Making the transition from an amateur to a professional in terms of business is as simple as earning money for your work. Once you start to earn from your craft, it makes sense to start to formalize your business, while the amounts are smaller, so you can develop good habits and prepare yourself for opportunities in the future.
Put it this way, if Interscope cut you a check for $1,500,000 today, would you have a plan in place to manage this money? Could you even cash the check? WHY ARE YOU TRYING TO CASH A 1.5 MILLION DOLLAR CHECK? THAT NEEDS TO GO INTO THE BANK!
You may be familiar with the basic business structures: sole proprietor, general partnership, LLC and different corporate structures. Each have benefits and drawbacks. You can find numerous articles that explain them in detail. For most people starting off, a sole proprietor business structure is the most beneficial for the following reasons…
- It is the easiest and most cost effective to setup
- You gain the benefits of having an official business (bank account, use of a trade name, ability to buy wholesale products)
- The record keeping requirements and fees are not as stringent.
Your financial needs at this level are really not that sophisticated. Why add complexity to your business structure unnecessarily? Things like
• Board meetings and minutes (Corporations)
• Double taxation on corporate profits and distributions to shareholders (Corporations)
• Minimum Annual Fees (LLC’s)
How To Start Your (Sole Proprietor) Business
Step One: Tax ID
An EIN or Tax ID number is like a social security number for your business. It’s FREE to obtain. When it comes to tax time, your business income will be treated differently than the income from your W-2 and an EIN helps keep that organized.
Your Tax ID will unlock doors. Keep that document and get a file box. This will be the first paper that goes into it.
More Information at this LINK
Step Two: DBA or Nah?
If you will be conducting business solely under your government name, you can skip this. Otherwise, you will need to file a Doing Business As statement with your county of residence. This allows you to legally transact business under your company name, as there needs to be a record of who owns this business.
You can handle it online, or with a same day visit to your county recorder clerk office. Fee’s may vary. You will receive some documents that show that you have registered with the county that you take to your local newspaper and bank. More on that later.
Step Three: Your Local Newspaper
Now that you have your DBA, in order to complete the registration, you must now place a Fictitious Business Statement in your local paper. The county usually gives you a list of acceptable ones. This ad runs in the legal notices section of your paper, and tells people that you have created a new business. DO NOT SKIP THIS STEP, otherwise your DBA will be canceled.
Step Four: Find a Bank
I’ve found that having a good relationship with my bank lends to better experiences than other people may have with the same branch.
- Choose a bank that is near or convenient to you. If you happen to know someone that works at the bank, even better. Get to know your teller, banker, branch manager. Just like building relationships in the industry, your banking experience will be smoother if they know and like you.
- Bring all your ID documents, the DBA statement, the Tax ID documents and sit with a banker. Let them know that you are starting a business and you want to get a business banking account.
- If you have had trouble in the past with banking, a charged off account, money owed in collections, being in Chexsystems, don’t be discouraged. Because your business banking history is connected to your EIN and your social security number is used for identity purposes only, you have an excellent chance of opening an account with most banks. DON”T FUCK IT UP THO!
Step Five: Put On For Your City
Go register your business with your city and get a business license, if necessary. Some cities don’t require it for a home based business, others require a special permit in addition to it. Look into it.
Step Six: Get The Plug On The Work
Once your business is established, head over to your Board of Equalization office and get a Tax Resale Certificate. Why? So when it comes time to producing merch, like T-Shirts, you can pay wholesale pricing from the distributor and not T-Shirt store pricing.
Wholesale goods are priced lower and are tax free, because your goal is to sell the end product.
For far less than a pair of Yeezy’s, you can get your business up and running. If the business window is open at the bank, and there’s a line for tellers, feel free to skip it. If Interscope wants to cut you a check, they now can make it payable to Lit AF Music Group. And when shit blows up, you’re ready to transition to the next phase. Laying down a solid foundation is the difference between, ‘playing business’ and conducting business.
*This information is provided as general knowledge and does not constitute tax or legal advice. Get a lawyer and an accountant on your team if you have those kind of questions.*
Courtesy of Timothy “Data” Nishimura
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