Work for Yourself

20 Questions You Must Answer to Start Your Own Business

Paul V. Zylstra

• Publisher: Christian Faith Publishing, Inc.
• Year: 2021
• Print ISBN: 9781098066697
• eBook ISBN: 9781098066703
• Topic: Personal Development
• Subtopic: Personal Success

Do you have a skill, product, or idea that you think may be valuable? If you do, you may want to consider taking control of what you are selling. Work for Yourself: 20 Questions You Must Answer to Start Your Own Business may be the resource you are looking for to help you create and manage the business that will let you realize your personal goals and dreams. Work for Yourself is not a book that suggest things you can do to make money. It is a book to help you get off the ground with a business once you know what you want to do. It is also a no-nonsense book that will help you decide if owning your own business is right for you. Within this short book are topics on selecting a business structure, creating a business plan, dealing with taxes and payroll, bookkeeping, what to do about health insurance, marketing, and much more. If you have something that you can provide that is valuable to others, Work for Yourself can help you profit from it.

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The Questions Only You Can Answer

Following are twenty questions that should be considered before starting a business. These are not easy questions to answer, and it is not an exhaustive list. You will most likely think of things that I have not considered. Although I tell the reader how I answered these questions and why, my answers may not fit your business. You need to find a lawyer, an accountant, or both for most of these questions. I am neither of these, so let the reader be aware of the fact that I am limited by my own experiences. Read carefully and consider thoughtfully all questions that pertain to you and your business.

1. What Kind of a Business Structure Do I Use?
   There are at least six basic types of business structures to choose from:
   • Single proprietorship
   • Partnership
   • Limited Liability Partnership (LLP)
   • Limited Liability Company (LLC)
   • Subchapter S Corporation (S-Corp.)
   • C Corporation (C-Corp.)

If your business is without liability and you are on your own, then a single proprietorship may be right for you. If you have a low liability business and you trust your partners, a partnership may be right for you. The primary reason to incorporate is to limit the damage from potential lawsuits. Since no one is immune to legal action, you need to plan ahead to protect your assets. Anybody can sue anyone at any time for anything. Each state has its own laws dealing with these issues. You will need to ask an accountant and a lawyer which is best for you.

I have found that an S-Corp. works best for me. The advantage that I have found with an S-Corp. is that all of the income from the business passes directly to your personal return without being taxed twice as it is with a C-Corp. In most states, the LLC and the LLP work the same way. The payroll taxes are the same for non-incorporated business structures as they are for incorporated, except the non-incorporated structures do not declare a separate profit. Non-incorporated structures pay the payroll tax on every dollar.

Prior to the invention of Limited Liability Companies, the S-Corp was a favorite among professionals for a business structure. My business was incorporated long before the existence of the LLC or LLP. According to the lawyer who set up my corporation, there was no real reason to change.

Your first decision to incorporate may make the most sense today, but as the laws change, other structures may work better. I have a friend with high medical expenses and special medical problems that need to be deducted. When he incorporated thirty years ago, he found that a C-Corp. worked best for his medical deductibility. With the evolution of corporate structures, tax laws that have changed four times at the Federal level, and the extended involvement of the government into health care, the C-Corp. may not be the best structure today. Unfortunately, you will not have a crystal ball to tell you what the future holds. If you guess, you will likely guess wrong. The only thing you can do is what my friend did. Make the best decision you can at the time and make it work.

Whatever business structure you choose, make sure that it limits your liability as much as possible and that it maximizes your income as much as possible. If you know that you will need to hire employees, plan on incorporating and adding this fact to your choice of business structures. Always leave yourself the opportunity to both grow in the good times and pair back in the inevitable lean times. You are not stuck with a business structure, but it may be expensive to change. Choosing a business structure may not be your most important decision, but it will be among the first of your more important decisions.

1. How Do I Track Cash Flow?
   Again, you need to consult with your accountant, but for a service-oriented business, a cash basis accounting system seems to make the most sense. That means that you only account for transactions as the money changes hands. Using the accrual method, you account for transactions from the time a purchase order is released or an invoice is submitted. This may work better for sales with an inventory behind them or where the IRS forces you to do it.
   I have used Quicken1 for many years to track my accounts. If I had to do more payroll than just me or if I had inventory or estimating, I would probably try FreshBooks,2 Xero,3 QuickBooks,4 Sage,5 or something that allows you to interactively track these things. Quicken Home & Business software is more than sufficient for what I do. The toughest job is to set up the payroll accounts, but once the job is done, it is easy to maintain. Quicken Home & Business gives detailed information on the appropriate structure to use. Because I use a cash basis, I do not track accounts receivable in Quicken. That would be easier for an accrual-based system. I use a separate spreadsheet to track accounts receivable.
   My best advice is to open a separate bank account for your business. Do not try to mix your business and personal accounts. Keep your business books separate from your personal books. I have balanced this fairly well. I take care of the business books and the personal books separately, but the business books get the most care and attention.
2. Do I Need a Business Plan?
   It is always best to have a plan, and the complexity of your business may also dictate the complexity of your business plan. If it is as simple as providing a service and you have few assets, you may not need to write down your plan, but it would still be a good idea. If you are seeking capital, your investors will require you to have a business plan. The Small Business Administration6 or your local Chamber of Commerce7 can provide you with the format for a business plan. They also provide classes on what needs to go into that plan. Parts of your business plan may seem unimportant, but someone somewhere that you need money from may deem them essential. The business plan will contain many things including:
   • Your statement of purpose as it relates to what you do or what you provide.
   • Your goals for meeting that purpose.
   • A summary of the purchasable essentials for starting the business.
   • A summary of personnel requirements.
   • A summary of fixed costs with dollars attached to each.
   • A target profit level.
   • A summary of products, including suppliers, purchase agreements, and alternate sources.
   • A billing schedule for services, and a target markup for products.
   • A description of your market and service area.
   • A summary of known clientele and any service agreements either negotiated or in negotiation.
   • A summary of cash flow requirements, including all fixed costs.
   • Your financial requirements to go into that business, including the cash flow, which you will provide initially, with an estimate of how long it will take for the business to become fully sustainable.
   • A summary of current cash available and additional funding required.
   • A source for additional funding and any collateral available to secure that funding.
   • Plans for meeting short falls.
   • Any plans you may have for expansion.
   • About a hundred other things that ...

Table of contents

• My Experience
• The Questions Only You Can Answer
• How Did You Answer the Questions?