11 things to consider when starting a small business

1. Consider choosing a business name that has flexibility

To save money, or because you already have brand recognition of your name, and possibly because of the inborn narcissist in each of us, you may want to have a company name with YOUR name in it, like "Jane's Services." Not a bad thing, but you do need to aware that you need to have your LAST name AND the specific service in your business name in order for you to avoid filing a DBA. So Jane's Services would need a DBA, but Jane Doe's Painting Services or even Doe's Painting Services, would not. At least that is the current law in Massachusetts. You should research the requirements for your specific state when opening your business (including in MA, since laws may change).

However, if your business is not straight forward or your name has no brand value, then you might want to consider naming it something evocative or catchy, like Apptopia or Bizzistance. Evocative business names allow you to expand your service or product offerings in the future, without changing your marketing collateral (business cards, pamphlets, etc). For example, if you opened Jane Doe's Painting Services , and then later decided to add cleaning services, then you'd have to have another set of business cards made for Jane Doe's Cleaning Services . Or change your business name to Jane Doe's Cleaning and Painting Services . And what if you decided to add on another service? You'll either have multiple business cards or one very long name for your business or just a business card without any company name on it. (That would be bad for name recognition, so I wouldn't recommend it.)

So, if you want maximum flexibility, choose an evocative business name, particularly if your products or services are diverse.

UPDATE: 5/26/2020

With COVID-19 and the government loan programs available to small businesses, you will need a DBA to prove that you own a legitimate business. Hopefully, nothing like this will ever happen again. But, if it does, you will find it extraordinarily helpful to have your DBA business certificate up-to-date and on hand to help you apply for the government programs you qualify for. So file a DBA, regardless of whether or not your last name is in your business name. It will save you headaches down the road. 

2. You may need to change your business name based on available domains

If you're a business providing online services, your domain name is an integral part of your brand. I went through a brainstorming session in my kitchen back in July of 2017. I knew I wanted to provide assistance to small businesses and came up with a list of about 20 evocative names and then searched their availability in GoDaddy. None on my list were available as dot com. But then I thought…hey…maybe BizAssistant.com ? Nope taken. Ahh, but Bizisstance.com was available! (Yes, that was my original business name, with one Z and two S. Which is another story. Read here.) To make a long story short. I started with Bizisstance and ended with Bizzistance as my official business name.

You don't have to build a website right away, or even at all. But you should reserve the domain name after you complete #3, so that if or when you're ready for a website, you'll have the domain that matches or correlates to your business name.

Additionally, even if you never build a website for your business, you can at least treat yourself to a custom business email address. Learn more here.

3. Test market your business name (and product names)

If you coin a name for your business, make sure that it is pronounceable. If your clients can't pronounce it, they'll be reluctant to refer people to you. I didn't test market "Bizisstance" before I printed up business cards or file my DBA and I paid a price for that. Luckily, actual out-of-pocket expenses were small. But the legwork and other administrative hassle to change it were time consuming. Read here to learn from my mistake.

Test marketing and getting feedback on your business name or product name doesn't have to cost anything. Run your names by your friends and relatives. Make sure you print the name on something and have them read it out loud.

4. Make a conscious decision to become an LLC, or not

This one could be #4 or number #10 on your list depending on whether or not you want to invest $500 up front or get a little traction with your business before filing. I'm going to put it as number 4 as I believe that if you're handling money or work with products or services that integrate with your clients' finances (e.g., bookkeeping, ecommerce), then it is a no-brainer to file for an LLC from the get-go. I didn't do this when I started my business, and, once again, had do extra legwork and redo some steps once I decided to make Bizzistance an LLC.

There are two types of corporations, becoming an LLC (Limited Liability Company) or Incorporated. I'm not a lawyer, so below are my simplified reasons for choosing to become an "LLC" instead of an "Inc." Consult with a lawyer or do your own Googling to make an educated decision for your company.

The primary benefit of becoming an LLC (imo) is that becoming an LLC legally separates your personal assets from your company assets. Which means that if a business creditor sues you, they can only go after your company assets, not your personal assets, e.g., your house, your personal savings, etc. (Bonus Tip: If you're a homeowner you should have already filed a homestead exemption for your primary residence with your first mortgage. If you haven't, before you open your own business would be an ideal time to do so).

Other benefits of becoming an LLC instead of incorporating, are that (1) you don't have to file an annual report and (2) for tax purposes, you can file your company taxes through your personal income tax return.

As I understand it, tax filings are more complicated if you Incorporate versus becoming an LLC. The main benefit of incorporating is that you can sell stock to investors. And I'm sure there are other benefits, but as my goal was to have my own business and work for myself, LLC was the better route for me. That said, your company can still be an LLC if you become a multi-million dollar business. You just can't sell stock to raise capital as an LLC. I'm oversimplifying, but if you only want to work enough to make ends meet and have enough for leisure activities, becoming an LLC may be all you need. But if you want to become the next Google or Amazon, then incorporating may be the better route.

You can always start as an LLC and then become an INC. But, once again, you'll have to redo government, town, and banking paperwork, along with some marketing materials.

5. Obtain an EIN (Employer ID Number)

Ok. So you've decided to have an evocative name for your business and maybe decided to become an LLC. And you've purchased (or at least checked on the availability of) a correlating domain. Now you have to obtain an EIN before you file the DBA. Why? Because DBA filings require a social security number or an EIN. DBAs are public records, which means that anyone can request access. Do you really want your social security number out there for the asking? I thought not.

The good news is you can apply for EINs for free. Click here to apply.

Finally, now you're ready to file a DBA. A DBA certificate or "business certificate" filing is only $30 in my town. From a quick Google Search, with the exception of a few outliers, most DBA certificate filings are of similar nominal cost.

You should do this even if you become an LLC (#4 above). For example, I have a DBA for Bizzistance LLC dba Bizzistance. That way, my company is a legitimate entity whether there is an LLC or not. And this gives you the option of omitting the LLC in your business stationery if you so choose.

7. Decide on a bookkeeping software

If you're a service provider, you will likely need to provide estimates and invoices. And every business needs to keep books. And most software out there now integrate all three: bookkeeping, estimates, and invoices. But most of those software are NOT free. Here's a list of bookkeeping apps.

Bizzistance chose Wave (Waveapps.com) as our bookkeeping software. Not only does it do what paid software can do, but it is also FREE! It's absolutely amazing for free software.

There are only two cons:

1. The current dashboard is not mobile friendly. You need a laptop or tablet to create bookkeeping, estimates, and invoice records.
2. Does not integrate with Eastern Bank (a popular bank in Massachusetts)

Of note, even though CREATING estimates or invoices in Waveapps cannot be done on a mobile phone, the INVOICES that are created ARE mobile-friendly, with integrated payment processing, so that your customer can pay the invoice by simply clicking the credit card or ACH tab or button in the invoice. This feature definitely expedites payments for you.

8. Choose a small-business friendly bank that is truly small-biz friendly

After filing your DBA, you can now open a bank account for your business to deposit monies. You can certainly wait, as I did, to get your first check to deposit before you open the account. My suggestion is to open the account after you secure your first paying customer, but before they pay you, so that you can deposit their payment as soon as you receive it.

Visit your local banks and credit unions and compare their service offerings. To minimize your fees and your need to drive to the bank, my suggestion is to find a bank that:

1. Does NOT charge you a monthly maintenance fee
   
2. Does NOT have a monthly minimum requirement
3. Gives you a generous transaction allowance before charging fees
   
4. Offers mobile deposit
5. Gives you an associated debit card at no charge
6. Is compatible with your accounting software

Bizzistance visited HarborOne, Eastern Bank, a local credit union, Bank of America, and Citizens Bank.

Bizzistance chose Citizens Bank, as it satisfied ALL the criteria above and had the most generous transaction allowance before they applied fees (200 transactions).

Ranking of the other banks against criteria:

1. Eastern Bank was a close second (100 transactions before fees applied)
   
2. HarborOne has a great marketing package for small businesses, but their offering was NOT small business friendly as they charged for both maintenance and transactions from the get-go
   
3. Bank of America was the least small-business friendly, with maintenance and transaction charges on top of a minimum balance
4. Local credit union - They're at the bottom of my list because they didn't offer any online banking services, which are very important for me 
   

Update 7/15/2020



Earlier this year, Waveapps changed banking integration partners. Rockland Trust is now compatible with Waveapps! Rockland Trust offers the same benefits as Citizens Bank PLUS they offer a set of free checks with every new checking account you open with them. At Citizens Bank, you don't get free checks. Rockland has a reputation for great customer service and civic-mindedness. They run summer and winter drives to help local kids. I opened accounts at Rockland and am in the middle of transferring my Citizens accounts over. Difficult because I can't write checks to quickly execute the transfer. What a PITA.

9. Get a second number that rings your cell and/or home phone

If you have only one or two people working for your company for the foreseeable future, then consider getting a Google Voice number to serve as your "business" number. Google Voice ("GV") is a free product. You do need to do a little bit of configuration to maximize the usefulness of this product. And GV can be configured to ring your home phone (if you still have one of those) as well as your cell phone or as many phones as you want!

I configured GV so that when someone calls me using the GV #, the GV # is the number that shows on my phone (not the caller's), so that I know it's a business call. You have to set up the GV# as a contact in your phone and assign it a specific ringtone for this to work like a second line. I use Google Voice because it's free and I know how to configure it. However, if you're not technically inclined, you can always subscribe for a second line from Godaddy or Sideline so your website or business card contains a public number and you can keep your private cell phone number private. Or you can hire Bizzistance to help you set it up for a small fee.

Of note, even though GoDaddy and Sideline costs money ($4.99 and $9.99 per month, respectively), since the phone number will be a dedicated WORK number, you can deduct 100% of the cost of the second line from your taxes. I went the Sideline route for about 8 months and then changed GV to save money. When you're a startup, every little bit out of your pocket is noticeable.

10. Set up a "dedicated" home office for tax deduction

If you're operating your business from your home and you have an extra room or extra space in your house that you can "dedicate" as office space, you should do it. The IRS allows deduction for up to a 300 square foot space for a dedicated home office. The key word is "dedicated." This means that if you have a 30' x 10' kitchen with a desk in it, you can't deduct the entire 30' x 10' kitchen as your office. You can, however, deduct for your desk space. So if your desk with chair is 4' x 5', you can deduct 20 sq ft. Therefore, if you have a spare room where no one sleeps in, you can deduct the square footage of the entire room (up to 300 sq ft). But once you have a bed in the room, you can only deduct the desk space and say, your the square footage for your office book shelf and filing cabinet, and any square footage taken up by your sales inventory. Therefore, if you can, treat yourself to as large a dedicated home office as you can to maximize your home office tax deduction. You're worth it!

11. Buy the necessary business insurance for your type of business

You've heard of general liability insurance. General liability insurance can cover expenses related to non-employee injuries that happen at your property, damage you cause to someone else’s property, libel, and slander. In other words, it can cover some of the most common lawsuits that arise from everyday business activities. [Source]

However, you've probably never heard of Errors & Omissions (E&O) insurance. If you're a company that deals with money or data, you need E&O insurance. Errors and omissions insurance is a type of professional liability insurance that protects companies, their workers, and other professionals against claims of inadequate work or negligent actions. [Source]

As a 1-person business working out of your home, you'll usually need only one or the other insurance, not both. My rule of thumb is that if your business deals with tangible property, you need general liability insurance. If your business is to provide services where the deliverable is something that is read (like websites or tax filings), then you need E&O insurance. If you own a brick and mortar business that provides deliverables that are read, then you may need both insurances.

Of course, you'll need business cards. But that is not a "consideration" but an "essential" if you're starting your own business.

Good luck with your new business! I hope this demystified some things for you and gave you insight into things you may never have considered.