Legal and financial considerations for your new web design business

I remember feeling really great after I got my business license in 2002.  Wow!  I was really doing it.  Finally, I was ready to officially start my business. There was so much to learn the process.  Much research was needed that included reading books, asking questions to friends that owned their own businesses, and lots of online research. Here are some legal and financial considerations when setting up shop as a web designer.

Picking your name

This 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 always changing their business name.  To me, this is a mistake.  Once you decide, grab all your online real estate, domains, handles, etc.

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, 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, then do this. But, don’t feel like it is a must to get started.

Deciding your type of business

You have a choice to make on what type of business to be.  Sole proprietorship, limited liability company, corporation or s-corp.  For me, the best fit was sole-proprietor.  It was the easiest to start out with, working part-time. Moreover, 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.

I will be filing as an LLC this year.  This is probably the best choice but costs a bit more.  Remember, you have to be very careful in your paperwork and bookkeeping no matter what. People tend to think this is total protection, but if you are paying for anything business with a personal account, you are putting that limited liability at risk.

Personally, I don’t know much about corporations, s-corps or other types of business setups.   I suggest if you are going big from the get-go, starting an agency or expecting a big income, that you get an attorney and/or accountant on board from the beginning.

Getting a contract in place

I have the same contract I have had since the beginning.  It’s 9 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.  It was part of a book I purchased on starting a web business years ago. Back then, I had an attorney friend look it over and if anyone wants changes now, I’d have to find an attorney 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. Whatever you do, don’t do any business without one.

And with each client you meet, make sure you think they are honest.  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 own personal taxes, but business taxes are something you want to be done right from the start.  Owing back taxes would suck if you did it wrong.  I put 1/2 of my earnings in savings.  This allows me to save and pay quarterlies.  This will save you 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. This 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 need to start out on the right foot.  Remember, the goal is to be a huge success.  Take yourself seriously from the very start.  Visit your state’s Secretary of State website.  Also, visit your city government website.  Reach out to friends for a referral to a good accountant for small business owners and for a good business attorney.  Check with your insurance agent what type of insurance you need.  You just can’t ask too many questions when you are setting up your new business.

RESOURCES – More than one for this post!

Home-Based Business For Dummies

Home Business Tax Deductions: Keep What You Earn

About WebCami

Cami MacNamara has been designing websites since 2002 from her home office in Seattle, Washington. Her career started as a way to be a stay-at-home mom. Certification soon followed and persistence paid off. Cami has designed over 400 websites and wants to share what she learned along the way. Look for her at WordCamp Seattle.Follow: WebCami.com / Twitter / Instagram