Legal and financial considerations for your new web design business
Updated 2022: I remember feeling great after I got my business license in 2002. Wow! I was doing it. Finally, I was ready to start my business officially. There was so much to learn in the process. So much research was needed that including reading books, asking questions to friends that owned businesses, and lots of online research. When setting up a web design business, here are some legal and financial considerations.
Picking your name
Naming your business takes a lot of research. I haven’t trademarked ever, but I really should. Most importantly, pick something you want to live with forever. I have colleagues that are constantly changing their business names. To me, this is a mistake. Once you decide, grab all your online real estate, domains, handles, etc. Consistency over time pays off when it comes to marketing yourself. Just Google “WebCami.”
Writing a business plan
Some people think this is an absolute necessity. I didn’t do it. Honestly, I knew what I wanted to do and the services I wanted to offer, and I wasn’t asking for funding from anyone.
If you need a loan to get started, then I recommend this. If you feel unsure about what you want to do, I recommend this exercise. But don’t feel like it is a must to get started. In other words, don’t let it stop you from taking the next step.
Deciding your type of business
You have to choose what type of business to be: sole proprietorship, limited liability company, corporation, or s-corp. For me, the best fit was sole-proprietor for many years. However, I recently became an LLC in 2021.
Sole proprietorship was the easiest to start with, as I worked part-time. In addition, I covered my bases with a contract, separate checking account, and business insurance. In addition, I got an EIN number for tax purposes, so I wasn’t sharing my social security when clients needed w-9s. Becoming an LLC is the best choice but costs a bit more.
Remember, you have to be very careful in your paperwork and bookkeeping, no matter what you choose. People think an LLC is a total protection, but if you are paying for anything business with a personal account, you put that limited liability at risk.
I don’t know much about corporations, s-corps, or other business setups, but I do have several friends that are LLCs and S-Corps at the same time. If you are going big from the get-go, starting an agency, or expecting a high income, I suggest getting an attorney and accountant on board from the beginning.
Getting a contract in place
I have the same contract I have had since the beginning. It’s nine pages long, and I’ve had a handful of potential clients try to give it back to me with edits. It’s a no from me every time. I’d have to find an attorney to consider those changes. The contract is for me, not the client, and I’m grateful it has helped me filter out people that might be a problem later.
Many find contracts online, like Killer Contract. Or you can have a business attorney draw one up. Or go to Legal Zoom. But, whatever you do, don’t do any business without a contract.
And with each client you meet, make sure you feel they are honest brokers in your arrangement. Do some online research about them. Even if you have a contract in place, someone can still try to take you to the cleaners.
Filing taxes
My best advice is that you get an accountant. Don’t do this on your own. Maybe you’ve been doing your personal taxes, but business taxes are something you want to be done right from the start. Owing back taxes could be painful if you filed incorrectly.
I put one-half of my earnings in savings. Doing so allows me to save and pay quarterlies. This practice is a good one when you start having success.
Understanding your licensing obligations
Each state is different. You might have to report income to your state and city on top of your federal taxes. You might need a state license or a city license, or both. There was a book about opening a home business just for my state when I started WebCami Site Design. It was a valuable tool for knowing what I needed to do to be a legit, licensed web designer.
Whatever you do, don’t wing it. You want to start with a solid foundation.
Get a business coach
If there was ever a time to invest in yourself, starting a new business is it! I have had the pleasure of working with a close friend, Chieko Watanabe over the course of my business and gained so much knowledge working with her. I’ve also had the privilege of working with a marketing coach (now a life coach), Erin MacCoy. Investing in myself and getting guidance from others has been a huge part of my success. I only wish I had done this from day one.
Research and ask questions
Remember, the goal is to be a huge success. Take yourself seriously from the very start. Visit your state’s Secretary of State’s website. Also, visit your city government website. Reach out to friends for a referral to a good accountant for small business owners and a reasonable business attorney. Check with your insurance agent what type of insurance you need. You will be surprised at how many people will be there to help you get started. You just need to ask.
You can’t ask too many questions when setting up your new business.
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