If you haven’t done so already, you will need to choose the name of your company and get it registered – the simplest version of a company is usually called a sole proprietorship, but the term can change depending on your country. You don’t usually need a business license, unless you have a physical location (physical clinic, store, restaurant) as well. And in the early days, you don’t need to incorporate either (which is more expensive), unless you are at risk of being sued.

If you’re unsure which legal business structure will work best for you, depending on your personal tax situation and the country you’re in (Inc, LLC, Pty, proprietorship, etc.). Then either do an Internet search on your options, here’s a good place to start:

http://www.entrepreneur.com/article/77730

or you can get in touch with your local business development center, or government branch that supports small business, for free advice. Or ask your accountant.

For example, the US Small Business Administration has fabulous resources, online training and mentor help (all for free) like this article on registering your business:

http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/choose-register-your-busi

STOP right now and read the articles above. Decide which legal entity you will use to set up your business and, if you already have a business, decide whether now is the time to incorporate, or not:

• a Proprietorship (easiest and cheapest, but you are personally liable for your company if you get sued)
• an Incorporated company (LLC, C-Corp, Inc. etc., you are not legally liable for lawsuits against your company – unless they can prove personal fraud or negligence)

And while we’re on the topic, here’s a free course on how to write a business plan (if you happen to need one at some point; like when you’re trying to get a bank loan):

http://www.sba.gov/tools/local-assistance?ms=nid3457

But you at least need to get your business name registered as a legal entity and this usually costs less than $100 and can often be done online. This protects your business name from others using it and makes sure you don’t use a name that’s already taken.

Take some time to jot down the answers to these questions:

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Are you going to set up your business as a sole proprietorship, or a corporation?

 

What will be the name of your business (this will appear on people’s credit card statements)?

 

What do you need to do to register your company – is there a phone number you need to call, or website you need to visit to get the ball rolling? NOTE: Don’t set up your company yet, until you’ve got the domain name for it!

Having a registered company (Proprietorship or Corporation) also enables you to pay for lots of stuff with pre-tax dollars as you can write-off a lot of your activities as ‘business expenses’. Again, exactly what you can claim against your taxes will vary according to your region, so either research this online, or hire a bookkeeper or general accountant for an hour to go through it and get you set up.

Deductible expenses might include the business portion of your real estate taxes, mortgage interest, rent, utility, insurance, equipment depreciation, utilities, painting and repairs, meals out (if you discussed business), trips to attend conferences, items bought for research (books, supplements, machinery – anything directly related to your business) and gas and car expenses.

You can see why you’d want to get your business officially set up as soon as possible! YES you can save a LOT of money by charging all these things as “company expenses”. Which means you get to pay for them with pre-tax dollars and save on your personal income tax bill.

Think of it this way: If you get your company to pay for dinner with your friend – where you brainstorm your latest product or service (so it IS a business dinner), you can pay for that dinner using pre-tax dollars. Then the next time you go out with that friend, they can pick up the tab.

So if your meal is a business expense, then your $50 meal costs you $50. But if you paid for that dinner as a personal expense, and you pay 25% of your income in taxes… that meal just cost you $66.67 – because you had to earn $66.67 to be able to pay your taxes and be left with $50 to pay for your meal.

You can see how this would add up quickly! And why it’s worth it for you to research allowable business expenses (also called tax write-offs) in your country, or pay for 1 hour of an accountant’s time to go through it with you. Click here for a quick run-down of what you can deduct in the USA, or in Canada, or in the UK.