Small Business Bestie

28: Bestie Bites - Launching your business with Michelle Smock

• Michelle Smock • Season 2 • Episode 2

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Ready to conquer the entrepreneurial world in Fayette County, Kentucky, and beyond? Michelle's tackling this one alone.... because she is super passionate about making sure everyone gets this right. Discover the key steps to launching your business with confidence, starting with the indispensable operating agreement. This episode offers a comprehensive guide to structuring your new venture, revealing why this document is pivotal not just for internal organization but for securing necessary financial tools like bank accounts and loans.

We promise you'll gain valuable insights from our discussion of the Kentucky Business One-Stop Portal and the support available through local resources like the Women's Business Center and SCORE, especially vital for women and minority entrepreneurs. Plus, hear why we recommend consulting legal pro Matt English in Lexington for expert advice.

Unravel the mysteries of the Beneficial Ownership Information (BOI) Report and learn how to shield your business from scams. We explain why early engagement with a business accountant can be a game-changer, particularly when you're considering an S-corp election. Our handpicked resources, including a detailed guide available on our podcast website, will steer you through opening business accounts and choosing bookkeeping solutions. Don't miss our tips on leveraging the expertise of Cultivate Accounting and the Women's Business Center of Kentucky to support your entrepreneurial journey. Tune in to equip yourself with the knowledge and tools to start your business on the right foot!

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Small Business Bestie is edited by Bourbon Barrel Podcasting

Speaker 1:

Hey guys, welcome to the second ever edition of Small Business Best Bestie Bites. So this week I wanted to give you guys a brief introduction to how to start a business, specifically in Fayette County, but it's very similar for most counties in Kentucky as well as across the United States. It's going to be some version of this, but I did want to talk about this because one of the things that I see a lot online, especially like in those Facebook groups and things like that, was when people ask, hey, I want to start a business, you know, should I hire somebody? Who do you know? The response is almost overwhelmingly hey, you don't need to pay somebody for that, you can do it yourself. 100% agree with that. You absolutely can, and oftentimes maybe even can do it yourself. 100% agree with that. You absolutely can and oftentimes maybe even should do it yourself, so long as you've done your research and you understand exactly what you're doing.

Speaker 1:

As most of you guys know, I own Cultivate Accounting with my husband, neil, and one of the biggest problems that we see over and over and over again is people who have started in LLC and they didn't really understand all of the steps that were required and then, two or three years down the line, it really catches up with them. So I want to make sure that you guys understand that they've misnomered the Kentucky Business One-Stop Portal. It is a great resource. It makes a lot of things very simple, but it is not, in fact, a one-stop. There are more steps that you have to take in order to fully register your business and in order to get all of your you know I's dotted and your T's crossed. So I want to go through all of those things with you today and make sure that you have all of the information. You're absolutely capable of doing this yourself. I'm not telling you that you have to hire anyone to help you with it. There may be situations where you're going to need some help and we can talk about those as well, but I want to make sure you have the information. If you still need more help down the road, you can absolutely reach out to me. I'm happy to help you. I've now accepted a position with the Women's Business Center here in Lexington, so if you're a Lexington woman or minority potential business owner, I can help you free of charge to walk through the steps and make sure that you're not missing anything. So make sure that you reach out to those resources. The Women's Business Center is amazing, but there's also a lot of other organizations out there. We have the SBDC, which is the Small Business Development Center. We have a program called SCORE. So I'm not saying that the Women's Business Center is the only one that offers these types of services. That just happens to be the one that I'm connected with and I think that we're, you know, a really easy organization to work with and I would love to help you if I can.

Speaker 1:

But if you don't need further help, I'm going to tell you all of the steps, from start to finish, to start an LLC in Fayette County. So the first thing that you're going to do is prepare your operating agreement. So an operating agreement is kind of like a will for your company, is like an easy way to think of it. I mean, it does other functions, especially if you're starting a partnership. Your operating agreement is going to line out who owns what percentage of the company, what your responsibilities are as the owners, what would happen if one partner decided to leave the company, things like that. But it also outlines what happens in case of the unexpected right. So what happens if the owner dies? Or what happens if you know there's a life situation and you need to dissolve the company. It kind of lines all of that out for you so that you don't have unexpected things come up and then go oh my gosh, I don't know what to do with this business that I've started, so it's really great for all of those reasons.

Speaker 1:

Also, a lot of times, a required document for a bank. So if you're going to go get any sort of lending or anything like that, even opening a checking account at a lot of banks, opening a commercial checking account, they're going to want to see your operating agreement. Now there's a couple of options here. You could hypothetically use a service like you know LegalZoom or Rocket Law or one of those online pay 50 bucks and get a legal document created. You absolutely can do that. It is not usually the best option, especially if you are opening a partnership and there's a little bit more like particular particulars that go into that. But if you can, I highly recommend having a law professional draft that document for you because it is a very important document for your business and so I think that, coming at it from a sense of like, this is necessary for my business and it's just a part of doing business. It's just a cost of doing business. If you have any way to create that funding to have a law professional take care of that for you, I highly recommend it. I've worked with Matt English here in Lexington with English and English Law Fantastic, very easy to work with, really knows his stuff. I know there are a lot of other lawyers in the Lexington area that you could go to. I'm not saying he's the only one, it's just the one that I've had the most experience with.

Speaker 1:

All right, you're going to get your operating agreement taken care of. Next, you're going to register with the Kentucky Business One-Stop Portal. Again, it's not actually a one-stop, but it does help you take care of several of the steps. So the first thing that the Kentucky Business One-Stop Portal is going to help you do is it's going to help you register your business with the Secretary of State and get your articles of organization. This is absolutely a must-have document. You don't have an LLC or a business until you have this document. So you're going to register with the Secretary of State. That costs $40 to register your business with the Secretary of State, unless you're a veteran, and in Kentucky they actually waive that fee for veterans, so it's free for veterans to register their business.

Speaker 1:

The next thing you're going to do is you're going to switch over and you're going to go to the IRS website. Now make sure that you land on the IRS website, because there are a lot of websites out there kind of making you think that you're doing this and they're kind of scamming you out of some money because they're going to charge you money to get your EIN or your employer identification number. You do not have to pay for this, it's absolutely free. The application is super simple on the IRS website. You basically enter your information and the name of your business and then they give you your EIN at the end. So you'll get your EIN and you're going to need that number in order to take the next step with the Kentucky Business One-Stop Portal. And that next step with the Kentucky Business One-Stop Portal is establishing your tax account.

Speaker 1:

Now, another problem that we see happen pretty often is that people mistakenly select that they need to have a withholding account, a payroll withholding tax account, set up with the state. If you are a single member LLC and you have no employees, you do not need that you, even though you work for your company, maybe you are not an employee of your company, if you are a single member LLC and you are working within your own company, so you do not need a withholding account. And once you get a withholding account set up, if you don't file the returns with them, then they're going to charge you a penalty and a fee and then it's going to be a headache to try to get those accounts closed back down. So make sure that when you're signing up for your tax accounts through the business portal, that you're not selecting a withholding account unless you truly have W-2 employees on payroll for your company, you're also going to register for your sales tax account.

Speaker 1:

Now, even if you don't have sales tax liabilities, you need to go through the process of answering all of the questions on the One Stop Portal. They're going to ask you if you're selling this or if you're selling that, or if you do this or if you do that, and they've got a thousand questions. Just go through. Make sure you answer all those questions appropriately. If you're not performing any of the services or selling any of the products that are liable for sales tax, then they will not establish a sales tax account for you. If you answer those questions incorrectly, then you may accidentally get a sales tax account opened up and then again, if you don't file your reports, they charge you a bunch of money and then you have to go through the process of getting them dissolved and it can be kind of a headache. So just make sure that you understand all of those questions that you're answering and if you have any questions about it, there's no rush Reach out to somebody, ask what you need to answer and make sure that you get it set up properly in the beginning. All right, so those are your tax accounts with the state.

Speaker 1:

Next you're going to go register with your county. So in Kentucky we have local taxes as well as state taxes. So you're going to pay a profit tax on your business profits. So you have to register your business with your county. Fayette County is pretty easy to get your business license and tax account set up. It's kind of one fail swoop. You're getting your business license and then by doing that they're assigning you a tax number, so that application is pretty easy. The one thing that I see people have trouble with on that is that it does ask for a certificate of occupancy to be attached to the application when you turn it in. Even if you have a home office, even if you start your business as a home-based business, you need to include a certificate of occupancy, which is basically like the document that the fire marshal would have given to sign off that your home was habitable when it was first built. So you can go to the land records office here in Fayette County and you can get that certificate of occupancy. You can apply for it online and they can mail it to you, or you can walk in and ask them for it either way, but you do need to include that with your business license application when you're trying to get your business license here in Fayette County. Once you get your business license and your county tax account set up, we also have the Fayette County School Board Profit Tax and so that's a separate tax account. So you're going to have your federal taxes at the end of the year, your state taxes at the end of the year, your county tax at the end of the year and then you're also going to have your school board tax at the end of the year. So just make sure that you follow all of those steps, go all the way through it to make sure that you get all of the accounts set up, that you need to get set up.

Speaker 1:

And now something new that they've done. You've probably heard of the BOI report or the Beneficial Ownership Information Report. So this is basically just something that the federal government is doing to kind of try to cut down on the scam businesses that are out there. So they want to know, like, who are the owners in the company if you are benefiting from the ownership in the company. They just want to know that. They've got a new database that they're keeping. Again, do not get scammed. There's a bunch of people trying to charge money to file this report. It's super easy. It's just your information, your business's information, and then they're going to have you upload a copy of your driver's license, front and back. It's free to fill that out. You do not have to pay for that. So that was a lot of information.

Speaker 1:

Now let's talk about reasons that you may want to get a professional involved. Number one this stuff is all just a little like Greek to you and you don't want to try to figure it out. Cool, hire somebody. If you are anticipating filing an S-corp election from the very beginning, get a professional involved. Okay, because those filings are a little more in-depth and I would highly recommend that you get a professional involved. If you're going to do an S-corp election, getting attorneys involved from the beginning to help you with your contracts always a good idea. And even if you're not going to use their services even if you're not going to use their services get a free consultation from a business accountant. Make sure that you're doing the bookkeeping properly from the beginning, because if you kind of ignore that and then try to come back to it a year later when it's tax time, you're really going to end up costing yourself a lot more money and a ton more stress than if you had just set it up properly from the beginning. So if you're on the fence, you're not sure about that, absolutely reach out and get some help with that as well. So I think I've given you guys all the information.

Speaker 1:

The last thing I want to say is that everything I just talked about, I've created a document. It's on the Small Business Bestie podcast website, so wwwsmallbusinessbestiepodcom and you would go to resources and all of this information is laid out in a document there. I've got just a black and white copy here, but just to let you guys know all of the things that I've mentioned all of the different websites, all of the different resources, all of that. I've got them all linked in this document so you don't even have to try to chase it down and go find it and make sure you're on the right site or anything. You can just click through the step-by-step list that I've created and make sure that you get your entire checklist completed to make sure that you got your business set up properly completed, to make sure that you got your business set up properly.

Speaker 1:

The other thing that I did on that document for you guys is I created a list of next steps. Okay, so you've registered your business. You've set up your tax accounts, you've done your BOI report. Now, what Right? So I've set up some next steps for you to think through. Like, okay, the first thing that you want to do is get your business checking account. You want to separate your finances business and personal as soon as possible and keep them separate.

Speaker 1:

I also talked through some of the bookkeeping solutions that are out there on the document. You can do QuickBooks, you could do Xero. You could do Wave. Wave is a great option when you're first starting out. There's no subscription fee on that one and it's pretty intuitive. You could also just use a spreadsheet, right.

Speaker 1:

So I talked through some of those things and I link out to some of those resources as well, and then I also just talked through how to document things properly as far as your expenses and things like that, so that you're not, like I said, not kind of creating more headache and more problems for yourself down the road. So please, please, please, jump on that website, smallbusinessbestiepodcom, go to the resources tab and grab that document. If you have any other questions, if you need any other help, absolutely reach out to me. I'm sure that you probably follow me on social media, so reach out through social media, reach out to the Women's Business Center of Kentucky and if you need accounting help, as always, cultivate Accounting would be happy to be your small business accountant. I hope that this information has been helpful for you and I will see you guys next time on the next episode of Small Business Besties. Thanks, guys.