Copyright © Luanne Lawrence | All Rights Reserved
121 Middleton Way Sacramento CA 95864 US +1.916.698.2809 Luanne@LMLMarCom.com
To get to independence and a real consulting business, there is a whole lot of, well, yuckiness. I am writing this only because so many of you have graciously sent me notes telling me that you have also wanted to make this move to freelancing and are waiting for your own right moment. Before that moment arrives, I wish I would have known and done a few things. I am pleased to share those insights with you. This will not be the most dynamic post, but if you are curious what needs to happen to get established, here is the run-down.
While gainfully employed, you might want to consider doing a few logistical things. It never hurts to be proactive, and all told, it took me about three months to figure it all out and work through the processes. Here’s a summary of the burdensome, cumbersome, troublesome and downright loathsome requirements you probably want to do to be legal, fully taxable and accountable to the state and federal government. Oh, and the county or city too –they also get a piece:
First most important tip I have to share – sba.gov is immensely helpful. I give a huge “Woo Hoo” to the Small Business Administration for trying to help woeful souls like me set up a business.
Make your business choice: corporation, S Corp, LLC, etc. I made the mistake of paying to meet with an attorney on this. Go to an accountant instead. She will help you know what works best for your savings goals and tax reduction needs. Attorneys will offer to help you with your paperwork, but (get this), mine said LegalZoom did the same thing he would, but he would guarantee his work. Hmmm… $350/hour or $50. No brainer. There are many excellent resources, including in the blog section of the SBA to help you establish a good understanding of the differences. Money magazine and others have excellent guides as well. Just google “choose a business structure.” Note: lots of charlatan sites out there with this search, so stick with only sites you know.
Figure out all the federal, state and county/city paperwork. The best resource for your state is your secretary of state’s Web site. It’s pretty much all laid out for you – forms to download or fill out online as well as fee structures. I considered three states and established in California for ease more than anything else. But note that I am paying 8x more to have an LLC in California than if I had chosen Oregon. Each state has fee and tax variation, and you do not need to establish in your home state, so shop around. I may have missed it, but I found limited accuracy in Web sites that tried to summarize all the states and their fees. Too many mistakes. I went individually to each state’s secretary of state pages and made my own charts.
Search out your name – very easy to do. In California, you can do an immediate search on the Secretary of State site and then you need to formalize your request. It took a week for me to do this part of the paperwork. Pretty easy. You can even do a very fast assessment of your chosen name to see if there is anything close to it. You don’t want to get confused with another business, so it’s worth it to search a bit with the words are choosing.
Your local residential district will require you to file a fictitious name request. Go to your local government Web pages to find the forms. This took a long time – a month or so to get it all finished. Only to get a letter saying that it was approved, but I had to, within 30 days, pay to advertise it for four running weeks as a public announcement. I found that the local register for state government (every state has one) is the cheapest way - $20, and they send the needed documentation back to the county so it is worry free.
Determine if the type of business you are starting needs federal licenses. Mine did not, but it’s good to check. State licenses vary greatly so be sure to go back to the SBA and click on your state to find out all you need to complete. Be ready to write the largest check of your new start-up birth at this phase. In California. I will be paying $800/year just to exist. Until I start to make a lot of money and then it goes up. But I will be at $800/year for a few years.
Taxes-I got my tax ID number instantly at the IRS – super easy.
SBA, again, has a reliable series of pages on taxes, broken by federal and state - a reliable guide with forms that I needed.
This is the nuts and bolts part of a new consulting business. I will also write in time about business plans and proactive self-marketing that you can start to consider before you make the giant leap. It cost me about $1,000 for fees to set everything up initially- just for the steps outlined above. And, as mentioned, it took me about three months to work through everything. But I did it piecemeal and not all at one time. I am sure you could achieve everything in a month if you were dedicated.
So, putting lipstick on a pig, this was challenging to navigate on my own. But as I figured out processes, it was actually not hard to follow through. I had budgeted more for starting the business, so the costs were actually less than anticipated. Even the unnecessary visit with an attorney was worth it for the peace of mind that I didn’t need an attorney to make this happen.
To get started, you have to know, well, where to start. Before you make the giant leap to consulting, all this paperwork and necessary first steps can be done while gainfully employed, leaving you more time to build your business the moment you decide to flip the switch.