Setting up a Small Business

So you're ready to take that leap from the corporate world to that of the entrepreneur, eh?  This is a list of the things you have to do to start your own small business.  This is not a comprehensive list, and you can skip some steps, but if you're starting a company, this is a good place to start. Before you do, this is what you'll have to consider:

1. Health Insurance: While COBRA has you covered when you leave, the problem is you pay the entire premium for your company, which with a spouse and kids and depending on your age, could add up to $2000 a month.  Basic health insurance for two healthy adults, one of childbearing years, will run you from $250-$500 a month depending on coverage, which goes up and down with deductibles, choice, and prior medical conditions.  You can buy individual insurance, but it's cheaper to buy it through your company and deduct it.   There's no waiting period if you do it this way, either.  Make sure you don't wait. You don't have to sign up for COBRA for sixty days or ninety days, but if you miss it, you are terminated, which means you have no medical coverage for sixty days.  That means you have to buy HIPAA insurance, which is so expensive you don't even want to know. 
2. Dental Insurance:  Related to the above, but different.  Watch out for waiting periods that could affect major dental work, and whatever you do don't take that DMO.  Dentalplans.com is a place to start, or you can call your dentist and ask them what they prefer.  Less than $30 a month.
3. Incorporation:  Are you going to be a sole proprietor, an LLC, or an S-corporation?  Or maybe an LLC taxed as an S-Corporation?  You can sign up online with the State (MO $105), or you can call a Tax advisor.   I suggest the latter.  Corporations have significant tax advantages, but a lot of risk.  At the same time, many companies, like my former employer, Kforce, require freelancers to be incororated to sign them up as an employee.
4. Tax Advisor:  Just pick up the phone and call one.  Call several.  They are connected with a whole slew of services that will help you get started, and as a CPA, they can help you prepare your taxes.  The key is to speak to one before you start buying, selling, and collecting checks.  Often less than a $1000 a year for basic services.
5. Payroll:  If you're going to get insurance through your company, you need a payroll service, and  Paychex and ADP are there to help out.  Simplify your checks and you'll save money when tax season comes around. ($42 a payoll period).
6. Insurance:  Company Insurance.  Liability and Workman's Comp and sometimes other levels based on the contracts you are signing.  If you have an agent, it usually helps to add the policy to your car and home policy.
7. Bank Account:  You don't have to have a separate bank account, but it sure helps when depositing checks and when you're audited.  Not to mention having an account with your bank lets you get a business credit card, small business loans, and a whole lot more.
8. Car Insurance and Office Space:  Don't forget to carve out a section of your home for your office.  It helps to have an entire room, but talk with your tax advisor on the best way to write off interest and depreciation.  While you're at it, figure out if you want to buy a car and lease it to your corporation, or just write off mileage (Keep a running total).  If you're going to rent out an office, consider HQ Global Workspaces or one of the Executive Suites.  Pricey, but if you can't work from home or need the buzz of the office, these places really help.  $10,000 a year.
9. Phone and Internet Services:  Cable Modem's and a Phone and a Fax may not be cheap, but they are full business expenses.  I suggest Vonage.  $24.99 a month unlimited calls to North America. 
10. Lawyer:  You ought to put one on retainer - just to be safe.  Building a reputation with a lawyer is easy, but having someone read over contracts, send out letters, and protect you from making legal mistakes could save your company.  $1000-2000 retainer
11. Hosting Service and e-mail:  If you have a company, you need a website.  if you're real small, just start a blog and save the money, but if you want a full website, pony up the $8,000 grand for an interactive web designer look for a hosting service ($10-20 a month).  With e-mail you can logon anywhere, and there are lots of free applications with a good service.  We use SuccessfulHosting.com $25 a quarter.
12. Database or CRM:  There are a lot of options, from Access and Outlook to ACT!, Goldmine, and my selection, SugarCRM.  SugarCRM is opensource and a free download.  I had to clean the demo up, but it's an easy system with cross-functionality, clean, and easily upgraded.  Saved me that $200 it did, and it's part of my hosting service.

If you're dizzy by now, it's because there is a lot to do, and it costs a lot to get started.  But it is fun, and every decision is signed by El Presidente (that's you).  The excitement lasts long enough to get everything done.  Now all you need is clients who write you checks.

Good Luck, and contact me at jim@recruiting.com if you have questions.