Starting and Naming a Business
Welcome to the final post in our series "Back to the Basics." Today I'm going to answer some of the frequently asked questions we get about starting and naming a business.
Many times you get stuck thinking about all the what-ifs. You need to be where you are right now. So when you are forming your business, and naming it, you need to do that based on your circumstances right now. Not all the what-ifs, maybes, or should be, but right now.
My first piece of advice is that when you're forming your business do it for where you are right now.
It's not a lot of work to form a business. There's a couple of key things that you need to do. You can start real simple and then, later on, you can change it.
Many of my students in Bookkeeper Training School get stuck on if they need to create a DBA or LLC, on naming the business, and if they should use their home address or get a PO Box, among many other things.
Decisions you need to make when starting and naming a business
Let's go through some of the decisions that you need to make when you start a business.
The first thing you need to do is decide on the name of your business. For a very long time, my business name was Kristin Ingram CPA. That was my business's name from 2006 until the end of 2020.
Maybe you don't like your name or you feel like your name is too common. Or you really don't want to use your name. And that's fine. However, using your name as your business name makes it much easier to start your business. Because if you decide you don't want to do an LLC, you don't need a DBA or anything. You can just use your name.
At the end of 2020, I decided to change my business name and form an LLC. I named my business Marginful Business, LLC. The reason I formed an LLC and remember, this is not legal advice. You have to make your own decisions. But the reason that I formed an LLC was that Jeff and I are starting to accumulate assets. I'm also starting to hire contractors in my firm. And so now that it's not just me anymore, I need a little bit of the structure around me. Also, we have assets that we want to protect. Having an LLC will help protect those assets.
When starting and naming my business, do I do an LLC or DBA?
Should you form an LLC or a DBA? A DBA stands for doing business as. That means you're not using your legal name. It's you doing business as another name. Some states call it the fictitious name. What a DBA does is allow you to legally use another name that is not your own for your business.
How do you decide if you should form an LLC or a DBA? You need to think about the right now, not the later. Do you have things or assets you need to protect? Are you going to be hiring people? Those are the kinds of things that you need to look at.
Maybe you just want to get an LLC. You have to look at the cost of creating an LLC in your state today and what the cost is going to be going forward. For example, in California, it is incredibly expensive to have an LLC. They have an $800 per year franchise tax. In some states, it's very expensive to form your LLC. And then it's expensive to keep it going. In Massachusetts, it's $500 to form it and then $500 a year. And so for some people, that's a lot of money to get started.
But it just depends on where you are right now, what you need to protect. If you start with a DBA, you can create your LLC later on.
When starting a business, how do I go about naming a business?
If you don't want to use your name for your business, how do you come up with a business name? There are a couple of different ways you can do this.
Know who your ideal customer is
First of all, you need to know who your ideal customer is. I have a lot of people that fight me on this, but you need to know who your ideal customer is. Your ideal customer is that person that you would love to work for. Think about:
- Who would that person be?
- What industry would they be in?
- How many kids do they have?
- What type of business do they run?
Basically, you create a fictitious person, or you could use a real person if you want to. For example, maybe you have an insurance agent in town who is just amazing. And if you could get her as a client, that would just be the ideal. And then you build this ideal customer. The reason that that's important is that when you're doing your marketing and coming up with your logo and colors, or what you're going to post on Facebook, you're always going to go back and make sure that your ideal person will be attracted by this marketing, logo, and colors.
Naming your business
Once you know who your ideal customer is, then think about what are some words or terms that would attract this person to your business. So if you're doing bookkeeping services or any services for that matter for this ideal customer, how would that make them feel?
What will that do for them? And just jot down some words that you think will work and see if you can get those into the name of your business. If you're going to do location-based, see if you can incorporate that into your name.
In Bookkeeper Training School, we have one person in the group who named her business Blue Ridge Bookkeeping. She named it that because she's in the Blue Ridge Mountains. Another one of our members has Pink Elephant Bookkeeping, and she named it that just because the name resonated with her.
You can play around with geography, or where you live. Maybe you can incorporate your state as part of the name. Or maybe the name has nothing to do with a location.
There are lots of different things that you can do with your name. You just got to play with things. And one of the cool things about being in Bookkeeper Training School is that you can post what your name is and get some feedback on it.
I am done naming my business, now what?
Once you've got the name you want to use, you need to do a Google search. You want to make sure that nobody else, especially if it's local, has that name. Also, you want to make sure you can get a good domain for your business.
What domain extension is best?
There are many new domain extensions out there. There is .ninja, .mom, or even the more common ones like .net, or .org.
However, when picking your domain extension, most people will usually type a .com, because that is what is most familiar to them. If you do use a different extension that is not .com, then you need to make sure that your audience is aware. Especially if you use the newer extension available. Your audience needs to know that it really is an extension.
Typically the .org is used for non-profit businesses and non-profit organizations. So try to stay away from a .org.
If you aren't going to use a .com but will go with a .net or .co, then make sure that the .com is not active. Because people automatically default to.com. So if you want to buy the domain with a .net or .co, because there's nothing really going on with the.com, that's okay. You're just going to have to make sure that you really emphasize the fact that it's a .net or .co.
If I'm starting a business, do I need to register it?
Once you've decided on the name, and have decided if you are going to create a DBA or LLC, then you need to register it. Typically you register the DBA at a county or town level, and the LLC is registered at the state level. But it all depends on your government.
I've registered my business, now what?
So you register your business and then once you register your business, you get your EIN. EIN stands for employer identification number. Even if you don't have employees, it's called an employer because that refers to business. And the EIN is actually used for something else with the IRS. Your EIN is like a social security number for your business. And it's free to get. You just need to go to irs.gov.
You don't need to hire someone to do this for you. You can do it yourself. But you need to make sure you get an EIN for your business. Even if you just use your name, you need an EIN. If someone hires you under contract they might need to send you a 1099. That means they're going to want either your EIN or your social security number. And with all the fraud out there, you want to protect your social security number as much as you can. So you don't want to be giving them your social security number. Having an EIN is going to help you protect that.
Should I use my home address or get a PO Box?
If you do an LLC, you need to include all the information. As the business owner, your personal information has to be on including as well as your home address. So if you're going to register an LLC, yes, you can get a PO box for your business. But a lot of times they want you to have an address. You can't just have a PO box.
If you have an LLC your personal address is going to be listed on all the forms that you fill out, and it will be available for people who know how to search for that information.
If I'm starting and naming my business under an LLC, do I need a registered agent?
As you're forming your LLC it will ask for a registered agent. States require a registered agent because they want a physical place where they can drop off important paperwork. So if a business gets sued and they need to serve the business with court papers, they want there to be a place where those can be delivered.
If you want to use your home address, you want to be your own registered agent. I have been the registered agent for all of my businesses. And again, this isn't legal advice.
Registered agents are typically pretty inexpensive because honestly, they're not doing a whole lot for your business. Literally, you're paying a fee to be able to put their information on your form just in case something might happen at some point. Typically a registered agent is about $35 to $69 a year. And their only purpose is to collect official mail from the state or if you ever get served with papers in a lawsuit. That's their whole job. So if you want to hire a registered agent, you can Google a registered agent and your state, and you'll find some, but I've always been my own registered agent for my businesses. And like I said, I've been in business for 17 years. So just keep that in mind.
Do you have any more questions on starting and naming a business?
If you have any other questions about this, I'm happy to answer them. Just leave your question in the comment below or fill out my form at askkristin.net.
If you're in Bookkeeper Training School, a lot of this stuff is in the course. I know some of you are trying to figure this out on your own after watching the free training. And so I wanted to give you a little bit of that to help you on the journey.
If you want more formalized learning with us, please go to bookkeepertrainingschool.com, check out the free training that we offer, and let us know if you have any questions.