Tax ID for Your Business

The first thing you’re gonna want to do after you have finally registered with your state is to then hop over to the IRS and grab yourself a unique Tax ID, your Employer Identification Number (EIN). Why do you need an EIN? Well, because you’re going to reach a point where your business is making some decent money and you don’t want the government to come in and seize it all. Al Capone didn’t go down for drug charges…..I’ll just say that.

A Tax ID is an identifier that is used by registered business entities to separate personal and business spending and taxes. You as an individual have a Social Security Number while a business has a Tax ID.

Getting a Tax ID is pretty straightforward and usually takes a few minutes. Its 100% free and can be done in a single sitting. That Tax ID can also be used when purchasing bulk or wholesale items. You’ll be doing taxes at the end of the year (or quarterly) with that specific Tax ID and will be tied to your profit/losses for your business.

https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

Bank Account

You’re also going to be using your EIN to open up a business bank account. This is your new financial operating point of your business. It’s going to be where you spend and receive money. There are a lot of different offers for from almost every bank in the US, we’re gonna talk about the basic Business Bank Account. We don’t need any additional services other than a place to store your money (that includes credit card processing).

Head down to your favorite bank and ask them about the details of their Business Accounts. Some banks have yearly fees, or minimum amounts, or other special requirements. Go ahead and create an account with an institution you feel comfortable with. Bring your EIN number and your State Entity registration information when signing up. Your bank may need that information.

The other reason that you will want a Business Bank account is because you will eventually get to a stage where you may need to take out business loans or other credit-required actions. Even if you think you will never take out a loan or borrow money, you want to set yourself up now for future in-case situations. Building a relationship and credit with your bank will help in the long run.

Make sure you only spend or receive money that is specific to your business with this account! DO NOT MIX YOUR PERSONAL MONEY WITH THIS BANK ACCOUNT. You will screw yourself over royally because you’ve just created a DIRECT path to all of your personal assets. Which will-be and can-be seized if you’re ever faced with a lawsuit or bankruptcy. You’ve pieced that “corporate veil”.

Make sure you keep track of EVERY receipt for every purchase you make from this account. You’ll be using it as deductibles AND budget tracking.

Business Savings

Yes, that dreadful word; “savings”…..yes..even your business will need it! A business savings can be used used to help keep you going when times get a little rough in the cashflow side of things. Its there to give you the confidence to make decisions that may be risky. Its there to help push your product or service through rough patches and keep things going.

You want to have a business savings account. A WAR CHEST!

To keep things simple, you generally want to have about 3-6 months of $$ stashed away. This is 3-6 months of basic needs (food, light bill, rent, mortgage, etc) to keep you alive and sheltered. This is also going to be your runway of trying things out before you need to alter course.

Trust me, it make your life easier as an entrepreneur when you know you’ve got financial backup in case the poo hits the fan. You will have the freedom to take more risk to reap those rewards.

Record Keeping

Mint – http://mint.com (free)

I use Mint all the time! It does an awesome job of letting me know about my spending habits. I can easily use it to automatically categorize and organize my income and expenses. You can also set goals for yourself and use Mint to tell you REALISTICALLY how to create them. Pretty slick. You connect your bank account(s) to Mint and it helps you keep track of spending and income in a meaningful way.

Alternative: Quickbooks  http://quickbooks.com ($5/month)

I tried Quickbooks a few times in the past as well as the online version. The online version is the preferred route if you’re looking for an all-in-one solution. QB has a LOT of features that might make that $5/month fee very attractive, for sure.

Invoicing

Get Harvest – http://try.hrv.st/1-294321 (Free for 2 project OR $130/year for unlimited)

Harvest is my go-to for invoicing. It definitely pays for itself with your first client. You can send out an invoice and give the option of 2 payment routes: PayPal or Stripe. Invoices get sent electronically either with a PDF, link, or an email where the clients can pay online directly. You get reporting on who is late and who paid on time. The invoices also have automatic reminders that are sent out at specific intervals.

You can also use Harvest to keep track of time to bill hourly, keep track of projects, and keep track of expenses. Reporting is not bad. It won’t tell you categories in your spending like Mint does, but it will let you know if you’ll be pretty close to blowing your budget out the water in overspending. If you have a team of more than one person, you can also keep track of spending and income per-person or per project.

Alternative: Hello Bonsai – https://www.hellobonsai.com/ (3 projects per year OR $192/year for unlimited)

Hello Bonsai originally started as an online contract manager tool. I use it primarily to send agreements to clients for them to sign from their emails or online. It helps keep things simple.

They’ve added additional features such as sending invoices out based on the agreement of your contract. You also have the options of sending out reminders as well as new invoices to your clients. Similar to Harvest, your clients have the options of paying online with PayPal and Stripe.

Getting Paid

Square Cash – https://cash.me/ (free for Personal, 2.75% for Business)

Square Cash is one of the simplest routes you can use to send or receive payments. With the business version, you are not limited to the amount you can send or receive. With a person account, you will have trouble over $2,500.00.

Create a “cashtag” to create a unique URL that you can use to allow people to send you payments online. That URL will display a large payment input method that will send money directly to your linked bank account. Square Cash use a special link called Cash.me to give you a unique link for payments online.

You can also text, email, or link to your Cash.me page to allow your clients to pay online. No, you do not need a Cash.me account to pay someone with a Cash.me app. You will simply be prompted to input your card information.

Square Cash also has a few physical products that you can use for your physical store to process credit cards. Their Point of Sale hardware has been installed in a lot of different stores/locations and are very affordable.

Alternative: PayPal Personalized – https://www.paypal.me/ (2.9% + $0.30 per transaction)

PayPal has been around for a long long time. They have recently caught up with allowing people to pay online with a single URL, link, or text message. You can have either a personal or business version, but the functionality is similar to Cash.me.

You can also use PayPal to handle your invoice payments from Harvest or Hello Bonsai.

Alternative: Stripe – https://stripe.com (2.9% + $0.30 per transaction)

Stripe is an online payment processing software solution that is essentially scaffolding. You register yourself and your bank account to receive payments. Its then up to you to BUILD that payment portal. Stripe takes care of authentication, payment processing, and refunds. You would use Stripe if you wanted to create your own software, website checkout, or custom in-app purchase piece.

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