5 Tips to Get Legally Legit in Your Business

Hey everyone, Courtney here. I'm here to talk to you about five tips you need to be legally legit in your business. These are great tips for those just starting out in the business world.

Tip #1

So the first tip I have to make your business legally legit is to make it an LLC, or a business entity in your state. People tell me all the time, “That costs too much money. What should I do? And how do I do it?” Simple. Go to your Secretary of State’s website and look it up. What do I need to do to file an LLC? Many times an LLC is efficient and there are some times it is not. But if you're reading this, and you're new in business, an LLC is probably just fine. 

Now, your state might be “California Special.” What do I mean by that? “California Special” means that the franchise tax fee in your state might be too high to file an LLC, and it might make more sense to hold off on that until you’re bringing in more earnings in your business. Again, we're trying to protect you. But for most of you watching this, you're a new business owner in your state so you want a single member LLC. 

Tip #2

All right, here’s the second way to keep your business legally legit. Once you have that single member LLC set up, you need to be getting an EIN number. Now, if you are “California Special”, this isn't just California--I'm not picking on them, you may become an S-corp (because you live in one of those special states). You also need to get your EIN number. Your EIN is going to be your business number, basically a social security number for your business. It will hide your personal identity and let the world know that your business is, in fact, a business. 

Tip #3

Now, the third tip is going to be about banking. People don't like to talk about banking and finances. I'm going to attack them here a little bit. If you're just starting, you have questions. You have questions about how to pay yourself and how to structure all these things. So after you get that EIN, the third piece is that business banking account. Most business banking accounts are going to require that you have an EIN anyway, so aren't you glad that I told you to do one? Now you have it! 

Get your business banking account set up--this is where your money lives for your business, not your personal funds. And your business funds don't go in your personal account.  Keep them separate, we live in two separate worlds. Use the business banking account to pay yourself in the form of a paycheck or a draw. It also pays business expenses. But otherwise, it just sits there. Don't buy groceries with it. Don't order pizza and don't put your Netflix subscription on it. It is your business account; treat it as such. 

Tip #4

Next tip is going to be contracts. Oh, I draft a lot of contracts. And I also do a lot of these other things too. But contracts seem to be the pain point that most people are like, “Oh, no, do I need a contract?” They're scary, right? You're going to hear me say this again and again. Get contracts and set boundaries in your business--they're absolutely necessary. They tell people how to treat you and how you treat them. It is a memorialized agreement about how we're going to interact. They're incredibly important. So once you have that business structure set in place, get your contracts lined out, get them done, make sure that they protect you and that they are in your business name. Make sure they have realistic expectations, contemplate risk, and they just tell people what to expect. The cool thing is, if you're a client base or a service provider, you can probably use the same template over and over again. You can have the same set of rules and same package that you offer many clients. That same set of rules can be duplicated. Super easy way to do it.

Tip #5

Final step--and you might be surprised to hear me say this because you're thinking I’m going to say trademarks. Typically I do. But if you are just starting in business, you don't know what to do, how to begin, and these steps apply to you. Most likely number five is going to be pretty dang important. That's taxes. I know the IRS is affectionately called the KGB, amongst other things. They're scary. They're big, they're out there, and they will find you. So what should you do in your business? Put money back for your taxes. I told you to keep that business checking separate. You take a percentage of that money, put it away for taxes. 

I hope these 5 tips to get legally legit in your business were helpful. Please drop questions, like, and subscribe. Thanks so much!