happens all too often in life. Your business, unfortunately, is susceptible to threats like natural disasters, pandemics, lawsuits, and cybersecurity attacks. If you’re hit financially, insurance may help cushion the blow.
Business insurance can help protect your company from financial losses. In fact, there are a number of types of business insurance available—and it’s up to you (and some experts, if applicable) to know which ones to get.
When starting a business, take the time to research the types of business insurance you need to safeguard your company from future threats.
Shop around for coverage like:
- General liability insurance.
- Errors and omissions insurance.
- Commercial property or auto insurance.
- Business interruption insurance.
You won’t need every type of business insurance out there. To determine what to sign up for, consider your business’s specific needs. And, it doesn’t hurt to ask an expert, like an experienced business owner, lawyer, or insurance agent.
4. Licenses and permits
Business licenses and permits let you operate your company in your locality or handle certain required tasks, like collecting sales tax.
The licenses and permits you need depend on factors such as your locality and industry. You may need to apply for things like:
- Business license.
- Sales tax permit.
- Building permits.
- Professional licenses.
…And so on. Talk with your state and locality to find out what your business needs to stay compliant.
5. Accounting books
Interest. Penalties. The IRS doesn’t mess around when it comes to penalizing businesses for accounting mistakes.
The best way to avoid making accounting mistakes, like errors of omission and data entry errors, is to keep up-to-date accounting books. Not the most interesting thing for a business owner (unless, of course, you run an accounting firm), but it’s one of the most important things you can do.
When you start a business, you need to set up your accounting books so you’re ready to record transactions.
To set up your accounting books, you should:
- Choose an accounting method (e.g., accrual).
- Determine how to record transactions (e.g., accounting software).
- Create your chart of accounts.
- Open a separate business bank account.
Consider talking with an accountant to ensure your books are set up correctly. And once your books are set up, remember to be diligent about tracking transactions.
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